31.10.2014 - The Bank of Japan will buy more government bonds

The price of euro failed to accelerate the decline, despite the data on GDP growth in the US, that grew by 3.5%, which is 0.4% better than analysts' forecasts. Investors were disappointed with the data on consumer spending by 1.8%, which is 0.7% less than in the second quarter. Growth of exports of goods and services in the third quarter slowed to 7.8%, against 11.1% in the previous period. Positive for the euro yesterday was the news on reduction of the number of unemployed in Germany by 22 thousand. Today we should pay attention to the data on retail sales in Germany (07:00 GMT), the consumer price index and the unemployment rate in the Eurozone (10:00 GMT). In addition, in the United States will be published data on personal income and consumer spending (12:30 GMT), the Chicago PMI (13:45 GMT) and the consumer confidence index for October (13:55 GMT). We maintain a medium-term negative outlook for the euro and recommend holding short positions.

The price of the British pound yesterday depended on the movement of the US currency. Despite this, the traders have been pleased by the data on house price inflation by 0.5% in October, against a decline of 0.1% in September. It is worth noting that the Bank of England tightened rules for getting a mortgage, in order to fight the risk of overheating of the housing market. Today traders were disappointing by statistics on consumer confidence index, which fell by 1 to -2. Further movement will depend on the data on unemployment in the euro area and a large block of data from the US. We maintain a positive medium-term outlook for the pound.

The price of the Japanese yen started to fall sharply after the Bank of Japan unexpectedly announced the increasing the volume of purchases of government bonds to 80 trillion yen, that is 30 trillion more than before. Household spending in Japan fell 5.6%, against the forecast of a decline of 4.0%. Basic consumer price index remained at 3.0% and the unemployment rate was 3.6%, in line with expectations of analysts. Given another easing of monetary policy the Bank of Japan against the completion of the program of quantitative easing in the US, we maintain a medium-term negative outlook on the yen.

The Australian dollar strengthened yesterday after the publication of data on the growth of GDP and the labor market in the US, but decline has resumed today in connection with revaluation of yesterday's data. Investors still believe that the US economy remains stable and exceeds expectations. At the same time the fall in metal prices have a negative effect on the trade balance of the export-oriented Australia. On Monday, we should pay attention to the manufacturing PMI in China and Australia. We maintain a medium-term negative outlook for the Australian dollar.

The price of the New Zealand dollar started to correct amid weakening of the US dollar yesterday after the publication of data, as well as in connection with the closing of short positions ahead of the weekend. We recall that the Reserve Bank of New Zealand has decided not to raise interest rates due to the negative impact of falling prices for exports of the country and the need to support the economy. At the next week the dynamics of prices will depend on the data on the industry in China and unemployment in New Zealand. We maintain a medium-term negative outlook on the New Zealand currency.

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