EUR / USD, GBP / USD.
Yesterday, the single European currency and the British pound were under pressure due to unsatisfactory PMI data and employment figures. Business activity in the manufacturing sector of the euro area in February fell from 59.6 to 58.5, with the expectation of 59.2. The Services PMI was 56.7 while expecting 57.7. In the United Kingdom, net public sector borrowing fell by 11.6 billion pounds against the forecast of -11.5 billion, but the unemployment rate rose to 4.4% from 4.3%.
According to Markit, the American Manufacturing PMI rose from 55.5 to 55.9 against the expected decline to 55.4, while the Services PMI rose from 53.3 to 55.9 and supported the markets in an optimistic mood before the publication of the Fed's minutes of meeting. Sales of houses in the secondary real estate market in January reduced the rate to 5.38 million from 5.56 million against expectations of growth to 5.61 million, but the released indicator remains high and had little impact on the overall background.
Late in the evening, the Fed minutes of meeting were issued from the last FOMC meeting. As expected, the regulator did not give any hints for the fourfold increase in the interest rate. Moreover, even three increases are already questioned, Patrick Harker speaks before the publication of minutes, expressing his favor for two rate hikes, while Robert Kaplan was less specific but hinted about the "gradual" rate of increase. But the market reaction was paradoxical. The initial reaction was the growth of counter dollar currencies and stock indices, but the markets declined during the closing of the session. The euro lost 54 points, while the pound 75 points, and the S & P500 -0.55%. Business media links the dollar strengthening with the growth of government bond yields. But based on closer examination, clearly shows that the currency quotes and the bonds moved synchronously, and the main indicator of market sentiment in the rate changes, as the futures for federal funds remained unchanged at 81.7% in March. Thus kept its rate unchanged for the fifth consecutive session. We do not exclude the speculative share on the released "minutes".
Today, the minutes of the last ECB meeting are published. Investors can not wait to see at least some indication about the curtailment of incentives since September. In case they "see" it, the euro and its related currencies will easily reverse as the growth continues.
Prior to the release of the minutes of meeting, important data will still be published. The sentiment index in German business circles Ifo for the current month may fall from 117.6 to 117.1. The second estimate of UK GDP for the fourth quarter is expected to be unchanged at 0.5%, while the UK balance of retail sales from the CBI for February is projected to increase from 12 to 13. The assessment of the consequences of Hurricanes "Irma" and "Maria" by the head of Federal Reserve Bank of New York, William Dudley is scheduled at 3:00 PM London time. It is possible that he will express his own opinion against the background of the current confusion with the rates. However, Dudley's fundamental speech is scheduled for tomorrow, and he will speak about the balance of the Fed.
After the continuous speculation for the further decline in major currencies, we are expecting for the euro to rise to 1.2520 / 40, while the British pound is predicted to rise to 1.3980-1.4025 with the target at 1.4150. If the ECB does not provide any optimism to investors, it will be possible to consider a scenario of medium-term dollar strengthening.
AUD / USD.
The Australian economy issued a moderately negative data yesterday. Quarterly wage growth was 0.6% vs. a 0.5% forecast, but the annual growth rate was 2.1% YoY against expectations of 2.2% YoY and 2.0% YoY in the previous period. Completed construction work in the fourth quarter fell by 19.4% against the forecast of -10.1% and growth of 16.6% in the third quarter. Because of the general pressure of the US dollar, the "Australian" dollar lost 78 points. A strong positive factor for the Australian currency is the growth of the ATP stock markets, primarily Australia itself, where S & P / ASX200 grew by 0.26% on good corporate reports. The China A50 increase by 1.91%, although growth is due to the return of investors from the long holiday weekend. The Japanese Nikkei225 follows yesterday's decline in the US market and loses 1.36%. Related markets (primarily raw materials) currently have a moderate decline in the strengthening of the dollar but showed growth yesterday against its sluggishness. The exception here is the oil, which is more focused on the continuous increase in the world supply due to the growth of US shale mining and the sale of reserves.
If the positive scenario of the market develops in the ECB minutes, we expect the growth of AUD / USD to the range of 0.7840 / 60 and further to 0.7940.
* The presented market analysis is informative and does not constitute a guide to the transaction.
