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31.08.2015 18:23

American focus: the US dollar mixed

Dollar earlier in the week trading lower against the euro and the Japanese yen but higher against most currencies of other developed and developing markets.

Investors overestimate the fair rate of the dollar against the backdrop of continued instability in the markets and approaching meeting of the Federal Reserve System in September.

Over the weekend, Federal Reserve Vice Chairman Stanley Fischer made it clear that the increase in the key interest rate this year is still possible. The report on the US labor market on Friday to give any further guidance on the Fed's actions.

Dollar moves mixed on weak data on Chicago PMI. Managers Association of Chicago reported that the PMI index slightly worsened in August, contrary to the forecasts of experts who expect further growth.

According to the data, the August index of purchasing managers in the Chicago dropped to the level of 54.4 points against 54.7 points in July. Analysts believe that figure will reach 54.9 points.

The company said that the slight weakening of the components of production and new orders put pressure on the main index. However, despite the deterioration in August, the data sub-codes are still above the 12-month average value. Part of this stability was due to the increase in stocks at the fastest pace since November 2014.

Also, the data showed that the sub-index of unfilled orders fell slightly in August. This figure remains below the neutral mark the seventh consecutive month, meanwhile, is a component that tracks employment, rose in August to the highest level since April. But despite the recent improvement, the index remained in the territory of 4 consecutive month of contraction. Experts point out that the employment component was relatively weak in recent months, and the study shows that in the short term is unlikely to be traced much improved. Responding to a question, 63% of respondents said they do not plan to expand the size of their workforce over the next three months. In addition, studies have shown that the increase in purchase prices, which is noted in the last three months, was short-lived - in August were recorded a sharp decline, reflecting a reduction in the cost of commodities.

Earlier, the euro fell against the dollar amid inflation data in the euro zone. At the end of August, consumer prices rose by 0.2%, which coincided with the change recorded in the previous month. Experts expect that price growth slowed to 0.1%. It is worth emphasizing the increase in consumer prices is less than 1% have been 21 months in a row. For the ECB's inflation target is 2%. The report also stated that the cost of food, alcohol and tobacco rose by 1.2% compared to 0.9% in July, while the cost of services rose 1.2%, as in the previous month. Prices of non-energy goods increased by 0.6% compared to 0.4% in July, and the price of energy products fell 7.1% against -5.6% in July. The increase in core inflation remained at 1%. In monthly terms, core CPI, which excludes prices of food, energy, alcohol, and tobacco rose by 0.1% (seasonally adjusted), in line with expectations.

The pound fell against the dollar, while analysts say that arose before risk aversion began to decline, helping the dollar recover. Also, traders continue to assess the comments made during the symposium in Jackson Hole. It is expected that the pound will continue to consolidate amid the lack of British news. Also recall that the UK markets are closed today.

Meanwhile, the focus is gradually shifting to the data on business activity in Britain, the publication of which will be held this week. According to forecasts, the purchasing managers index indicate that activity continued to grow strong pace. It will be another sign of the health of the economy and will testify against the probability of weakening the country's economy because of the problems in China. Recall recently, market participants revised their forecasts on the timing of increases in interest rates by the Bank of England, which became the cause of weakening expectations regarding inflation or economic slowdown. Investors are now believe that the leadership of the Central Bank will raise short-term interest rate in the 3rd quarter of next year, but not in the 2nd.

Market Focus

  • The eurozone started the third quarter on a solid footing, according to PMI survey data
  • Earnings Season in U.S.: Major Reports of the Week
  • German private sector output growth slowed for the second month running in July
  • ECB's Mersch says as conditions normalise, it is unlikely that uncoventional policies will remain necessary
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