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10.12.2015 19:20

American focus: the US dollar rose

The US dollar rose after two days of decline. This indicates that investors in recent sessions did not follow consensus on the position on the eve of the meeting of the US Federal Reserve next week.

Over the previous two sessions, the EUR / USD rose 1.7%, as investors continued to reduce short positions on the euro after the European Central Bank on December 3rd. The outcome of the ECB meeting disappointed many market participants.

Many investors expect the Fed meeting on 15-16 December will raise its key interest rate from near zero. This is likely to lead to an increase in the US dollar, as the higher cost of borrowing increases the return on assets in dollars.

However, asset managers are not so sure about the signals that the Fed will send the markets about the pace of future policy tightening. Fed closely examines data on the US economy and will determine the pace of rate increases based on the health of the national economy. Recent US data have been mixed - in the labor market showed improvement, while in the manufacturing sector discernible weakness.

Some asset managers are expected to reduce the US dollar after the Fed meeting, as the dollar fell after the traditional solutions of the central bank to raise rates.

The US Labor Department reported that the number of Americans who first applied for unemployment benefits rose last week, reaching a five-month high at the same time, but again remained below the critical level of 300 thousand.

According to the report for the week ended December 5, the number of initial applications for unemployment benefits rose by 13,000, to a level of 282,000 (seasonally adjusted). The last reading was the highest since early July. Economists had expected 269,000 new claims. The figure for the previous week has not been revised.

Prices of imported goods in the US fell at the end of November, registering the fifth consecutive monthly decline, reflecting the impact of cheap oil, the strong dollar and slow growth abroad. This was reported in the report of the Ministry of Labour.

According to the data, in November, import prices fell by 0.4% compared with the previous month. Economists had forecast that prices will drop by 0.7% after falling 0.3% in October (revised from -0.5%). In annual terms, import prices decreased by 9.4%, demonstrating the 16th consecutive decline.

The November decline in prices was broad-based - negative trend was recorded in the oil and natural gas, industrial materials, such as metals, food products, automobiles and capital goods.

The Swiss franc fell against the dollar, which was mainly due to the results of the session of the Central Bank of Switzerland. As well as expected, the Central Bank decided to leave the deposit rate unchanged at -0.75%. In addition, the SNB left unchanged range for the 3-month LIBOR rate at -0.25% - -1.25%, as expected. Furthermore, in their appeal the regulator called the franc "significantly overvalued" currency. Central Bank indicated that is ready for action in the currency market to weaken the franc. Traditionally, the Swiss National Bank published its economic forecasts. The regulator said that GDP growth in 2015 will be just below 1%, and in 2016 will amount to 1.5% growth. In addition, the SNB raised its forecast for inflation this year to -1.1% from -1.2%, but left the inflation forecast for 2016 at 0.5% "Slow global economic growth is felt in Switzerland ", - said in a statement the Central Bank. It also states that the recent economic performance fell short of expectations." A careful study of the indicators leads to a somewhat more positive assessment of the economy - said the SNB. - Nevertheless, capacity utilization remains unsatisfactory, and the demand for labor - restrained. "

Commenting on today's decision by the SNB, analysts IG Bank said that the central bank missed a chance to signal to market participants that it can withstand further easing of monetary policy of the European Central Bank. "The economic situation in Switzerland continued to worsen clearly during the third quarter and the weakening of the Swiss franc could bring needed relief," - said the analyst

The British pound fell sharply against the dollar, which was caused by the announcement of the outcome of the meeting of Bank of England. As it became known, the Bank of England kept its asset purchase program in the amount of 375 billion. Pounds and the key interest rate at a record low 0.5%. 8 of 9 members voted to keep policy unchanged. Moreover, all members of the Committee unanimously supported the retention of bond-buying program in the amount of 375 billion pounds. The bank said that the decline in oil prices and weak wage growth should be for some time to contain inflation. Also, the Central Bank said that GDP growth in the 4th quarter will probably be about the same as in Q3 The bank stressed that the increase in Fed rates could have a negative impact on emerging markets.

Little impact on the pound had also previously presented data showing that the total trade deficit widened to Britain 4.140 billion. Pounds in October, compared with 1.073 billion. Pounds in September (revised from 1.353 billion. Lbs). The deficit in trade in goods rose to 11,827 billion. 8,802 billion pounds. Pounds, peaking in July and exceeded expectations at 9.7 bln. Pounds. This change was mainly the result of a large increase in imports of goods - 2.3 billion. pounds to 35.4 billion. lbs. Meanwhile, exports of goods fell by 0.7 bln. Pounds to 23.5 billion. Lbs. At the same time, the surplus in trade in services remained at the level of 7.7 billion. Lbs. The report also said that the trade deficit with the EU countries amounted to 8.1 billion. Pounds compared with 7.1 billion. Pounds in September. The deficit in trade with countries outside the EU increased to 3.7 billion. Against 1.7 billion pounds. Pounds in September. Excluding oil and other volatile goods deficit in October was the largest since the start of statistics in 1998. Also, the Office for National Statistics said that in three months (to October), exports stagnated and imports grew by 3.1 per cent.

Market Focus

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  • U.S. commercial crude oil inventories decreased by 4.7 million barrels from the previous week
  • Australian unemployment rate stable at 5.6% in June
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