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19.01.2016 19:20

American focus: the pound fell

The British pound fell to a minimum of seven to the dollar after the Bank of England to the head Mark Carney that he does not have "a clear timetable" for raising interest rates. Carney said that now is not the time to raise rates, and added that the British economy is more vulnerable to the problems of the world economy than the United States. He said he expected lower price pressures in 2016. Carney also reiterated that further economic growth and inflation, before the Central Bank will begin to raise interest rates, adding that further increases will be carried out smoothly and gradually.

Earlier today, the Office for National Statistics reported that consumer prices in the UK rose to a 11-month high in December, but at the end of 2015 the rate of increase was the lowest since the start of statistics (1950). According to the report, consumer price index rose in December by 0.1 percent on a monthly basis and by 0.2 percent per annum (maximum increase since January 2015), which was partly due to the highest annual increases in prices of air tickets for 5 years. Experts expect that the prices will remain unchanged in comparison with November, and will grow by 0.2 percent in annual terms. Overall, the 2015 inflation averaged 0.0 percent compared with 1.5 percent in 2014. The last reading was the lowest since 1950. Weak price pressures and an impressive increase in wages will keep the Central Bank from raising interest rates any time soon, especially if the rate of increase in salaries continue to slow down, and the weakness of the world economy have a negative impact on the UK industry. It is currently expected that the Central Bank will raise interest rates only in the 3rd quarter of this year. Also, the data showed that core consumer price index, which excludes the cost of energy, food, alcohol and tobacco, rose to 1.4 percent from 1.2 percent in November. It had expected the index to increase by 1.2 percent. Inflation in the service sector grew at its fastest pace since September 2013, by 2.9 percent per annum. Meanwhile, the prices-received index fell to the manufacturers 1.2 percent, confirming the assessment of experts.

The US dollar rose slightly due to the improvement in risk appetite due to the increase in oil prices and expectations of new stimulus measures in China. China's economic growth met expectations of analysts, but showed the worst result in 25 years, strengthening hopes to introduce measures of monetary easing in the second largest economy in the world, probably by early February. Economic data boosted the index Shanghai SE Composite by 3.25% and reduced the anxiety of a slowdown in the world economy. At that time, as the news from China contributed to the strengthening of the dollar and an increase in US equity markets, analysts were quick to warn that we are probably not talking about a global turn, which hoped investors with long dollar positions. "Today has been a surge in the Chinese stock market, and coupled with the increase in oil prices that helped strengthen currencies dollar bloc, putting pressure on the euro and the yen - said the chief specialist in the global foreign exchange strategy at Brown BrothersHarriman & Co Mark Chandler. - But I would say that it is too early to expect a turning point. "

The euro rose against the dollar after declining in the first half of the day on the background data for Germany and the euro zone. The research results, published by the Centre for European Economic Research (ZEW), revealed that the level of economic confidence in Germany worsened in January, reaching at this 3-month low. According to the indicator of economic sentiment fell to 10.2 in January from 16.1 in December. The last reading was the lowest since October 2015. However, the index was higher than the forecasts of experts at the level of 9 points. We also learned, assessment of the current situation improved slightly in January - the corresponding indicator rose by 4.7 points to 59.7 points.

Meanwhile, the final data provided by the statistical agency Eurostat showed that annual inflation in the eurozone was 0.2% in December, against 0.1% in the previous month. Last modified in line with expectations and a preliminary estimate. Among the countries of the European Union annual inflation was 0.2% as compared to 0.1% in November. The maximum rise in prices in the euro area (in annual terms) was seen in cafes and restaurants (+ 0.10%). Vegetables and tobacco rose by 0.06%, while prices for fuel for transport and heating oil fell by 0.40% and 0.19% respectively. Meanwhile, the cost of gas decreased by 0.1%.

It had little impact as updated forecasts from the IMF. Recall now the IMF has lowered the forecast for global growth in 2016 from 3.6% to 3.4%. The reason for the revision was the problems in the Chinese economy. To the downside risks also include greater strengthening of the US dollar and increased risk aversion. US GDP forecast for 2016 was lowered to 2.6% from 2.8%, and the forecast for eurozone GDP had increased by 0.1% to 1.7%.

The yen fell against the dollar earlier, breaking the mark of Y118.00, which is associated with a decrease in demand for safe-haven assets amid recovery in prices for oil and copper, as well as expectations of new stimulus measures from the Chinese authorities. Investors also drew attention to the statements of the Bank of Japan's Haruhiko Kuroda, who said today that the central bank has "many tools" to revive inflation. So he dismissed fears that after the aggressive easing of monetary policy for almost three years, a set of tools to further stimulate the economy and inflation could dry out. This statement Kuroda made at a time when the market is increasingly discussing the likelihood of expansion of the asset purchase program at the next meeting of the Bank of Japan, scheduled for the end of January. Now the volume of the program is 80 trillion yen.

Market Focus

  • The Bank of Japan decided by a 7-2 majority vote to hold the interest rate at -0.10%
  • Earnings Season in U.S.: Major Reports of the Week
  • 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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