Market news

2 May 2016

American focus: The US dollar weakened against most major currencies

The US dollar depreciated significantly against the euro, reaching a minimum of 26 August 2015, which was caused by technical factors and the publication of weak US statistics. Final data presented at Markit, showed: the seasonally adjusted manufacturing PMI index fell to 50.8 in April from 51.5 in March. The value coincided with the preliminary estimate and forecasts. However, the index dropped below the average for the 1st quarter of 2016 (51.7), and pointed to the weakest improvement in the general conditions for a little more than 6.5 years. Production remained almost unchanged in April, but the pace of expansion was the weakest since October 2009. The Markit said that weak customer demand, uncertainty about the economic outlook and lower capital costs for an energetic sector put pressure on industrial production in April. Meanwhile, manufacturers are once again recorded a slight increase in orders, but the growth rate was the weakest since December 2015. The volume of new orders from abroad fell at the fastest pace in 1.5 years, while the number of unfilled orders decreased for the third time in a row, recording the highest growth since September 2009. Against this background, the pace of job creation turned out to be the weakest in nearly three years.

Meanwhile, a report published by the Institute for Supply Management, showed that the manufacturing index fell to 50.8 in April from 51.8 in March. It was expected that the rate will drop to 51.5. Activity in the manufacturing sector fell from the end of 2014 because of the collapse in oil prices and lower export demand, which was the cause of the deterioration of the economic situation abroad and the strengthening of the dollar.

On the trading dynamics also affect the application of the ECB Draghi. He noted that in conditions of extremely low inflation is no alternative to a soft monetary policy. Draghi also said that in the medium term depositors of banks benefit from low interest rates. "To date, our policy can stimulate the eurozone economy in the conditions of falling output and extremely low inflation due to the fact that interest rates remain below their long-term levels," - he said.

The British pound strengthened against the US dollar, reaching its highest level since 5 January. Experts point out that the current increase of the pair was due to a widespread weakening of the US currency. The dollar began to actively become cheaper after last Wednesday, the Fed left rates at the same level and did not give a clear signal as to whether to wait for the growth rate in June. This decision was taken by the central bank on a background of mixed signals from the global economy and the slowdown in inflation in the United States. Preservation of low interest rates has a negative impact on the US currency, making it less attractive to investors. Today futures on interest rates Fed indicate that the probability of a rate hike of 17% in June.

Later this week, investors will be watching UK data on business activity in the manufacturing sector, the construction sector and the service sector. It is expected that the manufacturing index rose in April to 51.2 from 51.0, the PMI index for the construction sector fell to 54.0 from 54.2, while the PMI index for the services sector fell to 53.6 from 53.7.

Market Focus
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  • Earnings Season in U.S.: Major Reports of the Week

All posted material is a marketing communication solely for informational purposes and reliance on this may lead to loss. Past performance is not a reliable indicator of future results. Please read our full disclaimer.

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