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    Weekly review on 29.02.2016

    Due to positive US news released last Friday, the USD strengthened sharply against the major currencies. It became known US GDP in Q4 was revised from 0.7% to 1.0% against the forecast of 0.4%.

    Price index of the domestic acquisitions for Q4 was also revised to 1.0% against the forecast of 0.8%. Core index of the personal consumption was revised to 1.3% versus the forecast of 1.2%. On annual basis the index in January was 1.7% against the forecast of 1.2%. The other inflation indices, including consumer confidence index for February were above expectations.

    Positive data increased investors’ expectations that the increase in the US interest rate is possible in the near future. In the result of the positive news the USD has grown while American stock indices dropped at the closing session on Friday.

    Today, American indices continue to decline. Japanese Nikkei Stock Average fell by 1.0% at the Asian session’; European indices continue the downward trend. The pair EUR/USD can grow on the sales of the European stock assets and against the downward movement of the pair last Friday when the pair dropped by 130 points reaching the level of 1.0930.

    There will be a lot of important news this week.

    On Monday at 12:00 (GMT 2) European consumer price index for February will become know. Although the index reflects inflation pressure in Eurozone, the reaction is likely moderate due to movement in the pair EUR/USD against rapid decline last Friday.

    On Tuesday at 03:00 and 03:45 (GMT 2) February business activity indices in the service and manufacturing sectors of China will be released. Taking into account that markets usually react actively to the Chinese news, volatility in the market will in increase. The indices are expected to be below 50, which will indicate slowdown on Chinese economy. With the account of the previous negative data, high rate of capital outflow from China, devaluation of the Yuan, huge expenses of the Chinese government to maintain stability in the financial markets, the reaction to Chinese data must be strong. The reaction will affect not only Asian markets but also European one especially in the pairs with the USD and world stock indices.

    At 05:30, interest rate decision of ARB will be known. Since May 2015 interest rate has been maintained at the level of 2.0%. Inflation rate and price pressure in the country are weakening. Poor state of the labor market (in January unemployment rate in Australia rose to 6% against 5.8% in December), decline in the world prices for commodities, including oil and iron ore reduction of capital investments especially in mining sector can force Central bank of Australia decrease interest rate.

    Economists expect the interest rate in Australia will be lowered to 1.5%.

    The decline in the interest rate and increasing expectations of the increase in the interest rate in the USA might direct the pair AUD/USD to the annual lows near the level of 0.6900.

    According to the member of the Board of the Reserve Bank of Australia, John Edwards the fair rate is somewhere near the level of 0.6500.

    On Wednesday, Australian GDP for Q4 will be released. It is expected that GDP will be 0.5% against 0.9 in the previous month.

    On Wednesday and Thursday important European news will be published, including produce price index for January. It is expected that the index will decline by 0.7% against the decline of 3.0% in December. If the forecast proves to be correct, it will negatively affect Euro. On Thursday Markit business activity indices of German service and manufacturing sectors will be released. In case of the negative data Euro and European indices will be under pressure.

    However, the main attention of market participants will be focused on the number of new jobs outside agricultural sector in the USA (Non-Farm PayRolls), which will become known on Friday at 15:30 (GMT 2). If the index is up to the forecast ( 195 000 new jobs) or higher, the USD will go up and market expectations of the interest rate increase in the USA will go up.


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