IAFT Weekly Economic Review

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Dear alfonso!

Last week there were some pretty important events that had an impact on the currency market to one extent or another. According to published data, the annualized consumer price inflation in Australia was lower than the previous value. As it follows from the minutes of the last meeting of the Reserve Bank of Australia, the central bank still considers exchange rate to be overvalued, despite its decline in recent years. Nevertheless, the losses of the Australian dollar against the US dollar were limited because it was able to get the support from a good macro-economic statistics for China, which is the largest trading partner of Australia. Consequently, any signs of improvement in the economy of China have a positive effect on the dynamics of the Australian dollar, although these factors are likely related to short-term than to long-term, so the risks of the renewed fall of the Aussie is kept.

MPC Meeting Minutes of the Bank of England had no surprises for the market participants. The ratio of votes "for" and "against" the rise of the interest rates is unchanged. In addition, a representative of the bank has recently stated in his comments that the rate rise may occur later than it was expected three months ago. Thus, the British pound amid the decline of the expectations of an early rate rise lost its former attractiveness, and until the stats on the UK show new round of economic growth, its prospects will remain bleak. Actually, as well as the prospects of the European single currency. The rumors about the possibility of buying of the corporate bonds by the European Central Bank which appeared on the market delivered another blow to the single currency. Nevertheless, it doesn't leave the attempts to develop an upward correction that may be successful, if the results of the FOMC meeting will disappoint bulls regarding the US dollar.

The Bank of Canada, as well as the analysts expected, left the interest rates unchanged, but the Canadian dollar gained some support by the fact that in the accompanying statement the phrase that the Central Bank takes a neutral position regarding the future direction of monetary policy has been removed. Considering the drop in oil prices and also the extremely low probability of an early rise of the interest rate by the Bank of Canada, you shouldn't expect the sustained growth of the loonie at this stage. As in the case with the major currencies, the further dynamics of the loonie may depend on the results of the FOMC. Besides, IAFT traders should underline some data concerning the labor market and consumer price inflation in Germany and the Eurozone, data on US GDP and inflation data for Japan.

Best regards,
International Association of Forex Traders

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