EUR/usd
The single currency keeps drifting near 1.2750, having no desire to fall and no strength to grow. The six-week decline of stock indices arouses more and more concern among the Fed's officials. Though they don't assert that this behaviour of the markets will make fomc revise its plan to end QE in October, they still promise to consider it in the coming days. Rosengren, President of the federal reserve Bank of Boston, said that QE will be finished in October if nothing dramatic occurs. So now market participants are trying to make out how dramatic the recent sale, which lasted for 6 weeks, can be considered. It is feared that the market decline may enter the phase, when it will have real effect on the officials. Thus, USD's growth, boosted by the high demand for the currency, significantly reduces commodity and energy prices. In its turn, this lessens the chance of higher inflation and can force the Fed to abstain from rate increases for longer than planned. In our opinion, QE will be ended in time, i.e. in October, as the market hardly needs this money. But as to the prospects of rate increases, they are now more vague and distant than it seemed a few weeks ago. The thing is that we still need to find out how pernicious the decrease in commodity and energy prices is for the business sentiment (if it is pernicious). Very many say that the current price of oil deprives the shale industry of profits, but on the other hand, the fact that the USA is a pure energy consumer should be to the benefit of many companies in the country. In the short term we should pay a special attention to the officials' comments as they can have serious impact on the performance of USD. It is quite likely that the currency will continue to depreciate, but sharp movements up or down are hardly possible.
GBP/USD
The cable is trying to settle down above 1.6100. It succeeds in it now and this means that last week the pound reversed from the fresh lows since November 2013 to the positive weekly close. It is quite a good claim for further growth. This week the major risk is probably posed by the release of the October meeting minutes. Everyone is interested to know if the alignment of forces has changed there. Earlier two people spoke in favour of rate increases, but recently we have often heard from the BOE that the beginning of tightening is postponed. In this situation the British currency will find it hard to continue growth against USD.
USD/JPY
The pair has been growing since the end of the previous week. Now it is close to 107.25, which was a level of consolidation before the decline last week and before the growth in September. Now the nearest target for bulls should be set at 107.85 – the weekly close of October 6-10 – so that the gap formed at the beginning of the previous week can be closed.
gold
The dollar's weakness is to the benefit of Gold. Even the decline of the markets is now treated as a reason to buy this instrument rather than sell it. Again, just like it was during the crisis, investors refer Gold to instruments helping to save the capital in the periods of uncertainty. After pushing off 1200 and being at a rather low level of 1237, Gold has a good potential for growth in the near future.
