MasterForex Trend analysis of currency pairs and Comments (Updated daily)

Overview of the main economical events of the current day - 08/02/2013

All attention on EUR

EUR retraced some of it losses vs USD yesterday after Mario Draghi announced that he expects a slowdown in inflation rates down to 2% in the coming months. He also believes that the economy will continue to remain weak in the beginning of the year and will gradually improve with the stock markets. It was also said that high EUR exchange rate is a sign of investors’ trust in the region and while ECB will continue to monitor it, they do not see it as a threat.

Earlier before ECB left its key interest rate unchanged for a 7th month in a row. This week EUR demonstrated the longest decline in that 7 months.

Keep an eye on Brussels today as EU leaders are meeting there to discuss 2014-2020 budget plans. Even before the summit it was quite clear that there definitely is a lack of consensus and finding common ground will not be easy. Basically there are two large fractions: UK, Netherlands and some other members are pushing for saving assets and cutting costs, while another, led by France, Italy and Spain insist on stimulating the growth via increased spending.
 
Overview of the main economical events of the current day - 11/02/2013

Retail sales in USA and UK; Eurozone, Japan and Germany GDP data

The week ahead is not particularly newsflow heavy, although there is definitely some news worth following.

On Monday, Eurogroup meeting is planned – e.g. a meeting of the finance ministers of the Eurozone. Expect market reaction to anything and everything that will be announced during the meeting. This is likely to be the main news on Monday, however some minor statistics are also planned for release such as 4Q overdue mortgages from USA and housing data from New Zealand.

Tuesday will bring UK’s housing prices for January, consumer confidence from Japan and some other UK data such as CPI, inflation data and other price indexes. Another important thing going on for EUR will be ECOFIN meeting which is likely to support whatever trends that will form on Monday.

On Wednesday, keep your eyes on manufacturing orders in December from EU. From UK expect a press conference held by Head of Bank of England. USA will publish a bunch of data, including retail sales, crude oil reserves and some other statistics. USA is also to place 10-year bonds, while Japan will release lots of GDP figures.

Most important Thursday news is probably going to be a press conference held by Bank of Japan – expect to see an interest rate decision and some market-moving comments. Also prepare for preliminary GDP data from Germany and EU as well as a monthly ECB report.

Finally, Friday will bring us a monthly report made by Bank of Japan. Also keep in mind that G20 meeting takes place on Friday and Saturday so expect some newsflow coming from there as well.
 
Overview of the main economical events of the current day - 12/02/2013

GBP declines fast on bad statistics data

EUR demonstrated some healthy gains rising against most of the major currencies on Monday thanks to a comment from Head of ECB, who said that EUR is not particularly overpriced and a weaker EUR policy will lead to rising inflation.

JPY vs USD trades close to a minimum level since May 2010 after Minister of Economy announced that the government needs to keep trying to stimulate stock markets. At the same time, Japanese currency declined vs EUR for the first time in 4 days after a potential future Head of Bank of Japan Haruhiko Kuroda said he supports further stimulus packages and expects some of them to be approved this year – looks like Kuroda is ready for serious action once he is elected as the new Head of BoJ.

Finally, GBP declined against most major currencies on bad manufacturing statistics. Add to the mix the speculations that investors are not so sure (as they used to be before) about exchange rate rising and you’ll get the idea why British currency was killed yesterday.
 
Overview of the main economical events of the current day - 13/02/2013

JPY jumps on positive comments

JPY grew vs USD and EUR after comments from G7 representatives that their previous message was understood incorrectly meaning that they are concerned about excessive changes in prices of the Asian currencies. They also were not happy about one-way regulation of JPY exchange rate. It also became known that this issue will be discussed this weekend during G20 meeting.

GBP has reached its 6 months minimum against USD as many market participants are expecting decrease in forecasts by Bank of England. GBP also declined against most of major currencies due to the fact that this decreased expected growth is likely pointing to interest rates remaining at a record low level.
 
Overview of the main economical events of the current day - 14/02/2013

GBP declines rapidly after Bank of England comments

GBP continues its downward motion on comments from Bank of England that the risks to the economy recovery have risen. GBP found itself under strong pressure after inflation report and Head of Bank of England comments. BoE’s report suggests that UK’s GDP is to remain lower than pre-crisis level until 2015, while CPI is expected to be higher than planned for at least another 3 years. Head of BoE also said that the recovery will be slower and any further monetary stimulation will lead to market optimism but not an economic growth. Finally, he also announced that external demand needs to be encouraged hinting that weaker national currency is the way to do it.

EUR has also fallen against major currencies as Portuguese level of unemployment rose to 16.9% in 4Q compared to 15.8% a quarter before providing market participants with uncomforting news.

JPY trades more or less flat vs EUR and USD in contrast to the previous trading session. It looks like investors are being cautious in the eve of Bank of Japan meeting despite the fact that market consensus is that no further stimulus packages are to be introduced right now.
 
Overview of the main economical events of the current day - 15/02/2013

EUR declines on negative news flow

EUR reached 3 week minimum vs USD after report showed that recession in Eurozone increased deeper than expected in 4Q, which hurts demand for region's assets and stimulates interest rates to remain low.

EUR also fell against JPY due to declined GDP in both Germany and France. Finally, ECB vice-president announced that the bank is technically ready to set a negative deposit rate if necessary. Right now the rate is 0%.

USD rose on positive initial jobless claims that surprisingly decreased below expectations. Despite some increase last week, average level remains at a 5 year low.

JPY grew vs most of major currencies on a comment from Russian finance minister who urged G20 to take a firmer stand against currency manipulations.
 
Overview of the main economical events of the current day - 18/02/2013

JPY continues to be under pressure

JPY visibly declined on Friday after a member of G20 announced that they are not supporting G7’s opinion that exchange rates should not be a part of policy. At the same time G20 urged members not to start competitive devaluation saying that the markets should define exchange rates. JPY has lost more than 7% since the beginning of the year as a result of Japan trying to stimulate its economic growth.

GBP showed its largest weekly decline against USD since June after retail sales soaring by 0.6% in January (compared to 0.3% decline in December) – the first time since 2011. This comes as a negative surprise as the market was expecting a 0.5% increase even despite the heavy snowstorms in the first half of the month.
 
Overview of the main economical events of the current day - 19/02/2013

Important statistics are out today from both Eurozone and Japan

Yesterday was a rather quite day due to banking holidays in USA (President’s Day) and Canada (Family Day). While there was some movement in Eurozone on the back of poor financials and Mario Draghi saying he still sees risks for recovery, this news lies perfectly in line with the sentiment so no surprises here. However, as said before, American investors didn’t have a chance to react to this news just yet so expect an increased volatility today.

Moreover, if news wires today are disappointing we could possibly see an overreaction with American investors (who are late to the party) joining a sell-off in Eurozone – and potentially there are some planned figures releases that just might be enough for at least a short term panic. Today watch out for ZEW confidence indexes from Germany as well as Eurozone business sentiment data from ZEW as well; wholesale trading and foreign security operations from Canada; Japanese trade balance data and a bunch of economic indicators from Australia.
 
Overview of the main economical events of the current day - 20/02/2013

EUR bounces back; GBP reaches new lows

EUR traded quite strong against USD yesterday and showed some noticeable gains even despite some negative statistics: housing construction is down as well as business sentiment measured by ZEW. However, consumer confidence is up in both Germany and Eurozone, while Greece’s budget deficit has shrank (albeit not by much) – these factors allowed EUR to show some gains vs. USD.

JPY also gained against USD as it seems like not everybody in Japanese government is a fan of quantitative easing – Minister of Finance is against the purchase of foreign securities which is part of the plan according to Prime Minister. A meeting between USA President and Japanese Prime Minister is likely to be under investors radar – if Obama supports Japanese interventions into the economy, we are likely to see another round of JPY sell-off.

GBP reached its low vs. USD since July as market participants are afraid that new monetary and tax policies will continue to put pressure on the economy. Add to the mix a possibility of UK losing its credit rating and that a new Head of Bank of England might pursue a softer policy that the current one and that easily explains the weakness of GBP.
 
Overview of the main economical events of the current day - 21/02/2013

USD jumps up on FOMC meeting minutes

USD raised against most of the currencies after a publication of FOMC meeting minutes that suggest that American economy is slowly recovering along with the rest of the world and that both housing and employment situations are looking up. Moreover, the solution of “fiscal cliff” problem decreased the risks to the economy and market participants took action boldly on this positive report.

EUR was more or less supported by news from Germany – January inflation data shows some increase due to high electricity prices allowing to postpone wildly expected slowdown of inflation in the country.

GBP continues to decline – it reached a 15 month minimum vs EUR after Bank of England meeting minutes were released showing that some members voted for expanding the asset purchase program this month. GBP also decreased against USD as well due to the fact that decreasing interest rates were also discussed as part of the possible solution.
 
Overview of the main economical events of the current day - 22/02/2013

EUR reaches a 6 week low against USD

EUR reached a 6 week low vs USD after weak statistics that show that business activity in the region is declining more than expected. The business activity index feel from 48.6 to 47.3, while market participants were expecting an increase up to 49. The decline is happening among all sectors and numbers are below expectations providing the market with a sell off opportunity.

EUR also continues its decline vs JPY for a third day in a row on the back of the possibility of cutting the interest rates in order to stimulate UK economy.

JPY itself is showing gains against most currencies after media reporting that ex Deputy Head of Bank of Japan Mr. Ivata and the president of Asian Bank for Development Mr. Kuroda are two main candidates for the Head of Bank of Japan position. We’ll also mention that Mr. Ivata supports the idea of purchasing foreign securities to stimulate growth.

USD showed some decline after weak manufacturing activity data, which came at negative 12.5 compared to negative 5.8 a month before and expectations of growth to 0.7 in February.
 
Overview of the main economical events of the current day - 25/02/2013

EUR continues its decline

EUR reached a month low against USD after ECB announcing that financial institutions are to repay less of their 3-year loans this week than expected. This erased the gains EUR showed earlier on higher than expected IFO index from Germany – as a result, EUR plummeted on news that banks are to repay only EUR 61bn per year – a level almost twice below than expected.

EUR also declined against JPY after European commission published a report which suggests that region’s economy is contracting for a second year in a row. According to the report EU’s GDP is to decline by 0.3% in 2013 and grow by only 1.4% next year.

JPY itself lost its strength on the eve of the meeting between American President and Japanese Prime Minister. Probably the most import piece of news for the currency in short term is the upcoming announcement of the next Head of Bank of Japan which might be made during this week.
 
Overview of the main economical events of the current day - 26/02/2013

EUR erases its gains after disappointing Italian elections

EUR heavily declined erasing its recent gains on the backdrop of Italian elections which ended with a split between center-left and Berlusconi. Investors took a lack of unified decision as a hint of upcoming political battles and quickly reacted to the news.

JPY continues its decline reaching May 2010 levels against USD following the rumors that Japanese Prime Minister is to select someone supporting quantitative easing as a next Head of Bank of Japan.

GBP declined to a 2 year low after Moody’s cut sovereign bond rating of UK by 1 notch. While the outlook remains stable, the agency sees risks for economy recovery due to slowdown in growth rates. As the agency expects slow recovery at least until 2016, they forecast rising government debt in the coming years which is likely to result in continuing spending cuts.
 
Overview of the main economical events of the current day - 27/02/2013

EUR swings back and forth

EUR rose from 7 weeks low vs. USD after investors bet on the fact that ECB will intervene to limit losses from so-called “periphery bonds”. The yields in Italian and Spanish bond markets are slightly up, while Italian stock market plummeted down after former Prime Minister Berlusconi announced that a union between left-centric party and him is impossible.

USD was under pressure after Head of FOMC Ben Bernanke announced that US economy will continue to recover this year, however labor market and the economy in whole are still weak, meaning that a next round of easing might be required. He also said that automatic spending cuts that are expected to be implemented starting this Friday are likely to negatively affect the rates of recovery.

As a result of the turbulence in forex markets, JPY appeared as a defensive option, which allowed it to show some gains.
 
Overview of the main economical events of the current day - 28/02/2013

Euro continues to rebound

EUR continues to grow vs USD thanks to positive news coming from both Italy and Germany. Italy successfully placed its bonds on the back of rising economic confidence, while German Gfk released its consumer confidence figures that show an increase in the numbers – which comes in line with confidence estimates of two other German organizations (Ifo and ZEW). Looks like we can expect to see some recovery in German economy after somewhat disappointing growth rates in 4Q.

JPY was rising against most major currencies on upcoming appointment of Head of Bank of Japan and expectations that Mr Kuroda (who is nominated by the government and is against aggressive easing) is likely to take the position.

GBP grew against USD after a member of Bank of England proposed re-setting the target inflation level.

While two major figures were speaking yesterday – namely, Head of FOMC Ben Bernanke and ECB’s Head Mario Draghi, neither of them made any surprising comments which resulted in almost no reaction from market participants.
 
Overview of the main economical events of the current day - 01/03/2013

USD shows gains as other currencies decline

EUR is falling against USD marking first monthly decline since July on the back of the Italian political battles as well as decreasing inflation in EU, which potentially opens doors for increased CB interventions. Moreover, Head of ECB Mario Draghi announced that no tightening of the monetary policy is planned in the near term. Even despite somewhat weak GDP data which shows that American economy grew by only 0.1% in 4Q compared to expectations of 0.5%, USD was rallying up.

GDP traded somewhat flat as Gfk consumer confidence index came at -26 in February – same level showed a month before and widely expected.

JPY remains under pressure after Prime Minister Shinzo Abe proposed Hariko Kuroda (Head of Asian Bank for Development) as a new head of Bank of Japan. Kuroda is known to be a supporter of additional stimulus and says that Bank of Japan has wide opportunities to do so.
 
Overview of the main economical events of the current day - 04/03/2013

Both EUR and GBP declined rapidly on poor statistics

EUR is falling fast vs USD after Friday reports show declining manufacturing activity on the back of a record high unemployment level. According to Eurostat, unemployment reached 11.9% in January which is the highest number ever recorded in EU history. As a result, the union currency is entering its fourth consecutive week of decline against USD.

GBP is also under serious pressure after Markit PMI for February came at only 47.9 – a level below a threshold of 50, which separates growth and decline areas. The market expected the number to come at 51.0, however the number of both new external and internal orders is falling, while companies are firing people at highest rates in the last 3 years. This resulted in market participants becoming more sure that Bank of England is likely to introduce new easing measures during the next meeting which takes place this Thursday.
 
Overview of the main economical events of the current day - 05/03/2013

Italian political battles put pressure on EUR and GBP

EUR is swinging back and forth against USD on the back of Italian politicians who can not form a coalition as well as upcoming GDP data for 4Q which is likely to show a recession in 4Q12. Market participants are waiting for the Financial Ministers meeting in Brussels and a number of Central Banks discussing their policies during the week. Finance Ministers are deciding whether they should give more time for Ireland and Portugal to repay their aid loans.

JPY is rising against almost all major currencies after Chinese index CSI 300 reached a 2 year low. JPY was increasing even after next Head of Bank of Japan Haruhiko Kuroda made a promise to pursue a softer monetary policy in order to defeat the deflation in the country.

GBP rose vs both EUR and USD as investors are afraid that the new Italian government will form for too long which potentially can result in slower recovery of the 17 economies of the currency block. Moreover, according to a recent report, housing prices in UK rose in February, showing the first gain in 9 months, which allowed for further gains.
 
Overview of the main economical events of the current day - 11/03/2013

Labor market data supports USD

USD was enjoying quite a growth on Friday fueled by strong labor data which showed higher than expected employment rates in February, while unemployment level declined by 0.2% reaching 7.7% - a record low level since beginning of 2008. This resulted in speculations that FOMC might end its extremely soft monetary policy sooner than previously expected, allowing USD for gains, which reached a record high level vs JPY since August 2009.

EUR on the other hand was growing vs USD after dipping on the labor data publications even despite Fitch cutting Italy’s rating from “A-“ to “BBB+” with a negative outlook. The agency says that their outlook reflects deeper and longer recession than expected before, while political uncertainty is also amongst the reasons for the cut.

Today keep an eye on Japan’s Parliament (that might elect a new Head of Bank of Japan) as well as BoJ’s monetary policy meeting minutes, while from Europe expect some trade and manufacturing numbers.
 
Overview of the main economical events of the current day - 12/03/2013

USD remains strong, however EUR outperforms it

USD trades more or less flat vs JPY remaining close to a maximum level since 2009 after hints that American economy is gearing up resulted in increased demand for USD. Market participants are also waiting for retail sales figures, which are believed to show improvement in February. Also keep an eye on upcoming retail prices data, which is also likely to show increase.

EUR grew vs USD erasing some Friday losses after US bond auction which ended up with slightly decreased average yield.

JPY trades close to 3 week low vs EUR after disappointing statistics from Japan. According to data, manufacturing orders are down 13% mom in January compared to expectations of only 1.7% - this is the highest drop in 8 months. Moreover, Haruhiko Kuroda (a most likely candidate for Head of Bank of Japan position) once again announced that more aggressive monetary policy is necessary, putting more pressure on the national currency.
 
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