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Overview of the main economical events of the current day - 15/05/2013

ZEW index didn’t meet the expectations of the dollar growth correction

Germany economic sentiment index released on Tuesday from the ZEW research institute didn’t reach the expected figures of 40 points and was at the level of 36.4 in comparison with 36.3 points in March. It dispelled all the hopes of possible dollar’s growth correction. The index of current conditions in Germany dropped to the level of 8.9 points in May from 9.2 points in April and also turned out lower than the expected figures of 9.8 points.

German ZEW Economic Sentiment

ZEW president Clemens Fuest commented the results of the research and marked that the current bad economic situation in eurozone is still putting pressure on investors’ and analysts’ sentiment. Economic sentiment index is calculated from the poll of financial experts to estimate an economic situation in the country for the nearest 6 months. A figure above zero indicates predominance of optimism, below – pessimism. High indicator’s figures show positive economic situation and a good business climate.

However industrial production data in eurozone turned out much better than expected. Industrial production rose by 1% in March in comparison with 0.4% in February while only 0.5% growth was expected, which became the largest growth since July, 2011. It increases hopes for eurozone’s economy revival as it has been in decline for 6 quarters in a row. GDP data of eurozone will be published on Wednesday.

The dollar continued rising on Tuesday for the 4th day in a row while there were shown new signs of American economy recovery and possible early closing up of incentive programmes. The head of FED Plosser declared that he wanted bonds buying programmes to be finished by the end of the year. He also said that the FED should close-up bonds buying programme at the next meeting already.

U.S. Congressional Budget Office announced on Tuesday that the federal budget deficit this year was likely to decrease sharply. Also, the National Federation of Independent Business (NFIB) declared that its Small Business Optimism Index grew in April to 92.1 against 89.5 in March.

While the dollar was rising, the pound continued falling on Tuesday despite the publication of BoE Inflation Report on Wednesday and RICS House Price Balance which showed that housing prices in Great Britain had risen up to the highest level since June, 2010.

Australian dollar continued falling on Tuesday – the 7th day in a row – and dropped to the lowest level since June. The government of Australia introduced a new budget plan and announced that in the current financial year the budget will be well balanced, which differs from the forecast. Also it was marked that the deficit would be observed for 4 financial years until 2016.

New Zealand dollar also dropped on Tuesday after the quarterly retail sales report. According to the report of New Zealand statistics department the total retail sales amount in the first quarter grew only by 0.5%, with growth expectations of 0.8%. Besides, the data for the previous quarter were revised down.

On Wednesday markets’ attention will be attracted by preliminary GDP data of eurozone’s main countries and the eurozone as a whole. There are expectations of some improvements in comparison with the previous quarter. ECB board member Jörg Asmussen announced on Tuesday that the economy of Germany had risen in the first quarter while the eurozone had been in "mild recession" for the whole of 2013.

 

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Overview of the main economical events of the current day - 16/05/2013

Eurozone economy has been decreasing for the sixth quarter in a row

On Wednesday almost all published macrostatistics turned out disappointing. First of all, preliminary GDP of main eurozone’s countries for the first quarter didn’t reach the expected levels. Besides, the previous quarter data were revised down. So, the GDP of France decreased by 0.2% while a drop by 0.1% was expected; the GDP of Italy fell by 0.5% while -0.4% drop was expected; the GDP of Germany rose only by 0.1% while +0.3% figure was forecasted.

The eurozone GDP as a whole dropped by 0.1% having shown a decline for the 6th quarter in a row, which also turned out lower than the forecast of -0.2%. At the same time the U.S. economy didn’t show negative quarter growth rates from the second quarter of 2009, which is very well seen on the chart below.

Source: epp.eurostat.ec.europa.eu

According to this data the euro fell to the 6-weeks minimum against the U.S. dollar but then it was maintained at the level of 1.2850 and even made an attempt to rise. Such situation was influenced by negative data of the U.S. economy. The manufacturing activity business from the Federal Reserve Bank of New York unexpectedly fell to -1.43 in May, compared with 3.05 in April and the growth forecast to 4.00.

Inflation in the manufacturing sector showed the most drastic decline for more than three years. The producer price index fell by 0.7% in April. Mainly it happened due to the drop of energy prices which fell by 2.5% for the month. The absence of inflation pressure is especially negative for the dollar as it allows continuing quantitative easing and buying of bonds without a fear of price growth.

The U.S. industrial production fell by 0.5% in April while a drop by 0.1% was expected, which was connected with a production loss in the manufacturing industry sector and decrease in demand of municipal services. Capacity utilization fell to 77.8% with the forecast of 78.3%. The data of March also lowered.

The index of industrial production in the USA

Source: federalreserve.gov

The data on the inflow of capital into the United States also turned out negative. Net Long-term TIC Flows in March amounted to 13.5 billion dollars against the forecast of their purchases in the amount of 43.4 billion. Investors mainly bought short-term bonds in March fearing that automatic reduction in expenditures of the federal budget can influence a weak recovery of American economy.

Only statistics from the National Association of Home Builders / NAHB / showed some improvement. NAHB Housing Market Index rose in May, after three months of decline –up to the level of 44, with growth forecast up to 43. On Thursday another U.S. macrostatistics block will be published: housing data, consumer inflation and weekly applications for benefits.

The pound managed to become stable on Wednesday after 4 days of decrease. It was supported by labor market data which happened to be better than expected. The number of applications for unemployment benefits decreased by 7300 in April while a decrease by 3100 was expected. Also, the unemployment rate decreased by 0.1% to the level of 4.5%, while according to the forecast it was to remain the same - at the level of 4.6%.

The Bank of England in its inflation report for the 2nd quarter increased forecasts for GDP growth in the UK, but stressed that the recovery would be weak. It is supposed that in the second quarter of 2013 the GDP growth will increase up to 0.5% from 0.3% in the first quarter. The head of the Bank of England Mervyn King marked that economy recovery was very close. According to him forecast improvement became the first since the beginning of financial crisis.

 

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Overview of the main economical events of the current day - 17/05/2013

The dollar shows its strength despite weak macrostatistics data

At the end of Thursday the dollar almost didn’t change according to the dollar index that shows its relation to the basket of six major currencies. The dollar rose against commodity currencies, fell against the pound and almost didn’t change against the euro and the yen. Although in the middle of the day it made attempts of growth correction after another portion of negative economic data this week.

The dollar was supported at the end of the day by San Francisco FED president John Williams who said that the reduction of bond purchases was possible by the summer as the labor market situation had improved since September although it would need a further growth. “If everything will be as we hope, we can finish the programme of bond purchases at the end of this year”, - said Williams.

The same thing was also announced on Thursday by another FED representative, Dallas FED president, Richard Fisher. All this reinforces speculations on earlier exit from economic stimulus programme and plays into the hand of the dollar despite not very favorable macroeconomic data.

On Wednesday, as we remember, there were data on manufacturing inflation, which showed a strong decline. On Thursday consumer inflation data were also negative. The consumer price index fell by 0.4% in April in comparison with 0.2% drop last month which was mainly the result of petrol price fall by 8.1%.

Housing Starts in the U.S. in April fell more than expected - by 16.5% in comparison with the previous month and amounted to 853 thousand in annual basis which is the lowest figure for five months. The number of initial claims rose to the level of 360 thousand with expectations of only 330 thousand, which shows the biggest weekly gain since November 2012. And the weak macrostatistics block was finished by the Philadelphia Fed manufacturing Index which fell to -5.2 in May while its growth up to 2.0 was expected.

Philadelphia Fed Manufacturing Index

Resource: phil.frb.org

The euro grew up at the beginning of the day after the release of inflation and trade balance data. The eurozone’s trade surplus increased in March and turned out two times more than in February, which was connected with a sharp export increase and import decrease. Inflation in eurozone in April slowed in annual basis up to 1.2% after 1.7% growth in March, which is the lowest level since February, 2010.

But then the euro receded from almost all conquered positions, which was influenced by the words of the EU industry commissioner Tajani about the strength of the euro. He called on the European Central Bank to take measures for weakening the single European currency and help the exporters. Especially bad impact on them is made by the euro growth against the yen.

The Australian dollar dropped on Thursday to the 11-months minimum against the forecast of Goldman Sachs which lowered on Thursday AUDUSD to the level of 0.90 from 0.98 by the end of the year. Other banks make even lower forecasts. UBS considers that the pair can fall to 0.80 level if the investment boom in Australia weakens quicker than it was expected due to commodity

 

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Overview of the main economical events of the current day - 20/05/2013

The main events of this week

The dollar rose on Friday against all major currencies and exceeded the level of 103 in the pair USDJPY for the first time since October, 2008 – after the release of a preliminary index of consumer sentiment from the University of Michigan in May, which happened to be much better than expected. It rose up to 83.7 points in May – maximum level since July, 2007 in comparison with 76.4 points last month.

The U.S. composite leading indicators from the Conference Board also rose in April by 0.6% and turned out three times higher than expected. These data show the possibility of further economic growth strengthening in the United States. The rally in the stock market, property market recovery and petrol price lowering can support consumer spendings which amount to more than 70% of the U.S. GDP.

Resource: conference-board.org

For the last week the dollar had risen by 1.4% in the dollar index which showed its relation towards the basket of six major currencies despite mixed data released last week. Market participants are more focused on earlier exit of the U.S. economy from incentive programmes, which was announced by some FED representatives last week. Even San Francisco FED president John Williams, who formerly belonged to the camp of «pigeons», made such statement.

This week a meeting of the Central Bank of Japan will be held and there will be a release of Australian Central Bank last meetings minutes (on Tuesday) and of Bank of England (on Wednesday). We can hardly expect any surprises from these events.
On Wednesday "minutes" of the last FED meeting in May will be published and market's participants will not leave it without attention. It was at that meeting where a possibility to change the volume of program of bond purchases, as upwards and downwards - depending on the situation in the economy – was announced. And if these minutes don't prove the assumptions of closing up of incentive programmes, the dollar can strengthen considerably.

The main events of eurozone will be Thursday release of preliminary PMI for May on industrial and service sector, and IFO indexes on Friday. According to the PMI a slight rise is expected but the indexes are below the level of 50 which shows the economy decline. IFO should remain unchanged. Eurozone economic prospects remain weak and no economic recovery seems to happen. On Thursday evening European Central Bank President Mario Draghi will make a statement in London about "The Future of Europe in the global economy".

Manufacturing and consumers inflation data of Britain will be released on Tuesday. It is expected to indicate a slowdown in the annual inflation rate in April. Retail sales data will be published on Wednesday; it is expected to grow slightly in comparison with the previous month. On Thursday in the second reading the country's GDP data will be published which are expected to be unchanged in comparison with its first estimate.

There are few data on the USA and mainly there will be housing market data: on Wednesday – existing home sales, on Thursday - new home sales and house price index from the FHFA. The housing market has shown some revival lately and becomes one of the driving forces of the U.S. economy growth. On Friday there will be durable goods orders. Last month they fell considerably. This month they are expected to grow a little.

But the main event of the week can be a speech of the Fed Chairman Ben Bernanke on Wednesday who will speak before the Joint Economic Committee of Congress with a speech about the U.S. economic outlook. In this speech market participants will look for some hints on the future of economic incentive programs, which can have a direct impact on the dollar.

The main bonds auctions of eurozone's countries (UTC time):

20-May

13:00 France to Sell Bills

21-May

08:00 the Netherlands to Sell 99-Day and 190-Day Bills
08:30 Spain to Sell 3- and 9-Month Bills

22-May

09:30 Germany to Sell Up to EUR5 Bln 10-Year Bonds

23-May

08:30 Spain to Sell Bonds

 

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Overview of the main economical events of the current day - 21/05/2013

The dollar is corrected before the key events of Wednesday

The dollar decreased on Monday against all currencies in anticipation of the publication of the minutes of the last FED meeting and Ben Bernanke's speech in Congress, both events will take place on Wednesday. The dollar's corrective decline started after 7-days growth and due to technical factors – after the dollar reached 3-years maximum last week amid rumors and expectations of a more rapid closing up of QE-3 program.

On Monday there were no any significant statistics data but Chicago FED report on manufacturing activity in its region was also negative for the dollar. Chicago Federal National Activity Index – CFNAI dropped to -0.53 in April from -0.23 in March while three of four components of the index showed a decline.

The yen rose on Monday from the minimum of 2008 after Japan's Economy Minister Akira Amari said that a further decline of the national currency could have negative consequences for the economy and could worsen the quality of life of people.

"Correction of excessively strong yen basically has come to an end", Amari said. According to the Reuters poll, 48% of firms in Japan want USD/JPY pair maintain near the level of 100 yen to the dollar particularly due to the fear of import costs growth while the yen is weak.

On Tuesday a 2-days meeting of the Bank of Japan starts, its results will be announced on Wednesday.

The euro demonstrated growth amid stronger industrial orders in Italy. They rose in March for the first time during five months by 1.6% while only 0.6% growth was expected. The increase was mainly due to foreign demand. Italy's economy has been reducing since the summer of 2011, and industrial production volume now is more than 20% lower its peak in 2007.

The pound also has risen, which was supported by the real estate market data. The report from the Rightmove showed that housing prices in Great Britain rose by 2.1% in May. It is the fifth monthly growth in a row which is connected with the limited supply. The annual increase was 2.5%, much higher than 0.4% growth in the previous month. Rising housing prices prove that the assets-buying program of the Bank of England and the loan financing scheme start to bring favorable results.

New Zealand dollar also finished Monday with a growth after having lost almost 6% of its value at the beginning of May. The reason for the corrective bounce up was the speech of the Minister of Finance who reported the rapid growth of real estate prices. If this price increase continues, it may make the Reserve Bank of New Zealand to raise interest rates.

JPMorgan Bank lowered the target level for the pair AUDUSD for the second quarter to 0.99 from 1.05. Meanwhile, according to Wall Street Journal poll, 15 economists on average expect that at the end of 2013 the Australian dollar will be traded at parity against the U.S. dollar.

The FED's representative Charles Evans announced on Monday that soft monetary policy would last till the inflation rate becomes lower than 2%. A bond buying program will be prolonged till a significant improvement in the labor market with 5.25%-6% unemployment rate. Another FED representative Richard Fisher said that the completion of the purchase of all the securities at the same time would have too negative influence. And there is no stable growth of jobs which is favorable to be seen.

 

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Overview of the main economical events of the current day - 22/05/2013

The pound slumped at the inflation data

The dollar almost didn't change on Tuesday to the dollar index – it rose against the franc, yen, Canadian dollar and pound but fell against the euro. The pound fell sharply after the release of manufacturing and consumer inflation data. Inflation rate slowed in April due to energy prices decline and oil prices fall by 6.8%

UK producer prices (PPI Output) increased in April by 1.1%, with expectations of 1.4% growth, which was the lowest annual rate since September, 2009.

The consumer price index (CPI) rose by 2.4% (vs. +2.6% forecast) and by 0.2% (vs. +0.4% forecast). Annual consumer inflation was the lowest since September, 2012.

Core CPI also did not meet the forecast of +2.3% and rose by just 2.0%, which was the lowest figure since November, 2009.

UK CPI Percentage change over 10 years:

Inflation figures reduction will give the future head of the Bank of England, Mark Carney more space to ease monetary policy after he takes up the post at the end of June. The pound recovered from the middle of March expecting that the Bank of England wouldn't provide further stimulation due to the fears that the inflation could get out of control. HSBC Bank believes that in the nearest 2-3 weeks the pound can sink again to 2013 low of about 1.48.

The euro rose on Tuesday after the speech of FOMC Member James Bullard and FOMC Member William Dudley. Bullard announced that the Fed should continue to buy bonds "correcting purchase rates according to the incoming data on the real economic growth and inflation". It can be a purchase upward correction as the inflation is relatively lower than the central bank's target level of 2% and it can fall even more. Bullard didn't make any comments whether the Fed should stop buying bonds.

The Swiss franc sank on Tuesday after the International Monetary Fund's report that supported the policy held by the Swiss National Bank. According to the IMF the Swiss National Bank should continue protecting the minimum limit for the euro/franc at 1.20. It also marked that Switzerland should not go back to a free floating exchange rate until deflationary pressure weakened and the economic recovery got stronger.

The Canadian dollar fell on Tuesday amid falling prices for commodities. Besides the CAD is under pressure of consumer inflation weak data which were released last week. The last speech of the governor of the Bank of Canada, Mark Carney had almost no influence on the CAD. He said about the success of Canada in the financial crisis and about the economic recovery.

Markets are waiting for Fed Chairman Bernanke to testify on outlook for the U.S. economy before the Joint Economic Committee of Congress on Wednesday. This speech can be more important than the publication of the minutes of the last Fed meeting which will take place a few hours after Bernanke's speech.

 

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Overview of the main economical events of the current day - 23/05/2013

Fed can start to curtail asset-buying program at one of its nearest meetings.

The dollar rose on Wednesday against all major currencies amid the Fed Chairman Ben Bernanke's speech in the Congress and the publication of the minutes of the last Fed meeting. At the beginning of Bernanke's speech the dollar slumped after he had said that premature tightening of Fed monetary policy could hurt economic recovery.

Market participants decided that the Fed was sure to continue its asset-buying program. Existing home sales data which turned out worse than expected also influenced the dollar's fall. Existing home sales volume reached the level of 4.97 mln houses while the growth of 4.99 mln was expected.

However, then the dollar rose sharply after Bernanke had said that "the Fed will gradually reduce the amount of bond purchases" and that "the Fed can reduce the amount of bond purchases at the next meetings if the data will allow to do it". All this increases the importance of the U.S. macroeconomic data.

The published minutes of the last Fed meeting showed that the question of an earlier curtail of incentive programs is seriously discussed among the FOMC members. However, there are significant disagreements concerning the timing of QE curtail start, which was shown at their last meetings.

"A number of leaders expressed their willingness to slow the pace of bond purchases at the meeting in June if the economic data published by that time will show a fairly strong and steady growth of the economy. However, the leaders had different opinions about the required evidences and the probability of such outcome", - according to the minutes.

USD/JPY pair grew up to the maximum of October, 2008 after the Bank of Japan made a decision not to change its monetary policy at the meeting on Wednesday. The Bank of Japan confirmed its plans to double the monetary base for two years. Also in April the deficit of trade balance became worse in Japan, it is being maintained for 10 months in a row. The yen decline hasn't had an affect on foreign trade yet.

The euro fell on Tuesday but this decline didn't last long. The trade surplus reached its record height of 25.9 billion euro in March partly due to the growing export.

But a sharp fall was shown by the pound after the release of retail sales data which were much worse than expected. Retail sales volume fell by 1.3% against the forecast of 0.1%.

Source: ons.gov.uk

The Swiss franc sank to a two-year low against the euro after the president of the Swiss National Bank, Thomas Jordan announced that there was a possibility to adjust the lower limit of EUR/CHF pair and also to introduce negative interest rates in case of necessity.

Australian dollar fell on Wednesday after consumer sentiment data in Australia from the Westpac showed the sentiment worsening for the second month in a row. Earlier the Australian Bureau of Statistics has warned of the possibility of a sharp slowdown in mining investment and the energy sector for the next five years.

 

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Overview of the main economical events of the current day - 24/05/2013

Manufacturing PMI shows a decline in China

The dollar weakened on Thursday against all major currencies showing a corrective fall and recovering the previous day's growth despite rather good macrostatistics data. Most of all the dollar fell against the yen amid a sharp fall of Japanese share index Nikkei that slumped by 7.3%, which has become the strongest adjustment since March, 2011 when it fell because of the earthquake. Stock markets started to fall the day before when Bernanke announced about the possibility of an earlier curtail of incentive programs. Another reason of decline was the release of HSBC manufacturing PMI data of China.

HSBC Flash Manufacturing PMI

Source: markiteconomics.com

HSBC preliminary PMI slumped unexpectedly in May to 49.6 from 50.4 last month while no changes were forecasted. It fell for the first time during 7 months below 50, which separates activity growth from its fall. It made the situation worse and market participants started to reconsider their estimation of economic outlooks of China. In May there was a sharper decrease of new orders and employment sub-indices while export order rate slowed.

A sharp fall of the dollar against the yen stimulated its decrease against other currencies. The euro grew amid the release of better manufacturing PMI than expected. Meanwhile the service PMI turned out worse than forecasted. Besides, it is still below 50, which indicates activity decline. Preliminary composite index PMI for the whole eurozone rose up to 47.7 in May from 46.9 with the forecast of 47.2.

The pound rose on Thursday amid the release of the second estimate of GDP for the first quarter, which remained unchanged. At the same time household spending of Great Britain rose in the first quarter at the slowest pace for 18 months despite a slight increase in earnings in the period.

Released US data on Thursday turned out better than forecasted indicating a further USA economic recovery. The number of initial jobless claims last week decreased more significantly than expected – to 340 thousand with a forecast of 346 thousand. The USA primary housing market sales rose by 2.3% in April having reached the highest level since July, 2008 – 454 thousand houses in annual basis with the forecast of 425 houses.

FHFA housing price index rose by 1.3% m/m in March with expectations of growth by only 0.8%. In annual basis housing prices rose by 7.2 % in March. Kansas City Fed composite index for manufacturing sector rose up to 2 in May against -5 in April. Index above zero indicates activity growth. The index growth is recorded for the first time since September, 2012.

The Australian dollar sank to its 11-month low after the release of PMI data of China but at the end of the day it showed some growth. Consumers' inflation expectations from Melbourne Institute grew up to +2.3% in May in comparison with +2.2% last month.

 

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Overview of the main economical events of the current day - 27/05/2013

Consumer sentiment in Germany reached multi-year highs

The end of Friday showed a little change of EURUSD although at the beginning the euro was rising after GfK release of the consumer confidence index in Germany and a more important index of business sentiment in Germany from IFO which turned out better than expected. But then the euro started to fall after the release of the US durable goods orders data which almost twice exceeded the expectations.

GfK report showed that consumer sentiment in Germany reached 6-year high. The leading indicator of consumer confidence in Germany rose up to 6.5 points in June from 6.2 points in May although no changes were expected. The index has been growing for 5 months in a row and its value is the highest since September, 2007. Labor market is still sound and the growth of wage level improves household income and increases its readiness for large purchases.

Source: gfk.com

The survey of the IFO research institute which is considered a barometer of business sentiment showed a growth of business confidence in Germany after its 2-month fall. Business sentiment index of Germany grew up to 105.7 in May from 104.4 in April exceeding the forecasts of economists who expected the index to remain without changes. Only the subindex of the current conditions rose up to 110.0 while the subindex of expectations remained at the same level of 101.6. Business sentiment index is an average of current conditions index and expectations index.

Also on Friday, the National Statistical Office of Germany provided the final data of the economic development in the first quarter. Germany's GDP dropped by 0.2% in annual basis and rose by 0.1% in quarter basis, which coincided with the initial estimation. Consumer optimism growth and improvement of business confidence indicate a possible Germany's GDP acceleration of growth in the following six months which can rise by 0.5% by the end of the year.

Friday's release of the data of the US durable goods orders allowed the dollar to recover its positions. The orders rose by 3.3% in April with an expectation of growth by only 1.7%. Base orders for durable goods without the volatile components of orders for transportation equipment rose by 1.3% while a growth only by 0.5% was expected.

However by the end of the week the dollar had fallen against the euro and the yen and had risen a little against the pound and commodity currencies. According to the dollar index which reflects its relations towards the basket of six major currencies the dollar dropped by 0.88 during the week. Most of all, the dollar sank against the yen amid Japanese stock index Nikkei 225 dropped by almost 7% during the week. The decline in the Nikkei futures was even higher than 10% at the moment. USDJPY pair has shown lately a very high correlation with the Japanese stock market.

Also recently there has been strong correlation between the dollar and the U.S. stock market: the dollar rose with it as the money received by the US stock market also supported the dollar. Over the past week the broad market index S&P 500 dropped by 1.1% after Bernanke's speech in Congress where he said about the possible reduction of the incentive programs at future meetings, in case of economic conditions improvement. Stock market decline had a negative impact on the dollar.

 

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Overview of the main economical events of the current day - 28/05/2013

The main events of this week

The week started quietly, there were no any significant statistics data on Monday and due to the holidays the markets of the USA and Great Britain were closed. This week will not be oversaturated with macrostatistics data. On Thursday in eurozone the indexes of consumer confidence and different economic sectors will be released. Their slight growth is expected. On Friday there will be a release of preliminary consumer inflation and unemployment data. In Germany labor market data will be published on Wednesday.

As it is expected, the unemployment figures will indicate that the situation in the eurozone economy remains difficult amid the pressure from the economy measures. There is a forecast of employment decline in the eurozone except Germany where the situation is more favorable, which was shown by business and consumer confidence indexes last week.

Also retail sales data of Germany will be released on Friday; a slight growth is expected in comparison with the previous month. In France consumer spending data will be published on Friday which will probably show a decrease due to a small household confidence, which has a negative influence on consumption.

In Great Britain CBI Realized Sales will be published on Wednesday, Nationwide Housing Prices – on Thursday and consumer and mortgage lending data – on Friday. The number of approved mortgages is expected to increase slightly as well as consumer lending in April. GfK Consumer Confidence, also released on Friday, is likely to show a subdued consumer confidence amid an uncertain economic recovery.

In the USA CB Consumer Confidence index will be released on Tuesday. It is forecasted to rise considering a rather strong growth of Michigan University preliminary sentiment index which will be finally released this Friday. S&P/Case-Shiller Composite-20 HPI will be released on Tuesday.

The US Preliminary GDP and Pending Home Sales will be released on Thursday. The GDP growth estimate is not expected to be reconsidered. On Friday there will be a release of Chicago PMI and consumer spending and income data for April. It is expected that the household sector has begun the second quarter insecurely. Personal income grew by only 0.1%, while consumer spending remained unchanged.

On Wednesday Bank of Canada Rate Decision will be held and no changes in the monetary policy are expected. The Bank of Canada Rate Statement will be examined thoroughly for any signals of the central bank position change. The meeting will be headed by Mark Carney. At the end of the week he will leave for Great Britain to take over the reins at the Bank of England. On Friday Canada’s GDP will be released.

Building Approvals and Private Capital Expenditure data will be published on Thursday. The companies are expected to continue lowering their forecasts of capital expenditures during the year. On Friday ANZ Business Confidence will be released.

Besides, on Friday there will be a release of consumer inflation data of Japan for April which is expected to have some adjustment due to the introduction of a quantitative easing program. If the CPI shows some growth, it can support USDJPY.

At the debt market Italy will sell medium-term bonds (CTZ and BTP€i) on Tuesday, and 5-year and 10-year bonds – on Thursday. In the USA medium-term bonds with a total amount of 99 billion dollars will be sold from Tuesday to Thursday.



28-May (UTC Time)

08:00 the Netherlands to Sell Up to € bln 2023 Bonds

09:00 Italy to Sell Up to €3.5 bln 2014 and 2018 Bonds (CTZ and BTP€i)

10:00 Belgium to Sell 2018, 2023, 2032 and 2035 Bonds

17:00 the USA to Sell $35 bln 2-Year Notes



29-May

09:00 Italy to Sell Bills

17:00 the USA to Sell $35 bln 5-Year Notes



30-May

09:00 Italy to Sell 5- and 10-Year Bonds

17:00 the USA to Sell $29 bln 7-Year Notes

 

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Overview of the main economical events of the current day - 29/05/2013

Consumer Confidence in the USA reached a 5-year high

The US dollar showed a significant drop on Tuesday after the release of positive macroeconomic data on the back of a rally in the stock market. The DJIA rose by 0.69% and reached its record high. The USA real estate market data and consumer confidence data pleased the buyers of the American currency again. It is proved by a steady recovery of the US economy in comparison with other countries, which makes an earlier exit from the incentive programs possible – which in turn makes the dollar more attractive for investors.

CB Consumer Confidence of the USA rose up to 76.2 revised upwards from April’s 69.0. It is the highest reading since February, 2008. Further growth of optimism about the future of economy can cause an increase of consumer spending which accounts for 70% of GDP.

According to the Standard & Poor’s survey S&P/Case-Shiller Composite-20 HPI accounted for 10.87% in March year-on-year while a growth only by 10.05 was expected. Prior month data were also revised upwards. Price growth was facilitated by low mortgage interest rates, a decreased number of property alienation cases and a reduction at the housing market.

The euro and the franc fell on Tuesday. According to the French National Bureau of Statistics Insee Consumer Confidence sank to 79 which is the lowest level since July, 2008. The index was expected to grow up to 85. Switzerland's trade balance also turned out worse than expected. Trade balance surplus fell to the level of 1.73 billion Swiss francs in comparison with 1.89 billion Swiss francs in March while an increase by 2 billion was forecasted.

The yen dropped against most currencies on Tuesday on the back of the growth of Japanese stock market. Japan's Economy Minister Akira Amari said on Tuesday that "Japan's stock market is expected to leave the zone of turbulence". It boosted the share prices ad supported the USDJPY. BOJ Board Member Ryuzo Miyao also announced on Tuesday that the Bank of Japan was not going to hold a quantitative easing as long as it would be necessary until the goal of 2%-inflation would be reached.

The Canadian dollar slumped on Tuesday against the US dollar to its lowest level since June, 2012 – before Canada’s Central bank meeting which will be held on Wednesday. The meeting of the central bank of Canada will be the last one with Mark Carney as the governor of the Bank of Canada. Although interest rate is not expected to change, the Bank of Canada can change the forecast of economic growth and inflation.

 

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Overview of the main economical events of the current day - 30/05/2013

The dollar is going down

The dollar weakened significantly recovering from its growth on Tuesday. There were no any important data about the USA on Wednesday. One of the main causes of the adjustment decline was a fall of stock markets which influenced the decrease of USDJPY. And then the dollar continued to weaken against all currencies. Taking profit and bad labor market data of Germany had an influence on the fall of stock markets.

Unemployment change in Germany rose by 21 thousand people against the forecast of 4 thousand. The prior month reading was also revised downward from 4 thousand to 6 thousand. Unemployment rate hasn’t change and accounted for 6.9% Nevertheless, the labor market in Germany is still strong despite a deep recession in eurozone where the unemployment level was 12.1% in March. Private loans in eurozone fell by 0.9% in April against the prior month reading of -0.7%. Meanwhile Italian Business Confidence turned out much better in May than it was expected – 88.5 against 87.9 in April.

The data concerning Great Britain were not brilliant. CBI Realized Sales (CBI - Confederation of British Industry) fell to -11 in May, which is the lowest reading since January, 2012. By the end of the day the euro and the pound had risen despite some confusing data. According to the Commerzbank poll released on Wednesday, German companies are more optimistic about the outlook for the euro in the next three months than they were in April and March.

The euro growth was probably supported by an article in the German newspaper Die Welt which referring to unnamed ECB representatives reported that Jens Weidmann, Jörg Asmussen and Yves Mersch were against bond purchases on ECB balance secured by assets. Jörg Asmussen voted against rate lowering in May and Mersch opposed the use of non-standard measures. Another board member Christian Noyer announced on Tuesday that he was not sure whether reducing of deposit rate had sense. All this will complicate the head of the ECB Mario Draghi’s further easing of monetary policy although anyway sooner or later it will be necessary.

The franc rose on Wednesday on the back of consumption growth. UBS consumption indicator rose significantly in April up to 1.46 in comparison with March reading 1.24 revised downward. A positive trend was supported by the registration of new cars, consumer sentiment and demand for hotel accommodation.

UBS Consumption Indicator

Source: ubs.com​

The Canadian dollar rose on Wednesday amid falling U.S. dollar and the planned meeting of the Central Bank of Canada. The Bank of Canada left the interest rate at the level of 1% having said that it “had sense” but further it may need a rate increase. Canada's GDP growth in the first quarter will be stronger than the expected 1.5% but the total and core inflation will remain subdued.

Organization for Economic Co-operation and Development (OECD) decreased its world economy growth forecast from the previous estimate 3.4% to 3.1% in its semi-annual Economic Outlook published on Wednesday. Besides the eurozone and China’s economy growth forecast was decreased. However the OECD appeared optimistic towards the USA expecting that its economy would rise in 2013 by 1.9% and by 2.8% in 2014. The forecast for Japan was also increased up to 1.6% from 0.7% and the next year estimate was 1.4%.

 

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Overview of the main economical events of the current day - 31/05/2013

EURUSD again trades above the 1.30 level

The dollar continued falling on Thursday amid rather weak macrostatistics data. Preliminary GDP, unemployment claims and pending home sales data turned out worse than expected. Weaker data can be considered a signal to continue the American economy incentive program, which is, no doubt, negative for the dollar.

According to the preliminary data the U.S. GDP grew in the first quarter of 2013 by just 2.4% year-on-year, not by 2.5% as expected. A slight decline of growth rate could be linked to a weaker inventories growth than it was initially expected.

The number of unemployment claims rose up to 354 thousand while the reading was forecasted to maintain at the level of 340 thousand. It is the third growth for the past four weeks, which can prove that the labor market may have lost its momentum of recovery.

The Number of Initial Unemployment Claims

According to the National Association of Realtors survey pending home sales index grew by 0.3% in April up to 106 – the highest level since April, 2012 – which hasn’t reached the forecasted growth by 1.5%.

The euro grew against the dollar on Thursday up to its 3-week high having risen above 1.30. In the first half of the day the euro was supported by the data from the European Commission. According to the data businesses and consumers in 17 countries of the euro-zone are less pessimistic about the outlook showing the first improvement of confidence since February. Economic Confidence which covers business and consumer confidence of the euro-zone rose up to 89.4 in May against 88.6 in April.

Euro-Zone Economic Confidence

The pound and the franc also showed growth on Thursday following the euro. According to the country's largest mortgage company Nationwide Building Society, House Price Index in Great Britain rose by 1.1% in May, which became the highest annual rates of growth since November, 2011. The GDP of Switzerland rose by 0.6% q/q in the first quarter, which significantly exceeded the expected growth by 0.2%. The quicker rates of growth were mainly linked to the growth of private consumption expenditures and increased investment in the construction sector.

The Canadian and Australian dollars also strengthened on the back of rising prices for commodities. Canada’s deficit of current account decreased to 14.1 billion Canadian dollars in the first quarter in comparison with the revised upwards reading of 14.6 billion in the fourth quarter with expectations of 15.3 billion.

The number of building approvals in Australia rose by 9.1% m/m in April while the growth by 4% was expected. However Private Capital Expenditure suddenly dropped by 4.7%, while it was expected to rise by 0.5%. The number of building permits in New Zealand rose by 18.5% in April in comparison with March, which also significantly exceeded the expectations.

 

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Overview of the main economical events of the current day - 03/06/2013

The main events of this week

The euro dropped on Friday after the release of unemployment data in the euro-zone which reached a new record high 12.2% in comparison with 12.1% in March. In Italy unemployment rate rose up to 12% in April, which is the highest reading for 36 years. Realized sales in Germany fell by 0.4% in April - the third month in a row.

Source: epp.eurostat.ec.europa.eu​

The dollar grew on Friday on the back of a positive macrostatistics data release. Thus, Chicago PMI rose up to its highest level of 58.7 since March, 2012 while the level of 50 was expected. Revised upwards U. of Michigan Consumer Sentiment reached the highest reading 84.5 since July, 2007 after 76.4 in April.

At the same time, consumer income and expenditure report was a little disappointing. The incomes of the Americans didn’t change but the expenditure fell by 0.2%, which didn’t reach the forecasted readings.

Over the past week the dollar lost 0.41% according to the dollar index which shows its relation towards the basket of six major currencies. Most of all the Japanese yen rose against the dollar (+0.78%). Then follow European currencies: the Swiss franc (+0.64%), the euro (+0.50%) and the British pound (+0.49%). Commodity currencies dropped amid falling oil prices – the Canadian dollar (-0.55%), the Australian dollar (-0.83%) and the New Zealand dollar (-1.89%). But at the end of the month the dollar has shown growth in the dollar index by 1.93%. It is interesting that the US stock index DJIA rose exactly the same.

The first week of the month will be rich in macrostatistics data. Besides three meetings of the central banks, the US traditional labor market report is released on the first week and it will be one of the main events of the week. Preliminary ADP data will be received on Wednesday.

Also there will be a release of PMI, trade balance index (the USA, Canada, Australia, Germany, France, Great Britain, China) and realized sales index (Australia, euro-zone). And at the end of the week, on weekend, a large block of statistics of China will be released.

In the debt market an important day will be Thursday when the medium-and long-term bonds are sold by Spain and France. On Tuesday and Thursday Japan will sell 10-Year and 30-Year bonds.



3-Jun (time UTC+4)

12:00 the Netherlands to Sell 86-Day and 208-Day Bills

17:00 France to Sell Bills



4-Jun

07:45 Japan to Sell 10-Year Bonds

13:00 Austria to Sell 4.3% 2017 and 1.75% 2023 Bonds

13:30 Belgium to Sell Bills



5-Jun

13:30 Germany to Sell Up to EUR4 bln 2018 Bonds



6-Jun

07:45 Japan to Sell 30-Year Bonds

12:45 Spain to Sell Bonds

13:00 France to Sell 3.50% 2020, 1.75% 2023 and 2.75% 2027 Bonds (OAT)

 

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Overview of the main economical events of the current day - 04/06/2013

Manufacturing PMI in the USA turned out the lowest for almost four years

The dollar slumped on Monday after the release of weak manufacturing PMI data. ISM Manufacturing PMI fell to 49 points since April’s 50.7 points – having dropped for the first time this year lower than the level of 50 which separates the activity growth from its fall. The index in May turned out the lowest since August, 2009. The output and new orders subindex dropped most of all.

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Construction expenses turned out also lower than expected having risen by 0.4% against the forecasted growth by 1.0%. The dollar fell lower than 88 yen – for the first time since May, 9. It may turn out too early to expect scaling back of QE-3 incentive program with such statistics.

At the same time the euro-zone PMI is a little better than expected although it is still lower 50 points which separate recession from recovery. Final manufacturing PMI reached 48.3 in comparison with 46.7 in April having reached the 15-month high. The index movement justifies the ECB forecasts about the euro-zone economic recovery in the second half of the year, which significantly reduces the probability of rate reduction at the ECB meeting this Thursday.

The pound grew on Monday also after the release of the same PMI statistics data which rose to 14-month high in May. Manufacturing PMI reached 51.3 level while the growth up to 50.3 was expected. The reading of March was also revised upwards up to 50.2 from 49.8. It reduces the probability of extra easing of the monetary policy at the nearest meetings of the Bank of England.

Source: markiteconomics.com​

The Australian and New Zealand dollar grew on Monday amid rising commodity prices. The official manufacturing PMI of China released by the National Bureau of Statistics of China on Saturday rose up to 50.8 points in May from 50.6 in April. The Australian dollar fell by 7.7% in May, which has become the most significant drop among all major currencies. Although no change of rate is expected in June, interest rate swap market forecasts its fall in September with a probability of 57%.

Meanwhile San Francisco Fed president John Williams announced on Monday in Stockholm that the Fed was likely to start reducing the volume of bond redemption this summer and finish the quantitative easing program at the end of the year. But Williams is not a voting member of the FOMC this year.

 

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Overview of the main economical events of the current day - 05/06/2013

Calm before the storm

The dollar almost didn’t change against the euro and the pound on Tuesday and rose against the yen and commodity currencies after a considerable drop on Monday. The euro and the pound traded in rather narrow ranges and trading is likely to be so till Friday waiting for a key report on the USA labor market which can make clear possible future actions of the Fed towards an earlier exit from incentive programs.

There were almost no important data on the USA except the trade balance which turned out a little better than expected. Trade balance deficit rose up to $40.3 bln in April while a growth up to $41 bln was expected. However the deficit rose significantly in April by 8.5% in comparison with prior month due to a higher growth of import. IBD/TIPP Economic Optimism Index grew up to 49 in June vs 45.1in May but didn’t reach the forecasted level of 50.

The pound had almost no reaction towards the release of construction PMI which is again better than forecasted and shows a growth along with the PMI of other economic sectors. After six months of decline when the index was lower 50, British construction PMI rose up to 50.8 against 49.4 earlier. A rise up to 49.6 was expected. There is a chance that on Wednesday service PMI will be also better than forecasted.

Source: markiteconomics.com​

Spanish unemployment change decreased significantly by 98.3 thousand people while it was expected to fall only by 50 thousand. However producer prices of the euro-zone fell in April for the second month in a row and its decline rate was the fastest for almost four years. Producer price index dropped by 0.6% m/m with a forecast of decline by 0.2%. Weak inflation data can give Mario Draghi more opportunities in future to ease monetary policy.

The Australian dollar fell significantly on Tuesday after the Reserve Bank of Australia had kept the key interest rate at the same lowest level 2.75% but had marked that the Australian dollar was still high. It also didn’t rule out the possibility of further rate decline according to a favorable forecast on inflation.

Meanwhile the negative balance of the Australian current account has considerably decreased for the first quarter, having fallen by 42% for the first quarter and having reached the forecasts. Australia Net Exports of GDP amounted to 1.0%, which turned out higher than the experts’ estimate 0.8%.

The dollar rose against the yen and again exceeded 100 yens per dollar amid the rise of the Nikkei 225 which rocketed by 2.1% on Tuesday. The experts of the Morgan Stanley Bank believe that USDJPY correction can last all summer. The decline in stock markets and the increased bond market volatility shake faith of market participant in success of «abenomics» and in the ability of the Bank of Japan to manage the deflation.

 

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Overview of the main economical events of the current day - 06/06/2013

ADP labor market data are again worse than forecasted

Statistics data from the USA on Wednesday again didn’t please the bulls of the US currency. Preliminary ADP labor market data turned out worse than expected and haven’t been reaching forecasted reading for the third month in a row. Besides, factory orders also turned out worse than expected. Revised unit labor costs also slumped for the past quarter.

Service PMI in May was a little better than forecasted – which almost didn’t support the dollar. As a result, the dollar significantly weakened against the pound and the yen, it almost didn’t change against the euro and CAD and continued growing only against the AUD and NZD.

Automatic Data Processing (ADP) survey released on Wednesday showed that nonfarm private payroll employment rose by 135 thousand against forecasted 170 thousand. Prior month data were also lowered from 119 thousand to 113 thousand. ADP survey is often considered preliminary before a key labor market report which is released two days later on Friday.

ADP Non-Farm Employment Change

Factory orders rose by only 1% in April in comparison with the prior month while a more significant growth was expected – by 1.4%. March data also became worse to -4.7% while before it was reported to decline only by 4%. Revised unit labor costs dropped by 4.3% for the first quarter having shown the sharpest decrease since 1947. Earlier the reading was reported to rise by 0.5% and no changes were expected.

ISM Non-Manufacturing PMI grew up to 53.7 in May in comparison with 53.1 in April and a little beat the forecast of 53.5. PMI growth rate increased but the employment subindex fell.

ISM Non-Manufacturing PMI

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The same service PMI of Great Britain was much better than forecasted, which allowed the pound to show a steady growth against all currencies. Service PMI rose up to 54.9 in May from 52.9 in April – it is the highest reading since March, 2012. Service sector is about ¾ of the UK economy.

The euro continued to trade flat - a little lower 1.31. It didn’t manage to maintain above this level due to weak data. The final services PMI of the euro-zone decreased to 47.2 from 47.5 in May. Meanwhile in Spain the PMI rose, in Italy it fell, in France it remained unchanged and in Germany slightly decreased. Realized sales in euro-zone fell more than expected in April by 0.5% and they have been decreasing for the third month in a row as in Germany.

The yen rose on Wednesday amid a sharp Nikkey decline which fell by 3.8% after the prime minister of Japan had introduced a new plan of reflation – so-called «third arrow» of economic policy. He promised to raise the per capita GDP by 3% and more every year during next 10 years, to create special economic zones and so on. But investors were not inspired by such plan and they greeted it by selling securities.

The Australian dollar continued the prior day’s fall on Wednesday, which was supported by the GDP data. The Australian GDP rose only by 0.6% for the first quarter while a growth by 0.8% was expected. Year-on-year the growth was 2.5% while 2.7% growth was expected.

 

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Overview of the main economical events of the current day - 07/06/2013

Dollar dropped ahead of the key US employment data report issue

On Thursday, the dollar's rate fell dramatically against all majors, though no external force contributed to it. Probably, market players reacted to Friday’s adverse employment data in advance by correcting their positions ahead of this primary event. And dramatic drop of dollar along with stock markets disruption started just after the beginning of ECB head Mario Draghi's press-conference concerning ECB's meeting results.

ECB decided to leave the rate unchanged. Strain of Mario Draghi’s comments remained unchanged as well. Once again he pointed at economic problems and risks, but, therewith expressed his hope that business activity will recover within one year. Inflationary expectations still remain low, and stimulatory measures will be utilized as long as necessary.

This year’s Euro Zone GDP forecasts got worse due to remaining downward risks. But Mario Draghi let everyone know that the key interest rate decrease is not something to wait for as of now. EURUSD pair reacted to the statement by growing significantly.

Bank of England also decided to leave the rate and the assets acquisition program unchanged. The Pound was also supported by the Britain’s housing prices that were growing this May faster than ever within the 2.5 years period. The Halifax housing prices index increased by 0.4% in May though it was expected to grow just by +0.2%, which confirms housing market’s recovery.

Thursday’s Euro Zone data was mostly negative. Quarterly unemployment rate in France increased from 10.5% to 10.8% at once, thus, reaching its maximum since 1997. Order volume in Germany’s production industry decreased in April by 2.3% against the background of expected -1.0%.

At the same time the US data was not so bad. Quantity of initial applications for unemployment compensation in US decreased last week by 11 thousand: to 346 thousand against the expected decrease to 345 thousand.

The average 4-week initial applications quantity is 352.5 thousand in May, which exceeds the April's value by about 10 thousand. And Non-Farm Payrolls (NFP) to be issued on Friday is expected to be almost the same as in the last month (165-168 thousand). It’s most likely that NFP will turn out to be less by 20-30 thousand: about 140-150 thousand. But mostly, this reduction was already reacted to on Thursday. But in case the data will be in accordance to the forecasts, dollar stands a good chance for upwards correction after the recent sales.

 

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Overview of the main economical events of the current day - 10/06/2013

The main events of this week

Last week the dollar showed the largest decline over the year and fell by 2% in the dollar index which shows its relation towards the basket of six major currencies. During the week the dollar leveled the entire May increase. The largest decrease was on Wednesday and Thursday after the ADP report when bad labor market data which must have been released on Friday were worked out.

The data of the USA Department of Labor turned out rather contradictory. On the one hand Non-Farm Employment Change rose by 175 thousand which is the largest increase since February. The data turned out a little higher than the forecast of 163-168 thousand and almost coincided with the growth of employment change for the last 12 months which is 172 thousand per month.

Non-Farm Employment Change

On the other hand unemployment rate increased by 0.1% up to 7.6% from 7.5% in April. Although, unemployment rate growth can be explained by the fact that the population has started to return to the labor market. It is indirectly proved by the growth of participation rate from 63.3% to 63.4% and by the decrease of population not in labor force by 231 thousand. Underemployment rate (U6), which includes discouraged workers and part time workers, has fallen from 13.9% to 13.8% for the past month.

Unemployment Change in the USA

In general the USA labor market data turned out a little better than expected. The dollar was decreasing in anticipation of bad data and now its corrective bounce can go on this week facing 2-day meeting of the Fed which will be held next week June 18,19.

On weekend there was a release of a large Chinese data block. Inflation continued to fall and new loans also dropped. Industrial production and trade balance were as forecasted. However, imports and exports decreased significantly. The released data are negative for the Australian dollar as the currency of the main trade partner of China.

This week there will not be a lot of important macrostatistics data. Market participants will think over the key data of the US labor market released on Friday. There will be two meetings of Japanese and New Zealand central banks.

As usually, on the second week of the month industrial production and inflation data will be released. There will be a release of the UK and Australian labor market data. On Wednesday the German Federal Constitutional Court is due to announce a ruling regarding the constitutionality of the ECB's Outright Monetary Transactions policy (OMT). The hearings will be held two days – on Tuesday and Wednesday.

The USA realized sales will be released on Thursday; and producer prices and Prelim U. of Michigan Consumer Sentiment - on Friday. Traditionally, on the second week of the month long-term US bonds will be sold from Tuesday to Thursday. In theory, it may lead to the dollar increase and reduce of risky assets.



10-Jun (UTC+4)

13:00 Germany to Sell EUR4 bln 182-day Bills

17:00 France to Sell Bills



11-Jun

12:00 the Netherlands to Sell Up to EUR3.5 bln 2016 Bonds

13:00 Greece to Sell EUR1.25 bln 182-day Bills

21:00 the USA to Sell $32 bln 3-year Notes



12-Jun

13:00 Italy to Sell 3- and 12-month Bills

13:30 Germany to Sell EUR5 bln 2015 Bonds

21:00 the USA to Sell $21 bln 10-year Notes



13-Jun

13:00 Italy to Sell 3-year Bonds (BTP)

21:00 the USA to Sell $13 bln 30-year Bonds



14-Jun

07:45 Japan to Sell 5-year Bonds

14:00 Belgium to Sell Bonds

 

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Overview of the main economical events of the current day - 11/06/2013

Standard & Poor's rating agency raised the outlook for the USA credit rating

By the end of Monday the dollar almost had not changed in the dollar index, it had risen to the yen and Australian dollar but had fallen to the euro a little. There were no any significant data on the USA on Monday, besides the markets of China and Australia were closed. The dollar tried to rise against the euro at the beginning of the day but during the second half of the day it lost all growth. Fed representative Bullard supporting asset purchases said on Monday that low inflation indicated that the Fed could still continue buying bonds. Inflation is still low due to low commodity prices, a slowdown in Chinese economy and weakness in Europe.

The dollar rose against the yen on the back of the start of 2-day meeting of the Japanese central bank and amid the release of Japanese GDP data for the first quarter revised upwards. It allowed Japanese stock index Nikkei to rise by 4.9% and to show the largest per cent rise since March, 16, 2011.

In the first quarter of 2013 the GDP of Japan was revised upwards (+4.1% year-on-year, earlier it was reported about 3.5% growth) and it proves the effectiveness of Abe Sondzo’s economic policy. In the fourth quarter of 2012 the GDP of Japan rose only by 1.2% year-on-year. Also in Japan a current account surplus was recorded in April at the level of 750 bln yens, which turned out twice more than expected.

The decision of the Standard & Poor's to raise the outlook for the USA sovereign credit rating from negative to a stable one had almost no effect on the markets. S&P announced that such decision shows a stronger economic momentum in the USA this year and the improvement of government’s budget situation.

The euro rose on the back of mixed industrial production data in France and Italy and also the growth of Sentix index of investors’ confidence. The euro was also supported by the statements of Fed president Mario Draghi who said that “the euro-zone will not get out of the debt crisis through inflation and that the ECB will not intervene only in order to help countries to maintain solvency”.

Industrial production growth in France amounted to 2.2% m/m, while 0.2% growth was expected and in annual terms industrial production decreased only by 0.5% with the forecast of 4% fall. At the same time industrial production in Italy decreased by 0.3% m/m in April while no changes were expected. Italian GDP rates of growth were revised downwards for the first quarter to -0.6% q/q from -0.5% before. Sentix investors’ confidence index rose up to -11.6 in June in comparison with -15.6 in May having shown the second monthly growth in a row but it turned out a little weaker than forecasted.

Sentix euro-zone investors’ confidence index

Source: sentix.de​

ECB board member Joerg Asmussen said in the interview with the newspaper Bild that the potential decision of the German court against the ECB program of buying back government bonds of troubled euro-zone countries could mean new risks for the single currency. On Tuesday in Karlsruhe starts a two-day session of the Federal Constitutional Court of Germany, the highest judicial body of the country. The judges will consider the legitimacy of government bond purchase program "Outright Monetary Transactions" (OMT), which was announced by the ECB President Mario Draghi in September 2012. The court will also consider the question of the constitutionality of euro-zone stabilization fund - the European Stability Mechanism (ESM).

The Australian dollar dropped on Monday and fell lower 0.94 for the first time since October, 2011 after the publication of foreign trade data and inflation in China on weekend. Imports unexpectedly fell by 0.3% in May, while exports grew by only 1%, and the result was significantly lower than expected. Base metals imports decreased including copper and aluminum and also there was a sharp decrease of coil imports. The main supplier of these goods is Australia. Goldman Sachs lowered the outlook for Australian GDP for 2013 to 2.0% from 2.4% and expected that the AUDUSD would trade at 0.85 against 0.90 in 12 months.