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

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Overview of the main economical events of the current day - 12/06/2013

The Bank of Japan disappointed the market participants

The dollar fell by almost 3% against the yen on Tuesday having shown the biggest daily decline since May, 2010. After the 2-day meeting that was over on Tuesday the Bank of Japan kept the monetary policy line without changes having abstained from extra economic support measures including the expected prolongation of credit operation period which is used to decrease the volatility at the debt security market. The market participants had some hopes that the Bank of Japan would approve credit operations for at least one year.

However the central bank didn’t meet the market expectations. As a result the yen rose sharply. An extra factor of the dollar decline was the result of the auction for the sale of 3-year U.S. Treasury notes, which showed a rather weak result. Securities yield rose to 0.581% from 0.354% the previous month, which is higher by more than 58%. The US Treasury 2-year and 3-year securities are traditionally popular for purchases from Japanese investors. The analysts of the Bank of America believe that further scale back of USDJPY positions can push it into 91 area.

The dollar crash against the yen weakened the dollar against other major currencies: euro, pound and franc. Commodity currencies managed to compensate its fall by the end of the day and closed almost at zero. EURUSD exceeded the level of 1.33 on the back of the German constitutional court meeting about the legitimacy of ECB peripheral bonds purchase program (OMT). The ECB representative Asmussen said at the hearings that the ECB was ready for unlimited purchases of government bonds by the OMT; and that “the financial markets need a strong signal that the OMT program is unlimited”.

The pound rose on Tuesday and exceeded the level of 1.56 despite rather mixed industrial production statistics. According to the Office for National Statistics survey the production in the manufacturing industry of the country decreased by 0.5% in April in annual terms while a drop by 0.3% was forecasted. However the base industrial production indicator turned out better than expected as in April it rose by 0.1% vs March while the reading was not expected to change. RICS House Price Balance in May was better than expected.

The UK industrial production index

Source: ons.gov.uk​

The franc rose amid the publication of SECO economic forecasts. The Swiss government raised the forecast of the GDP growth in 2013 up to 1.4% from 1.3%. Meanwhile NFIB Small Business Index in May grew up to its high for a year having exceeded the expectations; and inventories at wholesalers in April increased by 0.2% as expected.

The Australian dollar updated an annual low against the dollar on Tuesday after the release of business confidence data in Australia but by the end of the day leveled almost all losses. According to the National Australia Bank data released on Tuesday the business confidence in Australia remained at the negative territory in May and was minus one point as the prior month. Negative indicator means that the number of pessimists is higher than the number of optimists. The biggest pessimism was found among mining companies.

 

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Overview of the main economical events of the current day - 13/06/2013

Dollar keeps on falling

Dollar weakened on Wednesday against the most majors backed by suspense surrounding the FRS stimulation program, at that again no notable macro statistics was issued in the US. Yen refreshed its weekly high against dollar on the ground of stock markets decline and Nikkei futures depreciation to the week’s low. Traders keep on taking profits and closing USDJPY long positions.

Euro resumed increasing on Wednesday to consolidate higher than 1.33 in EURUSD. Euro zone’s production industry statistics in April turned out to be exceeding expectations. Industrial production increased by 0.4% month-to-month, although it was supposed to remain unchanged according to forecasting. On an annualized basis it decreased by 0.6%, although decrease by 1.1% was predicted. Euro zone’s industrial production keeps increasing for three months on end, which might be an early symptom of economic rehabilitation.

Euro’s appreciation was also supported by ECB’s representative Asmussen saying that ECB won’t buy up obligations at a price which is too high, and ECB is more conservative than FRS. Moreover, Euro’s growth is caused by short-term loans interest rates growth in Europe, which indicates that expectations regarding the ECB rates’ future decrease reduced significantly.

Euro zone’s industrial production index

Source: epp.eurostat.ec.europa.eu​

The Pound appreciated on Wednesday reaching 4-months high against dollar backed by good looking employment data. Claimant Count Change decreased dramatically in May exceeding expectations of most experts. According to the Office for national statistics’ report quantity of applications decreased by 8.6 thousand as compared to the April’s value 11.8 thousand reconsidered to be lower. Average Weekly Earnings (3M/y) increased by 1.3% as compared to the last year’s similar period, while growth by only 0.2% was expected. The previous quarter’s value increased as well from 0.4% to 0.6%.

Australian dollar moved out of the three years low supported by consumer confidence increase inside the country. After two months of depreciation Westpac’s Consumer confidence index increased in June by 4.7% to 102.2 as compared to 97.6 in May. The index’s value exceeding 100 indicates there are more optimists than pessimists out there. The statistics made traders take their profits from Australian currency short positions, as, technically, Aussie looks overbought for quite a long time.

Westpac Australian consumer confidence index

Source: westpac.com.au​

On Wednesday New Zealand dollar also kept rebounding from the year’s lows. NZ Card Spending – Retail increased in May by 0.5% conforming to forecasts. NZ Card Spending increased in May by 0.6% after decreasing by 1.1% last month. REINZ House Sales increased by 7.5% on an annualized basis in May turning out to be the best May's result in the last 6 years. REINZ Housing Price Index increases for 5 months on end, and May’s growth amounted to 0.7% as compared to April's value.

Dollar keeps falling with FRS meeting waiting ahead on June, 18-19. It keeps increasing for 4 weeks in succession. While the first three days of the week almost lacked US events, at last important retail sales report is about to be issued on Thursday, just as traditional weekly Unemployment Claims.

 

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Overview of the main economical events of the current day - 14/06/2013

Retail sales turned out to be better than expected, though dollar dropped

Dollar could not turn the negative tendency and kept on decreasing in price on Thursday against most majors, in spite of encouraging retail sales and unemployment claims data happened to be better than expected.

Initial unemployment claims decreased last week by 11 thousand to 334 thousand against the expected increase to 350 thousand. US retail sales increased in May by 0.6% with expected increase by 0.4% - it’s the fastest growth rate in three months. Sales in April and March were reconsidered to be increasing.

US retail sales change (M/m)

​

Dollar dropped below 94.00 against Yen for the first time since the beginning of April due to dramatic decrease of Japanese stock index Nikkei that tumbled down by 6.4% on Thursday and already moved over to bear market for it fell from maximum points by more than 20% already. Negative mood was stimulated by the World Bank worsening its world economy forecasts, and news of Japanese investors that keep selling foreign bonds and stocks.

Euro and Pound managed to get back all that was lost during first half of the day and ultimately even increased a little. Euro was negatively affected by loan costs for Italy increased to maximum since March during the bond auction. Weighted average return of 3Y bonds increased to 2.38% against 1.92% of the previous auction held on May, 13. Pound got higher than 1.57 against dollar for the first time in 4 months.

Australian dollar kept up retracing and increased significantly on Thursday after employment data was issued. According to Australian Bureau of Statistics Employment Rate increased by 1.1 thousand people in May, while the value was expected to decrease by 10 thousand. Unemployment Rate remained unchanged and amounted to 5.5%, while it was expected to increase by 5.6%.

New Zealand dollar appreciated significantly as well after Reserve Bank of New Zealand decided to leave the rate unchanged at the level of 2.50%. RBNZ Governor Graeme Wheeler displayed his taste for tight-fisted policy but to a lesser degree than it was expected.

 

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Overview of the main economical events of the current day - 17/06/2013

Main events of the upcoming week

Summarizing Friday’s results dollar’s price almost didn’t change according to dollar index, though it kept on decreasing against Yen. In the beginning of the day it tried to rebound, but then tumbled down after June's Preliminary University of Michigan Consumer Sentiment happened to be worse than expected. The index fell down to 82.7, though it was expected to remain unchanged at 84.5.

The US Industrial Production also happened to be worse than expected in May: It remained unchanged, though expected to rise by 0.2%. Dollar was pushed down by The Wall Street Journal's article saying FRS will, probably, fall short of expectations and QE-3 shutting down process will supposedly linger a lot.

However, according to the week's results dollar index lost 1.25%. It’s worth mentioning that the DJIA stock index lost almost the same value within the week – it decreased by 1.17%. Analysts notice recent close correlation between dollar and American stock market. DJIA reached high on May, 22, and dollar index did the same the next day - then both indexes started to decrease.

The upcoming week will be quite rich for events judging by macro statistics that is going to be issued. German ZEW Economic Sentiment is issued on Tuesday in Europe. On Thursday Flash Manufacturing PMI & Flash Services PMI is published to show data on France, Germany and Euro Zone. Similar HSBC Flash Manufacturing PMI on China will be issued on Thursday.

In Britain production and consumer inflation data will be published on Tuesday, and retail sales data – on Thursday. On Friday inflation and retails sales data might be published on Friday. The 1st-quarter GDP data is to be issued in New Zealand on Thursday.

On Tuesday and Wednesday Meeting Minutes of Australia’s and UK's central banks will be published. Next scheduled Swiss National Bank’s quarterly meeting is to take place on Thursday. The Citi’s experts believe that to fight deflation SNB might start acting more aggressively and increase depth of negative interest rates.

But the main event of the week that might show markets' direction for the following months is Federal Open Market Committee (FOMC) meeting, results are to be announced on Wednesday. Market participants will wait for FOMC Statement with particular attention, as well as for FOMC Press Conference hosted by Ben Bernanke, that will be held half an hour after the statement announcement. FOMC Economic Projections on GDP growth, inflation and rates will be issued along with the press-conference. They are issued once per a quarter, usually in a quarter's end.

During his recent speech B. Bernanke let everyone know that the authority might start gradual shutting down of QE-3 within the following “few meetings”. Although, recent macro statistics obviously doesn’t count in favor of it. And in case the head of FRS won’t say anything about shutting the program down or will say something blurry, dollar’s rate might keep on falling further. CNNMoney’s polling among economists and analysts shown that almost two-thirds of them expect that FRS won’t cut monthly asset acquisition, at least until this December.

 

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Overview of the main economical events of the current day - 18/06/2013

The World's most influential bank is to hold meeting on Tuesday

It was yet one more calm day of moderate fluctuations within quite small ranges as no significant events happened. All market players were waiting for FRS meeting to begin on Tuesday. Summarizing the day’s results, dollar’s rate almost didn’t change speak by dollar index, though attempts to increase were made in the beginning and middle of the day after Empire State Manufacturing Index and NAHB Housing Market Index turned out to be exceeding expectations.

According to report of National Association of Home Builders (NAHB) Housing Market Index increased to 52 in June by adding 8 points as compared to May’s value, thus, reaching the highest level since April 2006. It was the largest leap of the index since 2002. For the first time since April 2006 the index exceeded 50-point mark. US housing market’s conditions are getting better and it is still the driving force of economic rehabilitation.

Report of Federal Reserve Bank of New York showed that production index reached the level of 7.84 as compared to 1.43 in May, while the market expected the zero value. Although, merchandise delivery, new orders and employment sub-indexes worsened.

Indexes from report of Federal Reserve Bank of New York

Source: ny.frb.org​

Euro's rate increased slightly against dollar backed by Euro Zone’s April balance of trade data. Export surplus happened to be just slightly less than the recorded maximum of this March. This Saturday the Italian government went public with the 3 bln Euro set of measures to revive the economic growth.

Marketable currencies decreased slightly on Monday in spite of decent data. Quarterly Westpac NZ Consumer Confidence index almost recorded the 3-year maximum. Canada’s Foreign Securities Purchases report showed that foreign investors purchased Canadian securities to the total amount of 14.91 bln CAD in April, thus, reaching maximum of the last seven months. Existing Home Sales in Canada increased by 3.6% in May as compared to the previous month.

 

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Overview of the main economical events of the current day - 19/06/2013

The markets wait for FRS meeting’s results

Dollar index actually is standing still for four days on end. On Tuesday dollar slightly increased against pound, yen and marketable currencies, but weakened a little against euro. Market participants wait for FRS to make decisions on Wednesday and will particularly closely analyze FOMC Statement summarizing results of the meeting and following FOMC Press Conference to clarify the Central Bank's intentions regarding terms of potential FRS asset purchase program shutting down.

Housing market and inflation data put some pressure on dollar. Housing Starts increased in May by 6.8% to 914 thousand, though happened to be worse than expected. Building Permits decreased by 3.1% to 974 thousand, which is also slightly worse than expected. Consumer Price Index (CPI) increased in May by a lesser degree than expected – by 0.1% as compared to the last month.

Euro kept on growing gradually to the 4-month maximum, higher than 1.34 backed by German ZEW Economic Sentiment. In June the index increased to 38.5 against 36.4 in May, thus, exceeding expectations by 0.4 point. At the same time, German ZEW Current Situation index decreased slightly in June: 8.6 against 8.9 in May, stopped well short of expected value 9.5.

Source: zew.de​

Meanwhile, ECB’s Mario Draghi declared on Tuesday that the ECB considers additional unconventional monetary policy measures to be used in case of emergency.

Pound's rate decreased, even though consumer inflation increased in May by a slightly larger degree than expected. Consumer Price Index increased by 2.7% on an annualized basis against 2.4% last month, while increase by 2.6% was expected. At that, production inflation stopped slightly short of expected growth values.

Australian dollar's rate dropped pressed down by RBA’s Monetary Policy Meeting Minutes showing the Central Bank is willing to decrease the key interest rate if necessary. “Australian dollar’s rate is still high, and inflation perspectives might facilitate further rate reduction" as said in the Minutes.

 

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Overview of the main economical events of the current day - 20/06/2013

Dollar gets its power back

Dollar spiked against all majors once results of two-day monetary policy meeting were announced, and accompanying announcement of Federal Open Market Committee (FOMC) made known to public. The Committee left interest rates and bonds purchasing volume unchanged. This meeting’s result was predicted by most analysts.

For the first time since September, 2011 more than one FOMC member opposed the majority decision. James Bullard and Esther George voted negatively. Their argument was that "The Committee should more decisively indicate its intention to ensure the target inflation level in view of recent low index rates” and that “the current high extent of monetary stimulation increases risks of future economic and financial disbalance and eventually might lead to long-term inflationary expectations increase”.

According to the Committee, current monetary policy remains reasonable, at least, as long as the unemployment rate exceeds 6.5%, expected inflation rate for the next two years doesn't exceed 2.5% and long-term inflationary expectations are balanced enough.

In economic and monetary policy forecasts issued on Wednesday FRS stated that the unemployment rate might decrease faster that it was expected earlier. It might reduce to 6.5% by the end of 2014, though before it was expected to stay higher than 6.5% until 2015. Unemployment rate reduction to 6.5% is one of preconditions along with inflation growth to start shutting down the QE-3 program. FRS also appreciated the US economic recovery perspectives and declared the housing market indicates further advance.

Source: federalreserve.gov​

During press conference Ben Bernanke announced approximate terms of bonds purchasing shutting down. He said, if economic recovery will continue, FRS will start to cut asset purchasing later this year and might finish by mid 2014. However, monetary policy's direction wasn't determined in advance and will depend on economic data being issued.

The announcement and strain of the press-conference were more optimistic in regards to the economy, and this spoke well for those market players, who think monthly bond purchasing will, probably, reduce further. All these factors increase dollar’s attractiveness.

 

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Overview of the main economical events of the current day - 21/06/2013

Dollar keeps on raising

Dollar continued to raise on Thursday after FRS's Ben Bernanke announced on Wednesday that the Fed might start shutting down its bonds purchasing program later this year and terminate it completely by the middle of next year. Besides of that dollar was supported by housing market data, as well as by business activity data from Philadelphia Fed’s region.

US Existing Home Sales suddenly spiked by 4.2% to 5.18 million houses on an annualized basis in May (it’s maximum since November, 2009), while growth just to 5 million houses was expected. Philadelphia Fed Manufacturing Index reached its maximum since April, 2011 in June after increasing to 12.5 points, while growth from May’s level of -5.2 points to -1 point was expected. Growth of the index was caused by substantial increase of sale and purchasing prices, as well as of new orders. At the same time, delivery terms and inventory reserves reduced.

Philadelphia Fed Manufacturing Index

Source: phil.frb.org​

At the same time some of the data was not so optimistic. Unemployment Claims increased last week to 354 thousand against the expected increase to 340 thousand. Conference Board Leading Index increased just by 0.1% in May, while increase by 0.2% was expected, though the index growth rate in April was reviewed from 0.6% to 0.8% (maximum since March, 2011).

Euro’s rate continued to reduce, and Flash PMIs turned out be slightly exceeding expectations couldn’t support euro. Euro zone’s business activity level decreased to the least extent since the last March. Euro zone’s Flash Composite PMI increased in June to 48.9 as compared to May’s 47,7. At the same time, German Flash Manufacturing PMI reduced suddenly. PMI index dropped to two-month low and amounted to 48.7 against May's 49.4.

Pound was supported by May’s retail sales data revived after faulty April, as consumers willingly took advantage of ad campaigns of super markets. Office for national statistics announced that retail sales increased by 2.1% in May as compared to April's value and by 1.9% as compared to the same period last year, while growth just by 0.8% and 0.2% correspondingly was expected. CHF almost didn't change its rate by the end of the day backed by Switzerland's central bank that left monetary policy unchanged.

Marketable currencies reduced on Thursday to the larger extent than the others, pressed down by preliminary Chinese production industry business activity data in June. HSBC Flash Manufacturing PMI dropped to 9-month minimum of 48.3 points, while growth from May’s 49.2 to 49.4 points was expected. NZD was pressed down by the 1st quarter GDP data. Quarterly GDP growth amounts to 0.3% against expected growth of 0.5%.

 

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Overview of the main economical events of the current day - 24/06/2013

The main events of the week

According to the results of the last week the dollar showed a considerable growth having recovered a half of the 4-week fall. The dollar index growth amounted to 2.39%. The deepest fall against the dollar was shown by the Japanese yen and commodity currencies. The dollar growth started just after the results of the Fed meeting had been announced when the possibility of QE-3 program was confirmed to reduce in the second half of the year and to scale back totally by the middle of the next year.

According to the Bloomberg’s poll, 44% of experts await for the QE-3 volume to reduce by 20 billion dollars a month at the first autumn FOMC meeting in September, 17-18. Two weeks before only 27% were sure of it.

On Friday the dollar growth continued on the back of inflation statistics and retail sales data release in Canada which turned out disappointing for the Canadian currency. Consumer Price Index (CPI) of Canada grew by 0.2% in May in comparison with April and by 0.7% in annual terms, while a growth by 0.4% and by 0.9% respectively was expected. Retail sales in April rose by 0.1% against the forecasted 0.2%. Core Retail Sales suddenly decreased by 0.3% while no changes were expected.

The first half of the current week will not be oversaturated with macrostatistics data. Market participants will continue to “digest” the results of the past Fed meeting which can influence the trade trends during the whole summer. In the euro-zone the main event will be Germany’s IFO index release which is expected to rise slightly. On Thursday Germany’s labor market data and euro-zone confidence index from the European Commission will be released. On Friday there will be a release of German retail sales data and French consumer spending data.

In Great Britain the final GDP data for the first quarter and also current account data will be released on Thursday. On Tuesday inflation report hearings will be held and on Wednesday BoE Financial Stability Report will be published. On Friday GfK Consumer Confidence and Nationwide Housing Prices will be released. A large Japanese data block will be released on Friday: inflation, retail sales, industrial production. There will be no significant data on Australia. On Thursday there will be a release of New Zealand current account data and ANZ Business Confidence.

There will be a lot of significant macrostatistics data on the USA. On Tuesday there will be a release of durable goods orders data, CB consumer confidence and new home sales data. On Wednesday the final GDP for the first quarter will be released. On Thursday consumer income and spending report and pending home sales data for May will be released. On Friday Chicago PMI and Revised U. of Michigan Consumer Sentiment will be released.

 

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Overview of the main economical events of the current day - 25/06/2013

Business confidence in Germany improved only slightly in June

On the first day of the week trade at the currency market was rather calm and the dollar almost had not changed by the end of the day amid poor macrostatistics data. However at the beginning of the day the dollar tried to grow on the back of commodity and stock markets decrease that was caused by the largest for almost 4 years fall of the Chinese stock market because of the liquidity crisis threat in the country and lowering of the Goldman Sachs PRC economic growth forecast.

The dollar was growing at the beginning of the day against the yen amid the landslide victory of the ruling coalition in the municipal elections of Japan in Tokyo on Sunday, which showed a strong support of the country’s Prime Minister Shinzo Abe’s policy. This will be an aid for the ruling party at the election next month to the upper house of parliament, which will help Abe to get a full control over both houses of parliament to enact the necessary legislations to implement his policy.

Also the dollar growth at the beginning of the day was supported by a yield bounce of the US treasury bonds. The yield of 10-year bonds rose up to 2.667% - the highest level for almost 2 years.

The market had almost no reaction towards nearly the only important indicator - IFO Business Climate in Germany – as the index coincided with the expectations. The index grew up to 105.9 points in June in comparison with 105.7 points in May. Besides, IFO – Expectations grew slightly but IFO - Current Assessment decreased.

Concerning the USA not too important Dallas Fed Manufacturing Activity index rocketed in June up to 6.5 against -10.5 in May. And manufacturing index reached its 2-year high. Chicago Fed National Activity Index for May that was released on Monday also slightly grew up to -0.30 against -0.52 in April. However Three Month Moving Average which smoothes out short-term fluctuations and is considered a better indicator fell to -0.43 in May from -0.13 in April.

Chicago Fed National Activity Index: Three Month Moving Average

The statements of some Fed representatives had some negative effect on the dollar at the end of the day. So, William Dudley said that Fed “hasn’t reached its aims yet concerning employment and inflation and in recent years the monetary policy hasn’t been incentive enough”. And Fed representative Kocherlakota said that “if the inflation is still low, the Fed can buy bonds even with unemployment below 7%”.

 

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Overview of the main economical events of the current day - 26/06/2013

Consumer confidence in the USA reached its high for more than 5 years

The dollar grew on Tuesday after the release of statistics data and almost all the data turned out well-matched as only one insignificant FHFA House Price Index of six released turned out worse than expected. But the growth was quite moderate, which can indicate its possible continuation at the nearest time.

Durable Goods Orders grew by 3.6% in May against the forecast of 3%. Durable Goods Orders Ex Transportation rose by 0.7% while its fall by 0.2% was expected. Prior month data were also revised upwards. The reading is a leading indicator of industrial production and can testify of its growth in the nearest months.

Changes of Durable Goods Orders (m/m)

S&P/Case-Shiller Home Price Index showed the largest monthly increase since the introduction of the statistics. House Price Index in 20 largest metropolises grew by 12.05% in annual terms and by 1.72% in comparison with the previous month, which turned out well above the expected 10.6% and 1.20% respectively.

New Home Sales in the USA grew by 2.1% compared with the previous month - up to 476 thousand houses in annual terms having reached its high for almost 5 years. All this indicates a gradual housing market recovery which will continue supporting economic growth.

Consumer confidence in the USA in June reached its high for more than 5 years. According to the Conference Board report published on Tuesday consumer confidence well exceeded the forecasted reading of 75.5 and grew up to 81.4 against 74.3 in May having reached its maximum since January, 2008.

The euro dropped on Tuesday, which was supported by the words of the ECB head Mario Draghi who announced that the situation in the euro-zone economy requires preservation of incentive monetary policy. According to him bond purchase program Outright Monetary Transactions (OMT) is needed as never before. Also retail sales in Italy dropped by 0.1% in April in comparison with the previous month although they were not expected to change.

The pound had almost no changes by the end of the day on the back of Inflation Report Hearings and the release of British Bankers' Association (BBA) report which showed that BBA Mortgage Approvals rose significantly in May up to 36.1 thousand against the forecast of 33.1 thousand. Lending scheme helps those who decided to buy a house for the first time to enter the market.

 

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Overview of the main economical events of the current day - 27/06/2013

The dollar grew despite the GDP report

The dollar rose on Wednesday against most major currencies but decreased a little against commodity currencies and the yen. The dollar continued its prior days’ growth despite the country’s first quarter GDP revised downwards in the third final reading. These data reflected already passed period of the beginning of the year while the markets are guided by more recent and advanced data of recent months which have more positive signals from the U.S. economy.

The U.S. Commerce Department lowered its estimate of GDP growth in the first quarter of 2013 to 1.8% at an annual rate from 2.4% while no changes were expected. The estimate worsening shows weaker than expected before rates of consumer spending and corporate investment amid increasing taxes in the USA. The estimate of consumer spending increase was lowered to 2.6% from 3.4%. Consumer spending accounts for two thirds of GDP and it is the driving force of economic growth.

The euro fell considerably on Wednesday and dropped lower than 1.30 against the dollar for the first time in 3.5 weeks after the ECB President’s speech in the French parliament. Mario Draghi said about his intention to follow a soft monetary policy in the nearest future and warned about existing risks for the economic growth in the euro-zone.

Draghi didn’t exclude any tools and said again that the ECB was ready to act in case of necessity. The positions of two CB stand in contrast – while Fed is going to scale back incentive measures, ECB announces its readiness to take them at any quantities.

The pound followed the euro and fell considerably on Wednesday on the back of semi-annual BoE Financial Stability Report and the comments of MPC Member David Miles who said that Great Britain might need a further stimulus and central banks had not made “bubbles” yet. In the semi-annual Financial Stability Report the Bank of England warned its borrowers and financial institutions about the sharp growth of interest rates, which could jeopardize the financial stability.

Commodity currencies grew slightly on Wednesday amid easing tensions in the credit market of China. Interbank rates decreased after the People's Bank of China pledged to provide banks with the necessary liquidity. Chinese CB announced its readiness to provide liquidity to all the banks that have temporal problems; it also said that it had already provided a number of banks with liquidity.

 

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Overview of the main economical events of the current day - 28/06/2013

William Dudley tamed bull’s temper about the dollar

By the end of Thursday the dollar almost hadn’t changed according to the dollar index although it had some attempts to grow after the release of positive statistics data from the US housing market. However the speech of the Fed representative William Dudley prevented the dollar to continue this offensive. By the end of the day the dollar had risen against the pound and the yen, had fallen a little against the euro and almost hadn’t changed against commodity currencies.

According to the National Association of Realtors report the volume of pending home sales reached its high for more than six years in May. The pending home sales index (PSHI) rose by 6.7% in May up to 112.30 while a growth only by 1% was expected. The income of the US population grew by 0.5% in May while a growth by 0.2% was forecasted and the population’s spending increased by 0.3% as expected. Unemployment claims fell by 9 thousand to 346 thousand last week with the forecast of decrease to 345 thousand.

The Pending Home Sales Index

The Fed representative William Dudley announced on Thursday that the markets misinterpreted the Fed statement having assumed that the tightening of the policy would happen in the nearest future. There is still a long way to go. And “the Fed might have reasons to continue bond purchases for a longer period of time”. Dudley is the deputy head of the U.S. Central Bank and permanently retains the right to vote on decisions concerning monetary policy.

The euro managed to resist the dollar on Thursday higher than the important level of 1.30, which was supported by good German labor market statistics and euro-zone economic confidence from the European Commission. Unemployment change in Germany decreased suddenly by 12 thousand in June (8 thousand growth was expected) and unemployment rate remained at the level of 6.8% as in the previous month (0.1% growth was expected). The composite index of business and consumer confidence towards the euro-zone economy grew up to 91.3 points in June in comparison with the revised reading in May – 89.5 points while an increase up to only 90.4 points was expected.

Euro-Zone Economic Confidence

The pound fell after the publication of the final UK GDP for the first quarter although the data showed that the British economy had managed to escape recession. At a quarterly rate the country’s economy increased by 0.3% as forecasted but at an annual rate the reading turned out worse than expected and grew only by 0.3% with an initial forecast of 0.6% growth. The deficit of the current account in the first quarter turned out higher than expected and accounted for 14.5 bln pounds.

Commodity currencies continued to correct after a strong fall of prior days. New Zealand dollar tried to grow after ANZ Business Confidence release which grew up to 50.1 in June from 41.8 last month. However New Zealand trade surplus suddenly dropped to 71 mln dollars in May due to exports fall.

 

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Overview of the main economical events of the current day - 01/07/2013

The main events of the week

The dollar continued to grow on Friday after the release of the U. Michigan Consumer Sentiment in the USA which was considerably revised upwards. Friday finished the month and the whole second quarter of the year. The dollar grew according to the dollar index by 1% for the past week. But the monthly and quarterly growth turned out the lowest: only 0.1% and 0.3% respectively.

Revised U. of Michigan Consumer Sentiment for June, which was released on Friday, was revised upwards up to 84.1 in comparison with the previous 82.7 and expected growth to 83. The index still maintains at its 6-year high although in comparison with the prior month the current conditions subindex has fallen slightly but subindex of expectations has grown. At the same time Chicago PMI, usually well correlated with the national dynamic, considerably decreased in June and fell to 51.6 in comparison with 58.7 in May.

Some statements of the Fed representatives supported the dollar. FOMC Member Jeremy Stein spoke at the US Foreign Relations Council and assumed that the American CB would start to decrease the asset purchase program in September of this year. But the decision to reduce the QE will be based on the data for the period from the last year autumn, and not just the last few months - he said. FOMC Member Jeffrey Lacker announced that the further growth of the American CB balance increased the risks connected with the necessity of QE scaling back as the US economic recovery was limited by structural factors which are not controlled by the Fed.

This week as the first week of the month will be rather saturated with important events. It will be a week of PMI and the US labor market data. There will be scheduled meetings of three central banks: the Reserve Bank of Australia - on Tuesday, the Bank of England and the European Central Bank - on Thursday. No changes of the monetary policy are expected but as always the attention will be attracted by the ECB head Mario Draghi’s press conference by the end of the meeting.

The meeting of the Bank of England will be significant as for the first time it will be headed by the former governor of the Canadian CB, Mark Carney who will replace Mervyn King. During the first three days UK data will be released: industrial, building and service PMI reports. A slight growth of indexes is expected except for the service sector.

Also industrial and service PMI of European countries – Spain and Italy – will be released on Monday and Wednesday. The final readings of the indexes of France, Germany and the whole euro-zone will be also released. On Monday euro-zone unemployment data and preliminary inflation data will be published. Retail sales of the euro-zone will be released on Wednesday and factory orders of Germany – on Friday.

Euro-zone data are expected to testify the continuation of recent trends: the production recovers from the low, the unemployment continues to grow and the inflation will also rise. Unemployment rate in the euro-zone for May is forecasted to reach a new record high.

Concerning the USA there will be also very important indexes of PMI and ISM in industrial and service sectors – on Monday and Wednesday respectively. Factory orders will be released on Tuesday and trade balance – on Wednesday. Thursday is a day-off in the USA – Independence Day. So, all the Thursday data are released on Wednesday. But the main event of the week is the Friday publication of a traditional for the first week of the month US Non-Farm Payrolls for June which can correct investors' expectations for future Fed policy. The preliminary ADP data will be released on Wednesday.

 

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Overview of the main economical events of the current day - 02/07/2013

Decrease of the employment components didn’t allow the dollar to continue to grow

On the first day of the week, month and quarter the US dollar couldn’t continue its growth that was seen before – after the release of ISM report which showed that manufacturing index of the USA grew higher than expected after its sudden decrease in May lower 50 for the first time in six months. Manufacturing PMI rose up to 50.9 in June against 49.0 in May with the forecasted growth up to 50.5.

ISM Manufacturing PMI of the USA​

However employment subindex fell to 48.7 against 50.2 in May. Market participants liked this decline as it can indicate the decrease of key labor market data which are expected on Friday. Employment report is in the center of attention not only because it says about the economy state but also because it signals the Fed’s future decisions concerning monetary policy. More negative data may delay the start of scaling back bond purchases.

ISM Manufacturing PMI employment subindex​

The euro growth was supported by similar PMI indexes released in the euro-zones that turned out better than expected (except Germany) and by revised downwards unemployment data in the euro-zone. The final manufacturing PMI in the euro-zone rose to 48.8 points in June compared with the first estimate of 48.7 points.

Manufacturing PMI in Spain rose to its 2-year high in June: 50.0 against 48.1 in May. In Italy the same index grew to 23-month high - 49.1, in comparison with 47.3 in May. April unemployment rate in the euro-zone was revised downwards by 0.2% from 12.2% to 12%. In May it grew to 12.1% not to forecasted 12.3%.

The pound didn’t manage to rise and lost most its positions despite the fact that the British PMI turned out much better than expected and grew up to 52.5 in June – the highest level since May, 2011 against 51.5 in May. Besides the number of mortgage approvals has reached its high since December, 2009 and has grown up to 58.2 thousand from 54.4 thousand in April.

The Australian dollar rose on Monday before the Australian CB meeting and amid the release of June official Chinese PMI that is 50.1 although it was expected to be lower 50. Besides AIG manufacturing PMI grew to 49.6 against 43.8 prior month.

The dollar continued to grow against the yen on the back of the continuing recovery of the Japanese stock index Nikkei, which was supported by the BOJ Tankan survey which showed that the major Japanese manufacturers are more optimistic than ever for the last two years. According to the Bank of Japan forecast the country’s economy will continue to recover till the second quarter of 2014.

 

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Overview of the main economical events of the current day - 03/07/2013

EURUSD fell below 1.30 for the first time in June

The US dollar showed a significant growth on Tuesday against all major currencies and exceeded the level of 100 yens per dollar for the first time since the beginning of June on the back of better than expected factory orders data for May and also the speech of the Fed head William Dudley. In his speech on Tuesday Dudley repeated that bond purchases could be decreased this year and the Fed could finish buying bonds in the middle of 2014 if the unemployment rate would drop to 7%. He said that he could see strong reasons to accelerate the USA economy growth in 2014.

According to the Ministry of Commerce report released on Tuesday factory orders rose by 2.1% in May in comparison with the prior month, which exceeded the expected growth by 2.0%. April data were also revised upwards to +1.3% from +1.0%. The orders had been rising for three of the last four months. Car sales growth, housing construction increase and energy consumption growth in the USA help the American companies to manage the decline in exports.

The euro fell against the dollar below 1.30 for the first time in June amid the release of the manufacturing inflation report which showed that producer price index had fallen more than expected – by 0.3% at a monthly rate against the forecasted drop by 0.2%. An extra pressure was made by a statement of the EC Eurostat that the unemployment rate in May was 12.2% and not 12.1% as it was announced on Monday. Besides, political tensions in Portugal added some negative as its Minister of Foreign Affairs had offered his resignation and the day before it the Minister of Finance had resigned.

The pound also followed the euro amid the release of construction PMI that showed some growth in comparison with the previous month but didn’t reach the forecasted readings. Construction PMI rose up to 51 in June against 50.8 in May with the forecasted reading 51.2. Some pressure was put by the BoE Deputy Governor Paul Tucker who said that high levels of household debt constrained the growth of the British economy.

The Australian dollar slumped on Tuesday after the Australian Reserve Bank kept the key interest rate at 2.75% for the second time in a row but left the possibility of its decrease in further months open. RBA Governor Glenn Stevens announced that “the inflation outlook may provide some scope for further policy easing if it is necessary to support the demand". ABN Amro Bank forecasts that by the end of 2013 RBA would have decreased the rate to 2.25%.

 

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Overview of the main economical events of the current day - 04/07/2013

Non-Manufacturing PMI in the USA suddenly fell

The US dollar took a break in its growth on Wednesday amid ambiguous statistics and positions balance before the ECB meeting and a holiday in the USA on Thursday. Weak non-manufacturing PMI which accounts for more than 80% of all the economy also helped the decline.

According to the ISM survey Non-Manufacturing PMI in the USA fell to its annual low 52.2 points in June in comparison with the reading in May - 53.7 while it was expected to rise up to 54.1. The subindex of new orders and PMI subindex have fallen while employment subindex has risen. Other US data released on Wednesday also were ambiguous.

According to the data released by the Ministry of Commerce the U.S. trade deficit in May rose to $45 billion while it was forecasted to drop to $40.1 billion. The imports grew by 1.9%, the exports decreased by 0.3% - as a result the US trade deficit has risen by 12%. At the same time labor market data turned out good.

Unemployment claims decreased by 5 thousand to 343 thousand last week although a growth up to 345 thousand was expected. ADP employment change rose by 188 thousand in June with the forecast of +160 thousand.

ADP Employment Change in the USA

The euro rose on Wednesday before the ECB meeting on Thursday despite the ambiguous data and the growth of political tensions in Portugal. Retail sales in the euro-zone grew by 1% m/m with the forecasted growth only by 0.3%; and within the year the sales decreased only by 0.1% while they were forecasted to fall by 1.9%. Meanwhile the final services PMI grew less than expected – to 48.3 against the initial estimate of 48.6 points.

The pound showed a significant growth after the release of positive services PMI which is ¾ of all the country’s economy. In June services PMI grew from 54.9 in May to 56.9 – the highest level since March, 2011 while a decrease to 54.5 was expected. New orders growth rate turned out the highest since June, 2007.

The yen grew on Wednesday amid the correction of stock markets and Nikkei futures decrease. The strengthening of the yen was also supported by growing tensions in Portugal. This week several ministers of Portugal offered a resignation including the minister of finance. The yield of 10-year Portuguese bonds rose on Wednesday above 8% for the first time since November, 2012.

The Australian dollar fell on Wednesday to the August, 2010 low after the RBA governor Stevens had announced that AUD was still at a high level despite the decrease by almost 10% since early April. Besides, the further decline of the Australian currency was possible, which would support the economy growth. Retails sales in Australia also turned out worse than expected. The decrease of non-manufacturing PMI growth rate also had a negative effect. Non-manufacturing PMI dropped to 53.9 points in June from 54.3 in May.

 

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Overview of the main economical events of the current day - 05/07/2013

The euro slumped after Mario Draghi’s comments

On Thursday it was a holiday in the USA and the main events of the day were the results of two central banks’ meetings; the Bank of England and ECB. The euro slumped during traditional press conference after the ECB meeting when Mario Draghi said about the outlook of the central bank monetary policy for the first time ever. Earlier the ECB tried not to decide anything in advance. Draghi announced that interest rates would remain at a current record low level or lower for an extended period of time –as long as it would be necessary.

At the meeting the ECB kept the base interest rate unchanged at a record low level – 0.5%. Currently downward risks prevail for the euro-zone economy while inflation risks are generally balanced – he said. This time the ECB sees no risks linked to low interest rates. Inflation expectations in the euro-zone are still restrained and the inflation outlook justifies the appearance of a guide concerning the policy prospects, Draghi said. There was a discussion of a possibility to decrease the rate – 0.50% is not the lowest limit and the ECB was technically ready to the negative rate – he declared.

The first meeting of the Bank of England headed by Mark Carney also made a surprise. The Bank of England decided not to change Quantitative Easing (QE) volume and kept the rates unchanged but suddenly issued MPC Rate Statement which used to be released earlier only in case of changes in the monetary policy, whether it were a rate or QE volume.

The pound slumped after the release of the MRC rate statement that was soft – in particular the attention of the market participants was attracted by the words about a sharp growth of market rates and its negative influence on the economic recovery prospects. Also according to the statement the increase of interest rates is unreasonable from the British economy point of view. Morgan Stanley experts predict a fall of GBPUSD to $1.41 by the end of the year.

The markets are waiting for a key non-farm payrolls report of the USA which is important not only because it signals the economy state, it also can throw light upon the further decisions of the Fed concerning the monetary policy. A more positive report than expected can draw the Fed nearer to the discussion of scaling back QE program. There is an expectation of employment growth by 160-165 thousand people and unemployment rate decrease by 0.1% to 7.5%.

 

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Overview of the main economical events of the current day - 08/07/2013

The main events of the week

The US non-farm payrolls released on Friday turned out significantly better than expected, which allowed the dollar to continue growing over the whole market. According to the Labor Department survey non-farm payrolls increased by 195 thousand in June while a growth by 165 thousand was expected. Besides, the data for the past two months were revised upwards by as much as 70 thousand.

The USA Non-Farm Employment Change

Despite a faster than expected growth of non-farm payrolls the unemployment rate didn’t change in June in comparison with May and it accounted for 7.6% as in the previous month although it was predicted to drop by 0.1%. Average hourly earnings per month have showed the highest growth since the last year end - by 0.4% up to 24.01 dollars. In comparison with the last year it grew by 2.2% - the highest reading since July, 2011.

An average growth of non-farm payrolls for the second quarter amounted to 196 thousand per month, which is a little lower than the first quarter reading that was 207 thousand per month. An average growth for the past six months is 202 thousand. The improvement of the situation at the labor market can draw nearer the start of QE3 scaling back. All this forms a contrast with the positions of the ECB and the Bank of England which announced their intention for extra monetary policy easing last week. JPMorgan and Goldman Sachs experts believe that the Fed could decrease bond purchases in September already and not in December as it had been forecasted before.

The dollar grew for the last week by 1.55% according to the dollar index. Most of all it has risen against the British pound (+2.01%), Japanese yen (+1.99%) and Swiss franc (+1.95%). For the second week already the dollar has been rising along with the American stock market which has risen the same 1.5% for the week according to the DJIA index. During this second week of the month there won’t be so many important events that can influence the balance of forces at the market. There will be a meeting of the Japanese CB and also a release of industrial production data, trade balance and inflation data.

In the euro-zone there will be a release of trade balance data and Germany’s industrial production data. Industrial production of Italy and France is released on Wednesday and the whole euro-zone’s one - on Friday. The industrial production is expected to fall in May in Germany and generally in the euro-zone and to show a slight growth in France and Italy. Concerning Great Britain trade balance data and industrial production data will be released on Tuesday; and a moderate growth of industrial production is expected in May. On Thursday non-farm payrolls of Australia will be released. Inflation data of China are released on Tuesday; and trade balance of the PRC – on Wednesday.

Concerning the USA - FOMC Meeting Minutes will be released on Wednesday, which is likely to confirm a more aggressive attitude of the central bank. On Friday producer price index and a preliminary U. of Michigan consumer sentiment will be released. At the debt market there will be a traditional for the second week of the month the US long-term bond auction. The 8th of July is a start of the quarterly earnings season of American companies for the second quarter which will last till the middle of August.

 

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Overview of the main economical events of the current day - 09/07/2013

The dollar made a pause in its growth

The dollar was correcting on Monday after prior days significant growth and without any considerable macrostatistics data on the USA at the beginning of the week. Having reached important technical levels of many pairs market participants corrected their positions. Correction can continue but on Wednesday FOMC meeting minutes will be released and also the Fed governor Ben Bernanke will make a speech about the coming 100th anniversary of the American central bank which will be celebrated in December of this year.

The euro rose moderately on Monday amid the Eurogroup meeting and the achieved agreement on financing of Greece, stabilization of political situation in Portugal and the speech of the ECB head Mario Draghi in the European Parliament – despite weak trade balance and industrial production data of Germany and investors’ confidence in the euro-zone. At the end of Monday finance ministers of the euro-zone achieved an agreement on bailout aid to Greece. The first sum of 2.5 billion euros will be paid to Athens in July, which will allow the country to escape the crisis of financing threat.

The ECB governor Mario Draghi making speech in the European Parliament repeated again that the monetary policy would stay mild as long as it would be necessary and interest rates would be kept at low levels for a long period of time. Although the situation in the euro-zone hasn’t stabilized yet and downside risks for the economy maintain, the ECB is awaiting a gradual economic recovery in the second half of the year although at a slow rate.

Germany’s trade balance surplus for May decreased to 14.1 bln euros from 17.5 bln prior month – exports fell by 2.4% m/m instead of a sluggish growth. Industrial production of Germany fell by 1% in May in comparison with the previous month while it was expected to decrease only by 0.5%, which was linked to a considerable drop in construction and energy sectors. The recovery of the largest European economy is still unstable amid uncertain prospects of the foreign trade. Sentix confidence index of European investors also dropped in June to -12.6 in comparison with the reading in May -11.6.

The political situation in Portugal stabilized on weekend after the prime minister had appointed the former Minister of Foreign Affairs, who resigned recently, the vice prime minister, which allowed to save the ruling coalition and avoid new elections. S&P rating agency lowered the forecast of Portugal current rating to negative one due to the growing political uncertainty which could undermine the county’s return to the debt market.

Meanwhile the Bank of France increased the prospects of the economic growth in the second quarter up to 0.2% in comparison with 0.1% which was predicted before. Also the Bank’s report released on Monday showed the growth of business confidence in June. Manufacturing business confidence of France grew to 96 in June in comparison with 94 in May.