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

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Overview of the main economical events of the current day - 02/10/2013

Fed QE Tapering Off May Be Not in October

The US dollar fell in the first half of Tuesday after the news about partial shutdown of the US government due to the disagreements over the budget bill in the Congress. But then the dollar partially recovered its losses amid the release of US Manufacturing PMI which grew despite the forecasts.

The markets seem to believe that government shutdown is unlikely to last long and economic damage may be limited (0.1%-0.2% from GDP per week). A larger concern is aroused by the problem of the US national debt ceiling increase which must be solved till October, 17.

The budget for a new financial year which comes October, 1 in the USA hasn’t been approved yet. The democrats and republicans in the Congress didn’t manage to agree even on a stopgap budget. For the first time in 17 years the USA is left without budget and the work of some federal institutions is suspended, so called ShutDown.

Publication of almost all indicators of statistics, which are released by governmental state institutions, may be delayed including Non-Farm Payrolls on Friday. All this can lead to the fact that the decision on QE3 tapering off may be not taken even at October meeting.

ISM Manufacturing PMI rose to 56.2 p. from 55.7 p. prior month while a drop to 55 p. was expected. The index has been growing for four months in a row. Inventories, production, employment and prices also have risen while new orders have decreased.

The euro reached the highest level since February, 6 Vs the dollar but then lost all its growth. Some pressure was put by German Employment report which showed unemployment growth in September by 0.1% to 6.9% while no changes were expected. German Unemployment Change rose by 25 thousand in September against expected decrease by 5 thousand. Euro-zone final Manufacturing PMI coincided with the preliminary estimate 51.1 p. against 51.4 p. in August (26-month height). However, the data of certain countries (Germany, Italy, and Spain) turned out worse than expected.

The pound reached its high since the beginning of the year but then also fell. UK Manufacturing PMI fell unexpectedly after 6-month growth while its continuation was forecasted. PMI dropped in September to 56.7 p. from 57.1 p. prior month (the highest reading for 2.5 years).

Australian dollar rose to 8-day high after the Reserve Bank of Australia had kept the key interest rate unchanged and published generally neutral statement according to which further rate decrease was unlikely. Other data were also positive. Retail sales in August rose more than expected - by 0.4% against the forecast +0.3%. HIA New Home Sales rose by 3.4% in August Vs prior month.

The yen was traded upwards after the Prime Minister of Japan Shinzo Abe had announced on Tuesday sales tax increase up to 8% from 5%, which will be followed by a stimulus package of 5 trillion yen to prevent economic slowdown because of a negative impact of tax increase. Tankan Large Manufacturers Index rose to its high for almost six years in the third quarter: 12 p. from 4 p. in June with the forecasted growth up to 7 p.

 

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Overview of the main economical events of the current day - 03/10/2013

Euro Reached 8-Month High Vs Dollar

The US dollar fell significantly on Wednesday and showed the lowest decrease for two weeks amid weak labour market data, continuation of the US government shutdown and unsolved budget issues and national debt limit increase. The euro rocketed on the back of the ECB governor Mario Draghi’s press conference and political tensions decline in Italy after Italian government got a confidence vote in the upper house of the parliament.

The White House and congressmen prepare for a long battle over the budget and continue exchanging accusations due to the shutdown of federal institutions without having started real negotiations on a compromise over the budget. According to The Wall Street Journal, the fact that lawmakers and the White House show no rapprochement increases the probability that the present crisis can turn into a more profound confrontation around the US national debt limit increase.

Due to the shutdown of statistical offices the only source of macroeconomic data in the USA became nongovernmental agencies. On Wednesday ADP data were released which showed a considerably smaller growth of employment change than expected, - which reduces the probability of QE3 tapering. FOMC Member Eric Rosengren also said on Wednesday that stimulus measures shouldn’t be tapered off prematurely.

ADP Employment Change rose to 166 thousand in September with the forecasted growth to 180 thousand. Prior month data were significantly revised downwards from 176 thousand to 159 thousand. ADP Non-Farm Payrolls on Wednesday, which is often considered a leading indicator of the official report, drew a greater attention of the market because of the fact that on Friday the official report of the Labor Department probably will not be published.

The ECB left the key interest rate on Wednesday unchanged at 0.5% per annum as it was expected. The euro had rocketed and reached 8-month high Vs the US dollar after the press conference of the ECB president Mario Draghi – investors regarded his comments as a sign that the central bank wouldn’t perform extra stimulation of the region’s economy which could put pressure on the euro. Draghi answered the question whether the euro rate was too high that the exchange rate was not a policy tool. The government of Italian Prime Minister Enrico Letta got a vote of confidence on Wednesday in the upper house of the parliament after the former Prime Minister Berlusconi decided to support the ruling coalition.

The pound was traded upwards despite a slight decrease of Construction PMI in the UK. Construction PMI dropped to 58.9 p. in September from the record reading for 6 years 59.1 p. seen in August against expected growth to 59.5 p. Meanwhile, Residential Construction reached the highest level since November, 2003 – 64.8 p. MPC Member Paul Fisher said on Wednesday that providing monetary policy Forward Guidance favored UK economic recovery.

New Zealand dollar rose after a tough statement of the Reserve Bank of New Zealand Governor Wheeler who said that in order to restrain inflation pressure and housing price increase – official interest rate could rise by 2% during 2014 – 2016. Interest rate can be raised even more significantly if the rules of mortgage lending don’t slow down housing prices.

Australian dollar was traded downwards on Wednesday amid weak macrostatistics data. Building Approvals in Australia fell by 4.7% m/m in August, which turned out considerably higher than forecasted decrease by 0.5%. Australian Trade Deficit in August fell less than expected to 0.815 billion AUD while its decrease to 0.4 billion AUD was expected.

 

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Overview of the main economical events of the current day - 04/10/2013

Shutdown Can Lead the USA to Default

The US dollar continued falling on Thursday against most major currencies for the fifth session in a row amid contradictory statistics and the US government shutdown. The dollar dropped against the euro, franc and yen and grew against the pound – having fallen a little according to the dollar index. Unemployment Claims turned out better than expected but the US Service PMI fell significantly. The euro rose on the back of strong retail sales data and euro-zone Service PMI growth. The pound decreased after a slight drop of the UK Service PMI.

There is no progress yet in budget and US national debt issues, government shutdown has been going on for three days in a row. The USA president Barack Obama said that the Shutdown could lead the country to default. Last week Treasury Department also said that the Congress could lead the country to default if it didn’t raise the debt limit till October 17.

According to the Bloomberg, next week republicans intend to offer the US president Obama to raise the USA national debt limit in exchange for accepting their suggestions on changing expenditure budget in particular healthcare program financing. Meanwhile, a famous business magnate and investor Warren Buffett believes that the US Congress will solve the question of debt ceiling increase before this problem starts hurting American economy seriously.

The US Unemployment Claims last week rose only by 1 thousand to 308 thousand although a growth by 8 thousand was expected. The claims rate is still about 6-year low. Initial Jobless Claims - 4 Week Average which smoothes the volatility of weekly data dropped by 3.75 thousand last week to 305.5 thousand – the lowest reading since May 2007. The data become more important because Non-Farm Payrolls is unlikely to be published on Friday.

The dollar fell on Thursday after ISM data release according to which Non-Manufacturing PMI dropped considerably in September to the lowest reading in three months 54.4 p. from the historical height of 58.6 p. in August. A decrease only to 57 p. was expected. Employment and PMI decreased most of all. FOMC member Williams making speech on Thursday said that mild monetary policy would be required for a rather long period of time. FOMC Member Dennis Lockhart also said that a long government shutdown made QE tapering in October less possible.

ISM Manufacturing and Non-Manufacturing PMI

The euro continued rising amid rather strong data that prove EU economic recovery. Euro-zone retail sales rose by 0.7% m/m in August against the expected increase by 0.2%. Prior month data were also revised upwards from 0.1% to 0.5%. Euro-zone Final Service PMI rose a little more than expected – to 52.2 p. against the preliminary estimate of 52.1 p. In France and Italy the index turned out better than expected while it was worse in Germany and Spain.

The pound was traded downwards on the back of a slight decrease of Service PMI from almost 7-year high reached a month ago. The UK Service PMI fell to 60.3 p. in September against 60.5 p. in August while no changes were expected. But all three September indexes released this week – Manufacturing, Construction and Services – turned out worse than expected. Halifax House Price Index turned out a little worse than forecasted – it rose by 0.3% m/m in September while a growth by 0.5% was forecasted.

 

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Overview of the main economical events of the current day - 07/10/2013

The Main Events of the Week

The US dollar rose on Friday against most major currencies after five days of decline and recovered almost all its weekly losses according to the dollar index – amid the expectations that American authorities will manage to solve the US budget problems in the nearest days. Non-Farm Payrolls report wasn’t released on Friday and its publication is postponed indefinitely.

According to the results of the week the dollar lost 0.15% to the dollar index falling for four weeks in a row. The dollar dropped against the Australian dollar (-1.29%), Japanese yen (0.73%), New Zealand dollar (0.57%), euro (-0.25%) and Canadian dollar (-0.12%) – but it rose against the British pound (+0.76%) and Swiss franc (+0.15%). The dollar got under pressure last week amid aggravated budget and debt crisis in the USA, government shutdown and difficulties in negotiations between republicans and democrats in the Congress on budget issues and coming national debt ceiling increase term.

Despite the fact that no compromise between the White House and the Congress is reached, the first encouraging signs of confrontation overcome appeared on Friday – the representatives of the Republican Party in the US Congress started to soften their position towards ObamaCare and now they are more inclined to a more comprehensive agreement on budget which would include debt ceiling increase.

According to the Goldman Sachs a compromise on both key issues: budget and debt – will be not made before the end of this week and both problems will be solved with a single package deal. The most possible term is close to October 17. In the past the shutdown of the US public institutions financing happened 17 times for the last 40 years and continued from one day to three weeks. The last crisis was in late 1995 – early 1996 and was record long -21 days.

This week the markets will wait for the US fiscal budget settlement and a lot of US statistics published by state institutions are unlikely to be released. These are Trade Balance (Tuesday), Wholesale Inventories (Wednesday), Import Prices (Thursday); Retail Sales and Producer Price Index (Friday). Only nongovernmental agencies and also Federal Reserve data will be released. The main event will be the publication of FOMC Meeting Minutes on Wednesday. On Tuesday NFIB Small Business Optimism and IBD/TIPP Economic Optimism will be released; and on Friday - Preliminary U. of Michigan Consumer Sentiment. Tuesday, October 8 is the start of American companies Earnings Season for the third quarter which will last till the middle of November.

In the euro-zone the Final GDP for the second quarter and Sentix Investor Confidence will be released on Monday and ECB Monthly Bulletin- on Thursday. In Germany Trade Balance and Factory Orders will be released on Tuesday and on Wednesday – Industrial Output. Also Industrial Output will be released in France and Italy on Thursday. Industrial Output and Factory Orders growth is expected in Germany in August in comparison with weak July data.

The Bank of England publishes the results of its monthly meeting on Thursday; no changes in the policy are expected. Industrial output and trade balance of the UK will be released on Wednesday. In Japan Trade Balance and Current Account will be released on Tuesday, on Wednesday – BoJ Meeting Minutes from September 4-5 and on Thursday - Core Machinery Orders. Chinese Trade Balance will be released on Saturday.

In Australia labour force data are due on Thursday, on Tuesday - NAB Business Confidence, on Wednesday - Westpac Consumer Sentiment. In New Zealand NZIER Business Confidence will be released on Tuesday and on Thursday - Business NZ Manufacturing Index. In Canada Building Permits will be released on Monday, on Tuesday – Trade Balance, on Thursday – New Housing Price Index and on Friday – labour market report.

 

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Overview of the main economical events of the current day - 08/10/2013

The USA Has No Budget for a Week, the Dollar Is Falling

The US dollar was traded moderately downwards on Monday to most major currencies amid no progress in fiscal crisis in the country. Most of all the dollar dropped against the yen on the back of continuing decline of Japanese stock market. The US government has been partially shut down for seven days. The US situation puts pressure on the dollar. Both parties on negotiations continue taking tough positions and don’t make compromise, which may jeopardize economic growth of the world’s largest economy.

Republicans still don’t intend to bring up for vote an issue about renewal of the government financing and national debt limit increase in the House of Representatives until the White House comes to terms in health insurance reform. The disagreements between the democrats and republicans seem to have intensified over the weekend. The leaders of the republicans increasingly insist on linking the attempts to resolve budget stalemate with the efforts to prevent debt default.

On Sunday the speaker of the House of Representatives John Boehner said that he couldn’t admit financing of the government or debt limit increase without negotiations on a wide cutdown in spending. The U.S. Secretary of the Treasury Jacob Lew said that the Congress was playing with fire if it didn’t raise debt ceiling till October 17. President Obama urged the Republicans to allow a free vote in the House of Representatives on spending bill. He believes that there can be enough votes in the House of Representatives for the bill to pass.

One of the largest banks of the USA, Bank of America lowered its forecast on US economic growth on Monday amid government shutdown. The forecast is lowered in the third quarter to +1.7% against +2.5% in the second quarter. The forecast for the fourth quarter is lowered to +2.0% from +2.5%. The analysts of the bank expect the Fed to start QE tapering off only in January 2014. Japan, the second largest holder of U.S. Treasuries, expressed its hope on Monday for a quick resolution of the US budget stalemate which can lead to a default on the national debt.

There were no significant macrostatistics data on Monday that could influence the markets. Sentix Investor Confidence fell unexpectedly in October to 6.1 p. from 6.5 p. in September although its growth to 10.9 p. was expected. According to the National Bureau of Statistics of Canada Building Permits slumped in August from a record reading of July – by 21.2% to 6.34 billion Canadian dollars against the expected decrease only by 2.4%. It is the lowest decrease of Building Permits since April, 2011.

The pound was traded upwards amid UK Economic Optimism growth which reached 17-year high in the third quarter, which proves the strength of British economy. According to the CBI and PwC opinion poll – companies of the UK financial service sector became more optimistic about the business outlook since 1996.

 

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Overview of the main economical events of the current day - 09/10/2013

Janet Yellen Will Be a New Chair of the Fed

The US dollar almost didn’t change on Tuesday by the end of the day amid still uncertain situation of the US fiscal crisis resolution. There is almost no progress in budget debates between democrats and republicans; government shutdown has been going on for eight days. The dollar strengthened a little on Tuesday against Canadian dollar and the yen. Trade deficit of Canada has widened. Factory orders in Germany also turned out worse than expected.

Tensions around budget problems in the USA that threaten with default continue growing but still there are no signs of active negotiations between the republicans and the White House on crisis overcoming. Some legislators’ initiatives intended to find a way to a compromise don’t get a wide support. Besides, the White House says that president Obama is still not ready for negotiations on Obamacare tapering in exchange for concessions of republicans about federal government financing.

The speaker of the U.S. House of Representatives republican John Boehner continued putting pressure on president Obama and the democrats on Tuesday. He said that he wouldn’t admit the US debt limit increase without concessions of the democrats and president Obama. The president risks leading the country to default if he doesn’t start realistic negotiations, said Boehner.

The democrats plan to hold a vote till the end of the week on the measures that would allow Obama to increase debt ceiling. On Thursday Finance Minister Jacob Lew will make a speech in the U.S. Senate Committee about finance issues and national debt limit. The US default on national debt can have more unpredictable consequences for financial markets than investment bank Lehman Brothers collapse in 2008, said Mohamed El-Erian, CEO of PIMCO.

The US data of nongovernmental agencies turned out worse than expected. NFIB Small Business Optimism dropped to 93.9 p. in September – the lowest reading for three months in comparison with 94.1 p. in August although its growth was expected. IBD/TIPP Economic Optimism fell by 16.5% in October to 38.4 p. compared with 46 p. in September. This IBD/TIPP index is a good leading indicator for U. of Michigan Consumer Sentiment which will be released on Friday.

Meanwhile, the White House says President Obama intends to nominate Federal Reserve Vice Chairwoman Janet Yellen to chair the Federal Reserve. The Wall Street Journal also says that the Fed's vice chair, Janet Yellen would replace Ben Bernanke. If this information is confirmed, Yellen will be the first woman to head the U.S. central bank.

The Canadian dollar was traded downwards amid Canadian foreign trade weak data. Trade deficit in August rose to 1.31 billion Canadian dollars from 1.19 billion in July – while a decrease of deficit to 0.70 billion was expected. The imports rose by 2.1% m/m and considerably exceeded the expectations.

The euro also couldn’t show a stable growth on the back of unexpected decrease of Factory Orders in Germany which fell in August for the second month in a row. Factory Orders in the largest economy of the euro-zone fell by 0.3% m/m due to a sharp decrease of foreign orders while a growth by 1.1% was expected. German Trade Balance n.s.a. for August and Current Account also turned out worse than forecasted.

 

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

The Pound Fell After Weak Industrial Output Data

The US dollar rose to most major currencies before the publication of September FOMC Meeting Minutes where it was decided not to taper off QE – and reached 3-week high according to the dollar index. British pound dropped at weak industrial output data and trade balance; the euro also fell. Japanese yen weakened amid Japanese stock market growth which showed the best growth since late September. Canadian dollar reached a monthly low according to the US dollar, AUD and NZD looked slightly better.

FOMC Meeting Minutes showed that FOMC members who voted against QE3 reduction explained their decision with weak economic statistics, worsening financial conditions and fiscal risks. However, many Fed leaders still would like to start QE3 tapering off by the end of the year and finish this program by the middle of 2014. The decision to put off QE reduction was taken be a few votes. It increases the possibility of bond purchase reduction within next several months.

President Obama said on Wednesday about the nomination of Janet Yellen for the Fed chair. According to The Wall Street Journal the budget conflict and the republican opposition can delay the appointment of a new Fed chair. Meanwhile, the US conflict between the white House and the republican opposition is still going on; state institutions still don’t work and there are no signs of exit from this situation yet. President Obama announced that the American economy risked going into a deep recession if the Congress didn’t agree to a government financing recovery and didn’t increase debt limit – and he urged the opponents to refuse from blackmailing.

The pound fell on Wednesday to 3-week low Vs the dollar after the release of weak industrial output data and UK trade balance. Industrial output decrease rate turned out the highest for almost a year. Industrial output unexpectedly fell by 1.1% Vs the prior month, manufacturing production – by 1.2% while its growth was expected. Although Total Trade Balance Deficit fell in August from 3.4 billion pounds to 3.3 billion but it turned out worse than expected decrease to 2.1 billion.

The euro followed the pound and updated October lows having no reaction to German industrial output data that turned out a little better that forecasted due to car production increase by 13.6%. German industrial output rose by 1.4% in August in comparison with the prior month against the expectations of growth by 1%. The decrease in July was less than reported before. Bundesbank marks that extremely good consumer sentiment supports German economy.

apanese yen and Swiss franc weakened on Wednesday against the dollar amid the nomination of Janet Yellen as a Fed chair. Yellen is famous for her adherence to a mild monetary policy and her support of further measures on economy stimulation can favor the growth of risk assets and decrease the demand for safe-haven assets such as the yen and franc.

 

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Overview of the main economical events of the current day - 11/10/2013

USA: Breakthrough in the Stalemate

The US dollar rose on Thursday Vs the yen and slightly changed Vs other major currencies having added about 0.16% according to the dollar index amid the first signs of the US fiscal crisis resolution. The yen weakened significantly on the back of the decrease of defensive assets demand and the growth of inclination to risk. The pound and euro almost didn’t change by the end of the day amid the finished meeting of the Bank of England and weak industrial output data in France and Italy.

There appeared the first signs that the US lawmakers are moving towards an agreement on national debt limit increase. On Thursday it was announced that republican leaders in the House of Representatives were going to introduce an offer to the U.S. President Barack Obama about temporary debt limit increase for six weeks amid a more extensive plan of budget discussion. It may become a breakthrough in the stalemate which led to a partial shutdown of the government and put the USA on the brink of a debt default.

Meanwhile, on Thursday weak statistics on US labor market was released. Unemployment Claims rocketed by 66 thousand last week to 374 thousand although its growth by 4 thousand was expected. Weekly growth is the largest for almost a year. However the data were not quite true-to-life – it was influenced by government shutdown and a failure of computer systems. Labor Department announced that about a half of new claims was due to California which shifts to a new computer system and two previous weeks it gave incomplete data. And only 15 thousand of claims were aroused by government shutdown.

The pound and the euro almost didn’t change by the end of the day. The Bank of England, as it was supposed, kept the key interest rate and Asset Purchase Facility unchanged. French industrial output in August reached the forecasts and rose only by 0.2% against the expected growth by 0.5%. Italian industrial output fell by 0.3% in August while its growth by 0.6% was expected. ECB President Mario Draghi making speech on Thursday in New York said that the ECB would follow mild policy to help the recovery.

The yen weakened significantly on Thursday amid stock indexes and risk inclination growth and decrease of demand for defensive assets. DJIA rose by 2.18% having shown the highest growth since this January. Core Machinery Orders in Japan rose by 5.4% m/m in August and reached the highest level for almost 5 years, which favored Japanese stock market growth. The Bank of Japan will do everything that is required to overcome deflation, said the head of Japanese central bank, Haruhiko Kuroda in New York. However, he refused discussing extra measures of reaching this goal.

Australian dollar was traded downwards after the release of labor market mixed data but then recovered its losses. Despite unexpected decrease of unemployment rate in September from 5.8% to 5.6% - employment rate rose only by 9.1 thousand and didn’t reach the forecast of 15 thousand. Participation Rate reached its low for almost 7 years – 64.9% of labor force against 65% in August.

New Zealand dollar fell slightly amid Business Manufacturing Index decline to 3-month low. Business NZ Manufacturing Index dropped to 54.3 p. in September in comparison with 57.5 p. prior month.

 

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Overview of the main economical events of the current day - 14/10/2013

The Main Events of the Week

The US dollar was traded on Friday moderately downwards Vs most major currencies amid US consumer sentiment decrease to the lows of the beginning of this year. The euro rose moderately while the pound fell insignificantly amid the UK construction activity decrease. The yen continued weakening having fallen to almost 2-week low Vs the dollar. The Canadian dollar rose after the labor report of Canada which showed an unexpected fall of unemployment rate to its low since December, 2008.

Preliminary U. of Michigan Consumer Sentiment fell in October more than expected (76 p.) to 75.2 p. compared with 77.5 p. in September. Current assessment was kept almost unchanged while economic outlook index fell significantly. Consumers are more pessimistic about economic outlook in terms of unsolved budget problems and the US national debt limit increase issues.

By the end of the week the dollar had risen by 0.3% according to the dollar index having shown the first weekly growth after four weeks of decrease. The dollar rose Vs the Japanese yen (+1.13%), Canadian dollar (+0.55%), Swiss franc (+0.53%), British pound (+0.34%) and the euro (+0.11%). The dollar dropped only against Australian dollar (-0.35%) and New Zealand dollar (-0.06%).

The dollar was supported by FOMC Meeting Minutes published last week which showed the intentions of most FOMC members to start QE tapering off by the end of this year; and also a seemed exit from the US fiscal crisis. Opposed parties started negotiations although no real results are reached yet.

This week the markets will still pay attention to the USA where the negotiations between the democrats and republicans on budget issue resolution and the US debt limit increase are going on. A bowling point comes on October 17 and quite probably the agreement between the parties will be reached at the very last moment. This week there will be a release of RBA Meeting Minutes; inflation data (UK, euro-zone, New Zealand, Canada, China); retail sales (UK and China), labour market (UK); and a large Chinese information block at the end of the week.

Monday is a day off in the USA (and Canada). On Tuesday Empire State Manufacturing Index is released, on Wednesday - NAHB Housing Market Index and Fed economic survey Beige Book, on Thursday - Philadelphia Fed Manufacturing Index and on Friday - CB Leading Index. Consumer Price Index will be released on Wednesday; Industrial Output, Building Permits and Housing Starts are unlikely to be published on Thursday.

In euro-zone industrial output will be released on Monday, on Wednesday – final Consumer Price Index and Trade Balance, and on Thursday – Current Account. On Tuesday euro-zone and German ZEW Economic Sentiment is released – investor sentiment seems to stay almost unchanged in October amid political tensions in the USA and Italy.

In the UK on Tuesday there will be a release of Producer and Consumer Price Index, on Wednesday – labour market data, and on Thursday – retail sales. In Australia on Tuesday there will be a release of the Reserve Bank of Australia Meeting Minutes and New Motor Vehicle Sales, and on Thursday - NAB Quarterly Business Confidence. Consumer Price Index of New Zealand will be released on Wednesday, and on Friday – of Canada. In China on Monday there will be also a release of inflation data, and on Friday – a large information block (GDP, industrial output, retail sales, fixed asset investment).

 

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Overview of the main economical events of the current day - 15/10/2013

Industrial Output Rate Reached 2-Year High in the Euro-Zone

The US dollar was traded moderately downwards Vs most major currencies amid broken hopes for a progress in negotiations of lawmakers on budget and national debt which again came to the deadlock on weekend – three days before the debt ceiling is reached. The euro was supported by the euro-zone industrial output data which turned out a little better than expected. New Zealand dollar rose on the back of positive housing market and service sector data. Japanese yen lost all its growth amid stock markets bounce.

During the weekend the U.S. President Obama didn’t manage to come to an agreement with the republican majority in the House of Representatives. The leaders of the parties in the Senate held their own negotiations but they also couldn’t reach any progress. The U.S. present debt ceiling will be reached soon after October 17. The US federal government works in a reduced volume since October 1 due to the lack of budget, which has a more clearly negative impact on the economy.

The dollar reduced its losses at the end of the day amid new hopes that the lawmakers would manage to reach a progress in the crisis resolution. The U.S. Senate leaders said that an agreement on debt limit increase and the recovery of the government work was coming. The White House put off the meeting of President Obama with lawmakers to give the Congress leaders more time to work out an agreement.

According to The Wall Street Journal the Fed will probably continue stimulating economy by quantitative easing to cover losses from the US government shutdown and intense debates over debt limit increase. According to the results of the last poll of economists held by WSJ last week, none of 46 respondents expect QE tapering off at the meeting on October 29-30. 37 of 46 economists expect QE tapering in December or in January. However, many say that the Federal Reserve can escape it even till the end of the first quarter 2014 or probably even longer. Meanwhile, the analysts of many leading banks decrease its estimates of the U.S. dollar rate Vs major currencies by the end of the year.

The euro rose moderately on Monday, which was favored by published industrial output data of the euro-zone which turned out a little better than expected. Industrial output grew by 1% m/m in August having covered the same 1% decline which was recorded in July. A growth only by 0.8% was forecasted. Monthly growth became the largest for two years although it became possible due to a sharp decline in July. At an annual rate industrial output dropped by 2.1% against the expected decrease by 2.5%.

The Australian dollar opened with a decrease after the release of Chinese trade balance data on Saturday which showed a fall of Chinese trade balance surplus, the main trade partner of Australia. But then AUD covered its losses and even closed with an increase amid weak dollar and risk inclination growth. Chinese trade balance surplus fell to $15.2 billion in September from $28.5 billion prior month having exceeded the expectations considerably. The exports fell by 0.3% at an annual rate against the expected growth by 5.5%.

Weak economic data on Chinese exports in September aroused concerns about GDP for the 3d quarter in China which will be released on Wednesday. Chinese inflation accelerated in September while New Yuan Loans exceeded expectations. Consumer Price Index rose by 3.1% in September from 2.6% in August having exceeded the expected growth by 2.8% - which turned out the highest growth rates for 7 months. Chinese inflation growth can limit central bank of China in actions aimed at stimulation of economic growth.

New Zealand dollar reached almost 3-week high on Monday Vs the US dollar amid positive statistics. Housing prices continued growing - REINZ Housing Price Index rose by 0.8% in September Vs August. REINZ House Sales rose by 19% at an annual rate. Housing market in New Zealand revived before the introduction of mortgage limits announced by the Reserve Bank of New Zealand. Performance Services Index on New Zealand increased to 55.6 p. in September compared with 53.3 p. in August.

 

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Overview of the main economical events of the current day - 16/10/2013

Dollar Strengthened Amid Hopes for Political Stalemate Resolution

The US dollar strengthened on Tuesday amid the hopes for an agreement in Washington which would allow overcoming a political stalemate and recovering federal government work – but then it lost a part of its growth after a shutdown of negotiations in the Senate. The euro weakened on the back of German mixed ZEW economic confidence data. Swiss franc also reached almost 4-week low Vs dollar. The pound was supported by inflation and housing market data and the Australian dollar was supported by the Reserve Bank of Australia Meeting Minutes.

The Senate leaders are coming to an agreement which will help to move a default threat for the US and recover a normal financing of the government – an appropriate bill may be approved by the senators in the nearest time. The dollar lost some positions at the end of the day after the negotiations in the Senate had been suspended – until the republicans in the House of Representatives become certain about future actions and introduce their own budget plan. The Senate and the House of Representatives work at different budget proposals.

Besides, the Fitch Ratings announced on Tuesday about a possible revision of the US credit rating “AAA” after the negotiations on debt limit increase and a stop of government shutdown came to a standstill – which according to the agency can harm the US dollar’s role credibility. Meanwhile, Empire State Manufacturing Index slumped to 5-month low against forecasted growth. Empire State Manufacturing Index dropped to 1.52 p. in October from 6.29 p. in September while a growth to 7 p. was forecasted. The decrease was due to a worsening situation with employment and prime costs.

The euro fell after the release of uncertain German ZEW economic confidence data. German ZEW Economic Sentiment rose in October to its high from April, 2010 – to 52.8 p. while the indicator was forecasted to stay unchanged at September level 49.6 p. German ZEW Current Situation fell to 29.7 p. in October compared with 30.6 p. in September – against expected growth to 31 p. Euro-Zone ZEW Economic Sentiment also didn’t reach the forecasted reading 59.4 p. and grew to 59.1 p. in October from 58.6 p. in September.

The pound also dropped but then recovered its loss, which was favored by Consumer Price Index which turned out better than expected and by official House Price change data. Consumer Price rate remained unchanged in September in comparison with August. Consumer Price Index rose by 0.4 m/m and 2.7% y/y having exceeded the expected growth by 0.3% m/m and 2.6% y/y respectively. ONS House Price Index increased by 3.8% in August having shown the highest price growth since October, 2010. The growth accelerated from July reading 3.3% and it was more significant than forecasted 3.4% growth. House Price Index reached a record level in the country’s history.

Australian dollar was traded upwards on Tuesday and reached the highest reading Vs dollar for almost four months – after the publication of RBA Meeting Minutes which turned out well-balanced. Though the Reserve Bank of Australia said that it didn’t exclude the possibility of further rate decrease, it marked that there was no urgent necessity in rate decline now.

 

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Overview of the main economical events of the current day - 18/10/2013

The Agreement Is Reached but the Dollar Slumped

The US dollar slumped on Thursday having shown the lowest daily drop for a month after the American lawmakers approved a bill on Wednesday evening which recovered government work and increased national debt limit. Unemployment Claims also turned out worse than expected. The pound growth was supported by retail sales data which exceeded the forecast. Business Confidence rose in Australia and Consumer one – in New Zealand.

The US technical default was managed to be prevented but the attention of the markets is shifted towards the damage made by the shutdown and also towards the fact that the Fed will have to put off the start of QE3 tapering off for a later period. Government shutdown caused a serious damage to economy, said President Obama.

FOMC member Evans said on Thursday that the Federal Reserve would probably keep stimulating for some time considering the lack of macroeconomic data for the estimate of economic state. FOMC member Fisher said that the Fed was not likely to taper QE3 at the nearest meeting on October 29-30.

The leaders of BlackRock and PIMCO investment funds believe that the Federal Reserve could put off asset purchase reduction till June, 2014 to support the economy after the political crisis. The expenditure for the US government recovery may turn out higher than the losses caused by a temporary shutdown - say the analysts polled by Bloomberg.

According to the Standard and Poor's, temporary government shutdown will lead to the US GDP decrease in the 4th quarter of this year by 0.6% and will cause serious negative consequences on consumer confidence. Bloomberg Consumer Sentiment fell to its low last week for almost two years. Americans became more pessimistic in estimating economic outlook amid aroused concerns that the political opposition could do harm to the economy.

China's credit rating agency Dagong has downgraded the U.S. rating from A to A- with a negative forecast. Although this step is rather symbolic – they say that the Fitch is going to follow Dagong soon. At the same time Moody's agency announced that the decrease of the US credit rating in the nearest 2 years was unlikely.

Meanwhile, Philadelphia Fed Manufacturing Index turned out slightly better than forecasted (15 p.) and dropped in October to 19.8 p. in comparison with 22.3 p. in September. At the same time the US Unemployment Claims fell less than expected last week – by 15 thousand to 358 thousand against the expected decrease to 335 thousand.

The euro reached 8.5-month high Vs the dollar and the pound – almost 2-week. The UK retail sales rose in September by 0.6% against the expected growth by 0.4%. At an annual rate retail sales rose by 2.2% last month in comparison with the growth by 2.1% in August and the forecast of +2.0%. Retail sales growth for the third quarter accounted for 1.5% q/q – it is the highest quarterly growth from the first quarter of 2008.

Retail Sales Change in the UK and the USA (m/m)

Retail Sales Change in the UK and the USA (m/m)

Australian and New Zealand dollar continued growing and updated the heights of October on Thursday. NAB Quarterly Business Confidence rose to +3 in the third quarter compared with -1 in the second quarter – and reached the highest level for two years. ANZ Consumer Confidence Index rose by 2.9% in October to 122.3 p. in comparison with 118.8 p. in September. According to the Westpac report for the nearest 10 years on New Zealand economy, a stable growth will continue till 2015 and will start slowing down only in the second part of the decade.

 

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Overview of the main economical events of the current day - 21/10/2013

The Main Events of the Week

The US dollar almost didn’t change at the end of trade on Friday after a sharp decline on Thursday and amid lack of any significant macrostatistics. Canadian dollar had almost no reaction towards consumer price index data which in general coincided with the forecast. Australian dollar continued growing on the back of Chinese positive GDP and industrial output data. Chinese economic growth at an annual rate accelerated in the 3d quarter, which was recorded for the first time in three quarters.

Be the end of the week the dollar had lost 1.04% according to the dollar index amid the growth of expectations that the Fed would continue stimulus measures for a longer period of time after approving a temporary budget agreement in the USA. The highest growth Vs the dollar was shown by New Zealand dollar (+2.23%), Australian dollar (+2.20%) and British pound (+1.34%). After them go Swiss franc (+1.07%), euro (+1.06%), Japanese yen (+0.81%) and Canadian dollar (+0.62%).

On Wednesday the Congress and the White House came to an agreement which allowed to avoid the US debt default and recover government work after 16 days of shutdown. However, the problem is not solved and the crisis is just put off for three months. The agreement is valid only till January 15 and it means that the budget stalemate can happen in January again –when the debates about the budget and national debt limit increase return. Budget uncertainty will influence Fed decisions and it is unlikely to start QE tapering at October or even December meeting.

This week will be saturated. The US federal institutions started working from Thursday and this week some missed statistics data which haven’t been released for almost three weeks will be published. On Tuesday October, 22 there will be a release of Non-Farm Payrolls, on Wednesday – imports prices and on Thursday - JOLTS Job Openings. Missing Crude Oil Inventories for a week till October 11 will be published on Monday and Natural Gas Storage – on Tuesday.

Inflation data will be published in a week: PPI – on Tuesday, October 29, and CPI – on Wednesday, 30. Labour market report for October is likely to be released a week later – on November 8. The rest statistics data released on November also may be delayed.

Among the USA plan data - on Monday there will be a release of Existing Home Sales (a drop by 3.3% is expected – the lowest monthly decrease since June, 2012) and on Thursday - New Home Sales. On Tuesday - Richmond Manufacturing Index, on Wednesday - FHFA House Price Index, on Thursday - Flash Markit Manufacturing PMI and on Friday – Durable Goods Orders and Revised U. of Michigan Consumer Sentiment.

The main event in the euro-zone will be preliminary manufacturing and service PMI of France, Germany and the whole euro-zone which is released on Thursday; and also IFO Business Climate report on Friday. There is an expectation of index growth which will show euro-zone improving economic state. On Wednesday Flash Euro-Zone Consumer Confidence will be released, and on Friday – retail sales in Italy.

The main event in the UK will be a publication of preliminary GDP for the third quarter on Friday. It is expected that the economic growth rates have gathered pace in the third quarter to 0.8% q/q compared with 0.7% in the second quarter. On Tuesday state finance data will be released, on Wednesday – the Bank of England Meeting Minutes and BBA Mortgage Approvals; on Thursday - CBI Industrial Order Expectations; and on Friday - Index of Services.

Trade balance of Japan will be released on Monday and Consumer Price Index – on Friday. In Australia inflation report for the third quarter and CB Leading Index will be released on Wednesday. In New Zealand trade balance will be released on Wednesday. On Wednesday there will be announced a decision of the Bank of Canada on interest rate, there will be a release of BOC Monetary Policy Report and BOC Press Conference will be held. On Tuesday retail sales in Canada will be released. On Thursday there will be a release of HSBC Flash Manufacturing PMI.

 

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Overview of the main economical events of the current day - 22/10/2013

Dollar Stopped Falling Before Non-Farm Payrolls

The US dollar almost didn’t change at the end of trades on Monday according to the dollar index before the publication of important labour market data for September on Tuesday which can turn out good as it will reflect the period before the government shutdown. The dollar lost almost all its slight growth after the release of housing market data which turned out a little worse than forecasted. The yen fell amid weak trade balance data of Japan.

Non-Farm Payrolls which must have been released on October 4 will be published this Tuesday. The U.S. employment rate is expected to have risen by 180 thousand in September against 169 thousand prior month – and unemployment rate remained unchanged at 7.3%. Employment and unemployment growth rate is paid special attention as the Federal Reserve announced unemployment rate one of the Forward Guidance for monetary policy.

The US Existing Home Sales data for September are slightly worse than expected. According to the NAR – home sales decreased to 5.29 million at an annual rate against the forecasted decline to 5.30 million. However, prior month data were considerably revised for the worse – from 5.48 million to 5.39 million. Home sales dropped after reaching its height for four years.

FOMC member Charles Evans made speech on Monday supporting the continuation of monetary stimulation and repeated that the central bank would need at least a few months more to watch labour market data before taking decision on QE tapering. Evans said that a number of good labour market reports are required as well as confirmation of economic growth strengthening and a few months to estimate the trend. He marked that the Fed wouldn’t be able to make the decision on QE tapering in December confidently – amid the expectations of reviving debates on the US budget issues in January-February.

According to the economists polled by Bloomberg the decision on QE tapering from $85 billion to $70 billion will be made at Fed meeting only on March 18-19, 2014. By July, 2014 the Fed will have decreased asset purchases to $25 billion a month and will finish it in October. Besides, fiscal crisis in the USA will lead to economic growth rate decline in the current quarter by 0.3%.

Finance Minister Jacob Lew urged the members of the Congress to do everything possible to avoid another government shutdown and “almost default” situation. Meanwhile, according to The Wall Street Journal, frightening prospects of further reductions in the U.S. defense spending in the current fiscal year that began October 1, could push the Republicans and Democrats to a more rapid and efficient budget deal. However, the negotiations will be complicated due to political struggle before the elections to the Congress 2014.

The yen dropped on Monday against all major currencies after the release of trade balance which deficit decreased less than expected. Trade deficit fell to 932.1 billion yen in September from 962.8 billion in August – while a decrease to 918.6 billion was expected. Exports growth slowed down in September to 11.5% at an annual rate from 14.6% prior month, the imports grew from 16% to 16.5%. It is the 15th month in a row when the trade balance runs with deficit and it is the longest period of deficit since 1979. Extra pressure on the yen was put by the speech of the Bank of Japan governor Haruhiko Kuroda who promised to continue a soft monetary policy to reach a stable inflation. The Bank of Japan raised economic estimate of all nine regions of the country on Monday.

Germany Finance Ministry said on Monday that the country's economy will continue to grow in the second half of the year thanks to a strong industry, a large amount of investment and private consumption. Optimistic outlook marks a good momentum of Europe's largest economy, which grew by 0.7 % in the second quarter of this year. Last week the leading economic research institutes of the country reported that GDP growth this year will be 0.4 %, and next year it will increase to 1.8%. German government will publish a revised economic growth forecast on October 23.

According to analysts polled by Bloomberg, the chances of the euro to become an alternative to the dollar strengthened as the US budget crisis will probably occur every several months. On this background the situation in the euro-zone seems calm despite the problems of certain countries. This year the euro performs better among currencies of 10 developed countries. From the beginning of the year the euro rose by 5.8% to a basket of currencies of other nine developed countries, showing the best dynamics in the group while the dollar gained 1.5%. Before that the euro had been falling every year for four years: from 2009 to 2012 it dropped by 20%.

 

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Overview of the main economical events of the current day - 23/10/2013

Dollar Slumped after Weak Non-Farm Payrolls

The US dollar slumped on Tuesday Vs all major currencies after Non-Farm Payrolls for September turned out much worse than forecasted despite the fact that unemployment rate dropped. According to the statistics the US economic growth is not steady enough. Weak labour market data will not allow the Fed to start QE tapering at the nearest meetings.

According to the Labour Department Non-Farm Payrolls grew in September only by 148 thousand while growth by 180 thousand was forecasted. Unemployment rate decreased to 7.2% while the reading was forecasted to stay unchanged at 7.3% since August. Despite the revision of August Non-Farm Payrolls upwards – from 169 thousand to 193 thousand – general revision for two months amounted only to +9 thousand of new jobs. Average Hourly Earnings last month also grew less than expected – by 0.1% - while its growth by 0.2% was forecasted.

The US Unemployment Rate in September turned out lower than forecasted but Non-Farm Payrolls grew less than expected. The released data continued the trend of three recent months when unemployment rate is falling but Non-Farm Payrolls turn out lower than forecasted. Unemployment rate decrease is the result of a stronger growth of Non-Farm Payrolls in the first half of the year and also reflects work force retirement.

In the nearest months employment rate decrease can be expected due to a negative influence of government shutdown and worsening market conditions already marked in September, which will be in favor of keeping the US economic stimulus program. The Reuters spread the results of the poll of Primary Dealers; and 9 of 15 expect the start of QE tapering in March, 2014. JPMorgan and Goldman Sachs also moved the terms of QE3 tapering to the next spring. HSBC analysts estimate the chances of QE3 reduction in December at 50%.

The euro updated its annual height Vs the dollar on Tuesday and reached the highest level for almost two years. Swiss franc rose to 19-month height to the dollar, and the pound – to almost 3-week. The UK budget deficit reduction in September exceeded expectations due to tax revenues growth. Public Sector Net Borrowing ex Interventions – budget deficit indicator – amounted to 11.1 billion pounds sterling compared with 12.1 billion pounds for the same period last year. Economic data prove the UK economic recovery. Swiss Trade Surplus exceeded the forecast in September and amounted to 2.5 billion Swiss franc compared with the expected surplus of 2 billion Swiss franc.

Canadian dollar rose on Tuesday to 4-week high Vs the US dollar before the Bank of Canada decision on rate on Wednesday having almost no reaction to retail sales data. Retail sales grew by 0.2% in August Vs prior month while a growth by 0.3% was expected. Prior month data were also revised downwards. At the same time Retail Sales ex Autos grew by 0.4% having exceeded forecasted growth by 0.2%.

 

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Overview of the main economical events of the current day - 24/10/2013

On Wednesday China Was in the Spotlight

The US dollar rose on Wednesday to the pound and commodity currencies and almost didn’t change to the euro and weakened Vs the yen and Swiss franc. Risk inclination fell on Wednesday amid the reports about interest rates sharp increase in China and rising bad loans write-offs by Chinese banks – which aroused the growth of yen and franc and the decrease of risk-sensitive AUD and NZD. Canadian dollar dropped after a mild BOC Rate Statement in which it refused its inclination to raising interest rate.

On Wednesday compared with the prior day China was in the spotlight. Rates growth at the local interbank market turned out the highest since July and it was recorded as the People's Bank of China didn’t start injecting funds into the market on Wednesday. Seven day Repo Rate in China which indicates the availability of funds in the bank system rocketed by 42 basis points – to 4%. The central bank of China is concerned about too fast growth of real estate prices in the country. Chinese banks also have problems. Five largest banks of China increased loan write-offs by 2.9 times in the first half of 2013 to 22.1 billion yuan ($3.65 billion) in comparison with 7.65 billion yuan last year.

Worsened liquidity situation which is the main growth driver of risk assets led to risk inclination decrease, stock markets fall and the growth of yen, franc and dollar. Japanese Nikkei fell by 2% and finished the session with a significant fall since October 2. The yen rose to its high for two weeks. New Zealand dollar dropped at the fastest rate for two months, Australian currency also weakened. Though at first AUD rose on Wednesday amid the news about higher than expected inflation rate in the third quarter. Consumer Price Index rose by 1.2% Vs prior quarter while a growth only by 0.8% was expected.

Canadian dollar fell to almost 2-week low Vs the dollar after BOC Rate Statement in which it refused an inclination to interest rate increase and lowered its forecast on GDP growth for the nearest several months. The Bank of Canada left its interest rate unchanged but marked economic slowdown. Bank of Canada governor Poloz said that more negative data would make them think again about the probability of rate decrease.

The euro almost hadn’t changed by the end of the day. Germany's economics ministry raised its economic growth projection for 2014 to 1.7% from 1.6% referring to a high employment rate, strong home economy and investment growth. Euro-Zone Flash Consumer Confidence grew from -14.9 in September to -14.5 in October. The index has been at the highest level since July, 2011 for two months in a row. According to the monthly statement of the Bank of Spain economic growth has been recorded for the first time since 2-year recession. In the third quarter of 2013 Spanish GDP grew by 0.1% compared with the second quarter when its fall by 0.1% was recorded.

The Bank of England Meeting Minutes published on Wednesday showed that the central bank could start raising interest rates earlier than expected – after Monetary Policy Committee had admitted that unemployment rate in the UK would fall in the second half of the year faster than assumed. The economy will also grow in the second half of the year faster than expected. The data indicate a stable economic recovery of the UK. After the publication of meeting minutes the expectations that the UK central bank could raise interest rates much earlier than in 2016, strengthened.

 

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Overview of the main economical events of the current day - 25/10/2013

EURUSD Above 1.38 for the First Time for Almost Two Years

The US dollar was traded on Thursday slightly downwards against the euro and the pound; it almost didn’t change Vs the yen, Swiss franc and Australian dollar; and it rose against Canadian and New Zealand dollars. Unemployment claims and Manufacturing PMI in the USA turned out worse than expected. The euro and the pound rose despite the decrease of euro-zone PMI and Factory orders in the UK. Australian dollar was supported by Chinese Manufacturing PMI growth.

Unemployment claims in the US fell less than expected last week – by 12 thousand to 350 thousand against the expected decrease to 340 thousand. The indicator has been falling short of market expectations for three weeks in a row. An average number of claims for past four weeks rose to 348.25 thousand from 337.5 thousand. The U.S. Flash Markit Manufacturing PMI dropped more considerably in October than expected – from 52.8 p. in September to 51.1 p. against the expected decrease to 52.5 p. PMI growth rate in October turned out the weakest for the past year.

At the same time Trade balance and job openings in the USA turned out slightly better than forecasted. The US Trade deficit in August grew by 0.4% to $38.8 billion from $38.6 billion in July, which turned out a little better than expected deficit growth to $39.4 billion. The exports fell by 0.1% while imports remained almost unchanged. The US Job Openings rose considerably in August by 1.8% to 3.88 million in comparison with 3.81 million in July.

The euro again updated its annual height having hit 1.38 Vs dollar for the first time since November, 2011 despite some decrease of Purchasing Manager Indexes which are worse than expected – except German Manufacturing PMI. Euro-Zone Composite PMI fell to 51.5 p. in October from 2-year highest reading 52.2 p. prior month while index growth to 52.4 p. was expected. However, the index has been above 50 for four months in a row already, which indicates economic growth.

Spanish Unemployment Rate fell lower 26% for the first time in a year. Unemployment rate fell to 25.98% in the third quarter of this year from 26.26% in the second quarter. Unemployment decrease to 26.10% was forecasted. ECB's Yves Mersch said on Thursday that another 3-year LTRO might not be necessary as the ECB soft monetary policy shows its effectiveness.

British pound recovered its losses at the end of the day which was after the release of weak CBI Industrial Order Expectations. CBI Industrial Order Expectations dropped to -4 in October against +9 in September. At the same time companies’ optimism increased reflecting economic recovery acceleration from the beginning of this year. Bank of England governor Mark Carney said on Thursday that the central bank would facilitate the provision of liquidity to banks if the financial system seemed unstable.

Australian dollar was supported by Chinese manufacturing PMI growth data. HSBC Flash Manufacturing PMI rose to 50.9 p. in October, the highest reading for past seven months against 50.2 p. in September – which says about the acceleration in manufacturing sector of the world’s second largest economy. The index is above important level of 50 p. for three months in a row. New Zealand dollar was traded downwards despite a significant trade deficit decrease. Canadian dollar also continued falling under the pressure of BoC Rate Statement published on Wednesday that the central bank refused its inclination to raise interest rate.

 

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Overview of the main economical events of the current day - 28/10/2013

The Main Events of This Week

The US dollar almost didn’t change by the end of Friday’s trade Vs the euro, pound and yen – and continued growing to commodity currencies. The US statistics released on Friday mostly turned out worse than expected. US consumer confidence dropped in October to 10-month low amid budget debates and government shutdown. Revised U. of Michigan Consumer Sentiment fell to 73.2 p. in October against the preliminary October reading of 75.2 p. and the final September reading of 77.5 p.

Durable Goods Orders in September exceeded expectations and grew by 3.7% while 2.3% was forecasted – but the growth exceeded mainly due to aircraft orders growth (+57.5%). Such orders are volatile and as a rule don’t reflect the demand in the US economy. The key demand indicator - Core Durable Goods Orders Ex Transportation – fell by 0.1% while a growth by 0.5% was forecasted; they have been falling for three months in a row.

The euro slowed down its growth on Friday amid Business Climate decrease in Germany in October from 1.5-year high – which happened for the first time in 5 months. German Ifo Business Climate fell to 107.4 p. in October while a growth to 108 p. was forecasted. The pound had almost no reaction to preliminary GDP for the third quarter which met the expectations. The UK GDP grew by 0.8% in the third quarter in comparison with the second quarter, and by 1.5% at an annual rate. Quarterly economic growth rate in the third quarter turned out the highest since the second quarter, 2010.

By the end of the week the dollar had lost a little more than 0.5% according to the dollar index having been under pressure after the U.S. labour market weak report. The US dollar dropped Vs the Swiss franc (-1.06%), euro (-0.91%) and Japanese yen (-0.37%); it almost didn’t change to the British pound – and rose Vs New Zealand dollar (+2.55%), Canadian dollar (+1.62%) and Australian dollar (+0.95%).

One of the most important events of the week may be FOMC meeting on October 29-30; its results will be announced on Wednesday. It is supposed that asset purchase as QE will be left unchanged – which was also favored by a weaker labour market report for September. October ADP Non-Farm Employment Change report will be released on Wednesday.

A lot of US important data will be published including delayed ones because of government shutdown. On Monday there will be a release of Industrial Output and Pending Home Sales data; on Tuesday - Producer Price Index, Retail Sales, S&P/Case-Shiller HPI and CB Consumer Confidence; on Wednesday - Consumer Price Index; on Thursday - Chicago PMI; and on Friday – ISM Manufacturing PMI. Non-Farm Payrolls will be released on November 8.

In the euro-zone Euro commission business confidence will be released on Wednesday; and on Thursday – unemployment rate and preliminary inflation data. Spanish preliminary GDP for the third quarter will be released on Wednesday. In Germany – labour market and inflation reports; and on Thursday - GfK German Consumer Climate and Retail Sales. European countries will shift to Daylight Saving Time on Sunday, October 27.

In the UK CBI Realized Sales report will be released on Monday; on Tuesday - BoE Monetary & Financial Statistics; on Thursday - GfK Consumer Confidence and Nationwide HPI; and on Friday - Manufacturing PMI. In Japan retail sales data and Household Spending will be published on Tuesday; on Wednesday – preliminary industrial output; and on Thursday - BoJ Interest Rate Decision, no changes are expected.

In Australia Building Approvals, Private Sector Credit, quarterly Import Prices report will be released on Thursday; and on Friday – quarterly report on Producer Price Index. RBA governor Glenn Stevens will make a speech at a conference in Sydney on Tuesday. On Thursday RBNZ Interest Rate Decision will be announced and also Building Consents and ANZ Business Confidence will be released. In China official Manufacturing PMI will be released on Friday. In Canada GDP will be published on Thursday.

 

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Overview of the main economical events of the current day - 29/10/2013

Dollar Grew Before the Start of 2-Day FOMC Meeting

The US dollar was traded upwards on Monday before 2-day FOMC meeting which starts on Tuesday amid inconsistent statistics. The US industrial output growth exceeded expectations – at the same time pending home sales dropped at the fastest rates for more than two years. The pound fell after a weak CBI Distributive Trades Survey.

The US industrial output in September rose by 0.6% compared with the prior month while a growth by 0.4% was forecasted. The indicator has been growing for two months already. The growth in September returned industrial output to its average of 2007 for the first time since recession. Capacity Utilization Rate increased to 78.3% in September, the highest level since this February – in comparison with 77.9% in August and the forecast of 78%.

Pending home sales declined for the fourth consecutive month in September due to higher mortgage interest rates, higher home prices and budget uncertainty. The Pending Home Sales Index fell by 5.6% in September to 101.6 from a downwardly revised 107.6 in August – which has become the lowest reading since December, 2012. At an annual rate the index fell by 1.2%, which became the first annual decrease for 29 months.

The pound fell after a weak CBI Distributive Trades Survey, the euro also slightly fell. According to the CBI, Realized Sales slumped unexpectedly in October from more than a year height 34 to 4-month low of 2 while a decrease only to 31 was expected. At the beginning of the day the pound rose after Hometrack Housing Prices which showed price growth in October for nine months in a row – by 0.5% at a monthly and by 3.1% at an annual rate.

Bank of England member Miles warned on Monday against premature interest rates increase having called it catastrophic despite recent signs of economic growth. Bank of England Meeting Minutes published last week raised expectations of an earlier start of interest rates increase than in 2016. BOE Chief Economist Spencer Dale also said that the Bank of England wouldn’t raise interest rates until unemployment rate fell significantly in the UK.

Meanwhile, Italian Business Confidence rose to its high in October for more than two years despite weak domestic demand. The index grew to 97.3 from 96.8 in September while index decrease to 96.3 was forecasted.

 

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Overview of the main economical events of the current day - 30/10/2013

Australian Dollar Fell After RBA Governor Stevens’ Speech

The US dollar grew on Tuesday Vs all major currencies amid 2-day FOMC meeting and bipolar US statistics. House prices rose more than expected but consumer confidence and retail sales in the USA decreased. Australian dollar dropped after RBA governor Glenn Stevens’ speech as he said that Australian dollar’s rate wasn’t supported by macroeconomic indicators.

On Tuesday 2-day FOMC meeting started and on Wednesday evening the central bank will announce monetary policy statement. In spite of the fact that the Fed is expected to keep its stimulus program unchanged the Fed can make a hint that it would start tapering this year in December already.

A positive moment was real estate price growth in American 20 largest cities - S&P/Case-Shiller Home Price Index grew by 12.8% in August at an annual rate in comparison with the expected growth by 12.5%. The indicator’s growth became the strongest since 2006. At the same time the US consumer confidence in October dropped to its low for half a year - CB Consumer Confidence fell to 71.2 p. against 80.2 p. in September while a decrease only to 75 p. was expected.

Retails sales fell by 0.1% in September while no changes were expected. However, the decrease occurred mainly due to auto sales fall by 2.2% - Retail Sales ex Autos rose by 0.4%, which met the expectations. September auto sales data could be distorted due to Labor Day celebration at the beginning of the month.

The euro rocketed after the speech of ECB member Nowotny but then slumped. Nowotny said that there were signs of euro-zone economic recovery and the ECB was unlikely to lower interest rates more. A negative deposit rate is unrealistic. And though the euro growth doesn’t make the central bank happy – it doesn’t require any correction from its side and, besides, the ECB doesn’t have funds to struggle with it. However, he added that the monetary policy should stay mild.

The pound also fell having ignored Mortgage Approvals growth in the UK up to the height since February, 2008. Mortgage Approvals rose to 66.7 thousand in September against 63.4 thousand in October while a growth only to 66 thousand was expected. The data indicate a further recovery at the housing market which is gathering pace. At the same time consumer lending data turned out worse than expected.

Australian dollar fell significantly on Tuesday having dropped to its low for more than two weeks against the US dollar after the speech of RBA governor Glenn Stevens who said that the Australian dollar wasn’t supported by macroeconomic indicators and probably would be considerably lower in future. This statement showed central bank’s concerns over the recent strengthening of Australian currency.

Canadian dollar continued falling. Raw Materials Price Index fell by 1.5% in September while its decrease only by 0.5% was expected. Besides, BoC governor Stephen Poloz in his speech on Tuesday again repeated his recent statement about the refusal of inclination to raise interest rates.