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

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Overview of the main economical events of the current day - 18/06/2014

Australian Dollar Dropped Amid RBA Meeting Minutes Release

On Tuesday 17 June the US dollar strengthened its positions vs. most major currencies, having added 0.22% to the dollar index before the release of results of FOMC Meeting on Wednesday. The euro dropped amid decrease of German Economic Sentiment to 1.5 year low. The pound sterling decreased amid weak U.K. inflation rate.

The US dollar strengthened its positions amid strong U.S. Consumer Price Index which accelerated its growth and grew in May with the highest pace for over 15 months. Consumer Price Index (CPI) increased in May by 0.4% m/m, having twice exceeded the expectations of growth. Inflation Annual Growth Rate composed 2.1% - this is the highest growth rate since October 2012. Core Consumer Price Index Ex Food and Energy increased by 0.3% m/m and by 2% y/y, having exceeded the expectations.

10-Years U.S. Treasury Yield which rose from 2.60% to 2.66% also promoted the U.S. dollar strengthening. At the same time Housing Market data appeared to be worse than expected. Building Permits dropped in May by 6.4% to 0.99 million of houses against the expectations of decrease by 0.4%. Housing Starts dropped last month by 6.5% to 1.00 million of houses, whereas decrease by 2% was predicted.

The pound sterling decreased after 4 days of growth amid weak U.K. inflation rate which decelerated more than it was expected. Consumer Price Index Annual growth rate decreased in May to 1.5% in comparison with 1.8% in April, whereas decrease only to 1.7% was expected. This is the lowest CPI growth rate since October 2009. Deceleration of CPI in May was due to Food and Transportation prices fall. Retail Price Index and Producer Price Index also appeared to be worse than expected.

The euro dropped amid decrease of German Economic Sentiment to 18-month lows. German ZEW Economic Sentiment continued to decrease in June for the 6th month in a row against the expectations of growth. The index decreased to 29.8 p. in comparison with 33.1 p. in May. Business Confidence decreased in recent months due to concerns about the Ukrainian crisis, developing markets, and Chinese economy deceleration.

At the same time, German Current Assessment continued its growth in June for the 7th month in a row, having strengthened its positions to 67.7 p. against 62.1 p. in April. June reading of the index is the highest for over almost 3 years since July 2011. Euro-Zone ZEW Economic Sentiment stopped in June its 4-month decrease and rose to 58.4 p. in comparison with 55.2 p. in May.

On Tuesday the largest decrease was demonstrated by the Australian dollar which dropped to 7-day low vs. the U.S. dollar after the release of the last RBA Meeting Minutes in which the Central Bank confirmed that interest rates will stay at record low for some period of time. RBA expects for the growth of GDP lower than the trend during the next year. AUD course is high according to historical standards especially in terms of decrease of commodity prices – it lends less support to economy rebalancing.

The New Zealand dollar was also corrected downwards on Tuesday after considerable growth of the previous week. Meanwhile, GDT Price Index increased during the Tuesday GlobalDairyTrade auction for the first time since early February. During this period of time the Index decreased by 25%. The Swiss franc dropped amid decrease of forecasts of country’s GDP by the Swiss Government for 2014 and 2015 due to possible export deceleration.

 

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Overview of the main economical events of the current day - 19/06/2014

The U.S. Dollar Dropped Amid FOMC Meeting Results

The U.S. dollar dropped on Wednesday 18 June vs. most major currencies, having lost 0.27% to the dollar index after the announcement of FOMC Meeting results.

The U.S. dollar was traded downwards and dropped during the press-conference of Fed’s Chair Janet Yellen who seemed to disenchant the U.S. dollar buyers. Yellen did not set time limits of possible increased of rates. As it was expected FOMC reduced QE3 for the 5th time in a row by another $10 billion to $35 billion.

FOMC sharply reduced the forecasts of the US economy growth for the current year, having left it without changes for 2015-2016. FOMC reduced the forecasts of Unemployment Rate for the nearest years. Inflation Rate forecasts were left without changes. Most of Fed’s officials expect the first increase of rates in 2015. In comparison with March forecasts a more sharp increase of rates in 2015 and 2016 is expected.

During the Press-Conference Fed’s Chair Janet Yellen announced that FOMC intends to maintain near zero rates during long period of time after Bond-Buying ends. Increase of rates has no fixed time. Fed Balance will stay large for some period of time. FOMC will continue discussions about normalization policy tools at future Meetings, but it is not a signal of imminent action.

Released on Wednesday data in the USA also appeared not to be dollar’s favor. The U.S. Current Account deficit expanded more than it was expected ($97 billion), having increased in the 1st quarter by 27% to $111.2 billion in comparison with $87.3 billion in the 4th quarter. The deficit appeared to be the largest for over 6 quarters which was due to export fall and decline in earnings.

The pound sterling decreased after the release of the last Bank of England Meeting Minutes, but then it negated all the losses, having even increased. Meeting Minutes signaled about possible but hardly probable increase of rates this year. Monetary Policy Committee Members were surprised but low probability attached by investors to 2014 Rate Move.

Most MPC Members agreed to see more evidence of reduction in slack before rate rise – MPC Members saw spare capacity in range of 1% to 1.5% of GDP. Premature rate rise could lead to considerable costs in lost output. Uncertainty over impact reinforces case for raising Bank Rate gradually and cautiously.

The New Zealand dollar was traded upwards before the release of New Zealand GDP for the 1st quarter. New Zealand Current Account Proficit of the 1st quarter reached 1.41 billion NZD in comparison with the deficit of 1.51 billion in the previous quarter, having exceeded the expectations. New Zealand GDP increased in the 1st quarter by 1% q/q against the forecast of +1.2%.

The Canadian dollar strengthened its positions amid Canadian Wholesales Sales growth at the highest rate for over 9 months. Wholesales Sales increased in April by 1.2% m/m having twice exceeded the expectations. The yen increased amid Japanese Trade Balance the deficit of which expended in May less than it was expected – to 0.91 trillion JPY in comparison with 0.81 trillion in April, whereas deficit at the level of 1.17 trillion was expected. The export dropped by 2.7% y/y, whereas import reduced by 3.6% y/y.

 

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Overview of the main economical events of the current day - 02/07/2014

Australian Dollar Rockets

On Tuesday 1 July the US dollar decreased vs. most major currencies amid decrease of the US Manufacturing Activity. The pound sterling strengthened its positions amid growth of the UK Manufacturing Activity. The euro decreased amid weak Euro-Zone Manufacturing Activity and German Employment Rate.

ISM Manufacturing PMI suddenly dropped in June from semiannual high after 4 months of growth. The index decreased to 55.3 p. in comparison with 55.4 p. in May, whereas growth to 55.8 p. was expected. Backlog of Orders, Prices, and Supplier Deliveries decreased most of all. Import and New Orders increased. Growing demand for Motor Vehicles and Construction Supplies, stable Consumer Demand, low Inventories, and improvement of situation at foreign markets will stimulate the US economy growth in the 2nd quarter.

The rest US data released on Tuesday appeared to be worse than expected. Final Markit Manufacturing PMI in June was revised downwards to 57.3 p. in comparison with preliminary estimate of 57.5 p. and 56.4 p. in May. At the same time June reading of the index appeared to be the highest since May 2010. Construction Spending increased in May by 0.1% m/m against the expectations of growth by 0.5%. IBD/TIPP Economic Optimism dropped in July to 4-month low at the level of 45.6 from 47.7 in June against the forecasts of growth.

The euro was traded slightly downwards amid weak Euro-Zone Manufacturing Activity which dropped to 7-month low. German Manufacturing Activity dropped to 8-month low, in France – to6-month low, and in Italy – to 3-month low. Final Euro-Zone Manufacturing PMI decreased in June to 51.8 p. from 52.2 p. in May and appeared to be lower than preliminary estimate of 51.9 p. Final German and Italian data was also revised downwards.

German Unemployment Change increased in June by 9,000 against the expectations of decrease. German Unemployment growth continues for the second month in a row. German Unemployment Rate stayed unchanged at the level of 6.7%. At the same time, Euro-Zone Unemployment appeared to be better than expected. Euro-Zone Unemployment Rate stayed unchanged in May in comparison with downwardly revised April reading of 11.6%, whereas growth to 11.7% was expected. Italian Unemployment Rate increased in May to 12.6% from 12.5% in April, which coincided with the forecasts.

On Tuesday the pound sterling refreshed its high vs. the US dollar for over more than 5years amid growth of the UK Manufacturing Activity to the highest rate for over 7 months, which increased the prospects of interest rates increase till the beginning of 2015. Manufacturing PMI rose in June to 57.5 p. in comparison with 57 p. in May, whereas decrease of the index was expected. The UK Manufacturing sector continued its growth and saved leading positions from the point of contribution to the whole economy, finishing one of the best quarter for over 2 recent decades.

The largest growth on Tuesday was demonstrated by the Australian dollar after the announcement of RBA Meeting results where key interest rate was again left without changes for the 11th month in a row. But final RBA Rate Statement didn’t demonstrate inclination to soft policy which was expected by some market participants after Jun Meeting Minutes, the last weak Consumer Sector and Employment, and amid the growth of currency quotation as well. The last announcement was slightly different from the previous one. RBA pointed that currency quotation now provides less support for achievement of balanced economy growth than it might have done.

AUD was positively affected by the growth of Chinese Manufacturing Activity to 7-month high. NBS Manufacturing PMI increased in June to 51p. from 50.8 p. in May. NZD also strengthened its positions. Meanwhile, Dairy Prices Index refreshed its fall again on Tuesday at the last GlobalDairyTrade, having decreased by 5.4% to the reading of the previous auction and having reached the rate of early February.

The yen weakened after 4 days of strengthening amid growth of Japanese stock market. Though most of Tankan Large All Industry Capital Expenditure in Japan appeared to be worse than expected, and Business Climate dropped after recent increase of sales tax – large Japanese corporations are inclined to increase capital expenditure in the current financial year by 7.4% in comparison with 0.1%, which were expected in the 1st quarter. This is good news for the Bank of Japan, which hopes that corporate expenditure will help to compensate the fall of consumption.

 

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Overview of the main economical events of the current day - 07/07/2014

The Main Events of the Coming Week

On Friday 4th July the US dollar strengthened its positions vs. most major currencies, having added 0.1% to the dollar index. The euro was traded downwards amid weak German Factory Orders.

On Friday the US dollar continued its growth after the US Non-Farm Payrolls, released on Friday. The calendar was almost empty, the 4th of July was celebrated in the USA and market activity was low. Market participants continued to estimate strong Non-Farm Payrolls released the previous day. In June the situation at the American Labor Market notably improved, which is confirmed by economy recovery continuation.

The US Non-Farm Employment Change jumped in June by 288,000 in comparison with upwardly revised 224,000 in May – which appeared to be considerably more than expected 212,000. Unemployment Rate reduced in June from 6.3% to 6.1% - the lowest rate since July 2008, whereas no changes were expected. According to CME, possibility of interest rates increase during FOMC Meeting in June 2015 after the release of Employment Change Report increased to 57%. The previous day the chances for interest rates increase in June 2015 composed 51%, and 43% a month ago.

The euro was traded downwards amid decrease of German Factory Orders, which dropped more than it was expected. Geopolitical risks brought pressure on confidence in the largest Europe’s economy. German Factory Orders dropped in May by 1.7% m/m against the expectations of decrease by 1.1%. In April growth of the reading by 3.4%, but not by 3.1% as it was stated earlier was noted. Increase was the highest since June 2013.

German Construction PMI dropped in June to 15-month low, which was mainly connected with the fall of new orders. ECB’s Noyer stated that ECB is ready to take all necessary measures for achieving inflation rate of 2%. Asset Purchase program oriented both to state-owned assets and private assets may be launched for these purposes. Euro course is overcharged vs. the US dollar, if taking into account the growth of the European economy. Strong euro pressurizes economical activity and inflation, and euro weakening vs. the US dollar would be reasonable.

According to the results of the week the US dollar strengthened its positions vs. most major currencies, having added 0.31% to the dollar index. Strong US Non-Farm Payrolls supported the US dollar, and increased the possibility of earlier interest rates rise. Most of all the US dollar increased vs. the yen and the Australian dollar. Only the pound sterling and the Canadian dollar managed to increase vs. the US dollar. The pound sterling received support from strong BBA Mortgage Approvals, Manufacturing PMI, and Construction PMI in the UK.

The most important event of the week will be the release of the last FOMC Meeting on Wednesday. These are very few data in the USA this week: on Tuesday JOLTS Job Openings and NFIB Small Business Index will be released; on Thursday – Wholesales Inventories and Wholesale Trade Sales; and on Friday – Monthly Federal Budget Balance. On Tuesday 8 July American companies quarterly report period of the 2nd quarter will start and will last till the middle of August.

On Monday Euro-Zone Sentix Investor Confidence will be released; and on Thursday – Monthly ECB Report. German Industrial Output will be released on Monday; and in France and Italy – on Thursday – low growth rates of Industrial Output are expected in May. French Inflation Rate will be released on Thursday; and in Germany and Spain on Friday. On Tuesday in Germany Trade Balance will be released.

On Tuesday in the UK Industrial Output will be released (acceleration of annual growth rate in May is expected), and on Thursday – Trade Balance. On Thursday BOE Monthly Meeting results will be announced, no policy changes are expected. On Tuesday in Japan Trade Balance and Current Account will be released; on Thursday – Core Machinery Orders. On Wednesday in China Inflation Rate will be released; and on Thursday – Trade Balance.

On Tuesday in Australia NAB Business Confidence will be released; on Thursday – Labor Market Report; and on Friday – Home Loans. In New Zealand NZIER Business Confidence will be released; on Wednesday – Electronic Cards Retail Sales; and on Thursday – Business NZ Manufacturing Index and REINZ House Price Index. On Monday in Canada BOC Business Outlook Survey, building Permits, and Ivey PMI will be released; on Wednesday – Housing Starts; on Thursday – New House Price Index; and on Friday – Labor Market report.

 

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Overview of the main economical events of the current day - 08/07/2014

Canadian Business Activity Dropped To Semiannual Low


On Monday 7 July the US dollar was traded slightly downwards vs. most major currencies, having lost 0.06% to the dollar index amid absence of any significant macro statistics in the USA. The Australian dollar strengthened its positions amid positive Labor Market and Construction Activity in Australia.

The US dollar strengthened its positions in the beginning of the day, but then it decreased. The decrease of 10-Year US Treasury Yield, which dropped on Monday from 2.64% to 2.62%, negatively influenced the US dollar. Meanwhile, Conference Board Employment Trends Index (ETI) continued its growth in June for the second month in a row and increased to 119.62. May reading was revised upwards from 118.58 to 119.03. Seven out of ten components of the index made a contribution to the growth if the index in June. According to Conference Board, fast ETI growth in recent months lets suppose that strong growth of new job places will possibly continue in summer.

The euro inconsiderably increased after 4 days of decrease amid growth of Euro-Zone investors Climate which improved after 2 months of decrease, which was due to new ECB measures of economy stimulation and improvement of expectations in terms of world economy. Euro-Zone Sentix Investor Confidence strengthened its positions in July to 10.1 p. in comparison with 8.5 p. in June (semiannual minimum) against the expectations of decrease. Expectations increased for the first time after four months of decrease.

At the same time, German Industrial Output dropped in May by 1.8% m/m against the expectations of growth, which appeared to be the largest decrease for over 2 years. Industrial production in Germany reduces for the third month in a row, though the Department of Economic Affairs noted that decrease of industrial production is a temporary factor. ECB’s Nowotny announced that low interest rates are right measures and will help Europe to return to economy growth. The pound sterling was traded downwards on Monday before the Tuesday release of the UK Industrial production.

The Australian dollar strengthened its positions amid positive Labor Market. ANZ Job Advertisements increased in June by 4.3% after the May decrease by 5.6%. Australian June Labor Market is to be released on Thursday. Australian AiG Construction Index jumped in June to 7-month high of 51.8 p. in comparison with 46.7 p. in May, having risen above 50 for the first time this year.

The New Zealand dollar was also traded upwards before the release of Business Confidence. However, Business Confidence decreased from 20-year high to the lowest rate for over a year. NZIER business Confidence dropped in the 2nd quarter to 32 in comparison with 52 in the 1st quarter.

The Canadian dollar dropped after the release of weak Chinese Business Activity, which decreased the previous month to semiannual low. Canadian Ivey PMI dropped in June to 46.9 p. from 48.2 p. in May against the expectations of growth. The index decreases for the 4th month in a row. At the same time Canadian Building Permits jumped by 13.8% in comparison with April, having demonstrated the highest growth rate for over 10 months. The hike was due to growth of demand for houses, storage capacities, and retail outlets.

BOC Business Outlook Survey in the 2nd quarter demonstrated that there are some inspiring signs for economy prospects, but some uncertainty amid strong competition still hold growth rates. High competition in the sphere of Retail Sales limits the growth of prices and holds Inflation expectations at low level. According to the results of the survey, companies’ expectations in terms of sales and loan plans weakened positions in comparison with the results of the survey in the 1st quarter; indicator of capacity rate lack decreased. Results of the survey pointed that BOC will possibly save neutral position at the Meeting on 16 of July, and will continue expressing concerns about low inflation.

 

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Overview of the main economical events of the current day - 14/07/2014

The Canadian Dollar Sharply Dropped Amid Labor Market


On Friday 11 July the US dollar was traded mixed, having added 0.07% to the dollar index. The Canadian dollar sharply dropped after the release of weak Canadian Labor Market.

The US dollar slightly changed vs. most major currencies amid absence of any significant macro statistics in most of countries. Trades passed in a tight range. According to the results of the week the US dollar decreased vs. most major currencies, having lost 0.12% to the dollar index amid release of softer than expected FOMC Meeting Minutes. Most of all the US dollar decreased vs. the New Zealand dollar and the yen for over a week. The US dollar managed to increase only vs. the pound sterling and the Canadian dollar.

The most important statistics was released in Canada on Friday. The Canadian dollar sharply dropped to 2-week low vs. the US dollar, having lost 0.8% after the release of weak Canadian Labor Market. Such a sharp response was entailed by oncoming BOC Rates Meeting, which will take place next Wednesday. Canadian Unemployment Rate increased in June to semiannual high at the level of 7.1% from 7% in May, whereas no changes were expected. Unemployment Rate increases for the second month in a row.

Canadian Employment Rate reduced in June by 9,400 against the expectations of growth by 20,000. At that Part Time Employment Change reduced by 43,000, whereas Full Time Employment Change increased by 33,500. Employment favors for unappropriated facilities of the country’s economy, which may provoke the Bank of Canada to continue keeping neutral position and save deliberate position in its final announcement of the Meeting results on Wednesday.

On Friday the Australian dollar was traded slightly upwards; however, it decreased after the speech of RBA’s Stevens, having closed with a slight decrease vs. the US dollar. Stevens announced that RBA has no definite opinion in terms of expectations of interest rate decrease, and he expects considerable decrease of the Australian dollar in the nearest future. The New Zealand dollar also slightly decreased according to the results of the day.

The euro had almost no changes according to the results of the day amid ECB’s Nowotny speech, in which he announced that at the moment there is no need in asset purchase program, because the last package of ECB measures didn’t manage to affect the market. Though some positive results are obvious already – like softening of financing terms, and cessation of common European currency’s growth.

According to final data, German Inflation annual rate growth increased June to 1%, whereas in Spain it decreased to 0.1%. Despite recent growth of concerns in terms of one of the largest Portuguese banks, according to the results of the week the euro had almost no changes and saved its positions around $1.36. The pound sterling slightly decreased on Friday amid weak UK Construction the volume of which dropped in May by 1.1% m/m against the expectations of growth.

Meanwhile, FOMC Member Plosser announced on Friday that FOMC should prepare the markets to the upcoming increase of rates, which may occur earlier than it was expected. According to Plosser, FOMC approaches to its policy targets, and he wished that ill the end of the year the key interest rate would compose 1%. At the same time, FOMC Member Lockhart stated that it’s too early to signal about the rates, and he would like to save the rates near zero till the middle of 2015 or more.