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205

Overview of the main economical events of the current day - 18/11/2013

The Main Events of the Week

The US dollar fell on Friday against all major currencies after negative statistics that showed the decrease of the US Industrial Output and Empire State Manufacturing Index. Industrial Output dropped by 0.1% in October while its growth by 0.2% was expected. Industrial output fell in the USA for the first time for the last six months.

Capacity Utilization Rate decreased by 0.2% to 78.1%. Meanwhile, processing industry (3/4 of all industrial output) rose by 0.3% having exceeded the expected growth by 0.2%. The US import prices fell in October at the fastest rate for almost a year by 0.7% m/m having exceeded the expected decrease by 0.5%.

Empire State Manufacturing Index slumped in November to minus 2.21 p. from 1.52 p. last month while a growth to 5 p. was expected. The index fell to its low for 10 months and for the first time in six months dropped below zero – the level that indicates index decline. New Orders and Shipments fell significantly as well as Employment Index. This report is the first to be released among production reports of regional banks and it is used to forecast manufacturing index in all country which is usually released at the beginning of the next month.

By the end of the week the dollar fell by 0.55% according to the dollar index leveling the same growth last week. The dollar slumped Vs all currencies except yen and Australian dollar and was put under pressure amid aroused expectations that the Fed new chair Janet Yellen will continue soft monetary policy after she enters upon the office at the beginning of the next year.

This week there will be rather a lot of US data including delayed data due to government shutdown. Fed Chairman Bernanke is due to speak at the National Economists Club on November 20 at 00:00 GMT. On Monday Treasury International Capital Flows and NAHB Housing Market Index will be released; on Tuesday - Employment Cost Index, on Wednesday – consumer Price Index, Retail Sales, Existing Home Sales and FOMC Meeting Minutes; on Thursday – Producer Price Index and Philadelphia Fed Manufacturing Index; on Friday – Job Openings.

The main events in the euro-zone will be the publication of German ZEW Economic Sentiment on Tuesday and IFO indexes on Friday; besides, preliminary Manufacturing and Non-Manufacturing PMI of France, Germany and the whole euro-zone. ZEW and IFO indexes are expected to grow in Germany as well as euro-zone PMI. On Monday euro-zone Trade Balance and Current Account will be released. In Germany on Tuesday there will be a release of Producer Price Index and on Friday – the Final GDP for the third quarter.

In the UK the BoE Meeting Minutes will be released on Wednesday and on Thursday - Public Sector Net Borrowing and CBI Industrial Order Expectations. In Japan Trade Balance will be released on Wednesday; on Thursday BoJ Interest Rate Decision will be announced. HSBC Flash Manufacturing PMI will be released on Thursday.

On Tuesday Meeting Minutes of the Reserve Bank of Australia will be published; and on Thursday RBA Governor Glenn Stevens is due to deliver a speech titled “The Australian Dollar: Thirty Years of Floating”. In New Zealand Producer Price Index report will be released on Wednesday. In Canada Wholesale Sales will be released on Wednesday; and on Friday – inflation and retail sales. Bank of Canada governor Poloz will deliver a speech in the Parliament on Thursday.

By MasterForex Company

206

Overview of the main economical events of the current day - 19/11/2013

The Dollar Has Been Falling for Two Days

The US dollar was traded downwards on Friday falling for the second day amid almost empty calendar but by the end of the day it had recovered some losses. The dollar was supported by the comments of FOMC member Dudley who was more optimistic about the US economic outlook. Economic growth is significant amid a fiscal drag – he said. The dollar dropped Vs the euro and yen and almost didn’t change Vs the pound and Australian dollar.

NAHB Housing Market Index stayed unchanged in November compared with October – at 54 but the prior month data were lowered by 1 p. The builders are less confident at the housing market than in summer but they believe the sector still has the potential to grow further. Capital flow in September showed that Total Net TIC Flows was negative: -$101.4 billion.

The euro was traded upwards on Monday and by the end of the day it had risen slightly. Bundesbank Published Monthly Report according to which there is a good possibility that economic growth in Germany will continue next months. Euro-zone trade surplus grew to 13.1 billion euro in September against 6.9 billion in August.

At the same time, euro-zone current account surplus dropped in September after the growth in August. ECB Governing Council member Ewald Nowotny said that the improvement of the euro-zone economic situation turned out not so significant as the ECB considered it some time before.

The pound almost hadn’t changed by the end of the day amid the lack of significant macrostatistics. According to the results of a half year poll of financial organizations that was published by the Bank of England – confidence in the UK financial system grew to its high for more than five years. The yen grew and the dollar fell again on Monday below the level of 100 yen amid negative dynamics of the Japanese stock market after it had reached almost 6-month high.

Australian dollar strengthened to 6-day high amid the news from China where they announced the details of the reforms approved earlier at the Plenary Session – but at the end of the day it lost its growth. Chinese leaders promised to expand the possibilities of private investment, to raise the rivalry on the market and accomplish other economic growth stimulus measures.

Canadian dollar strengthened on Monday amid the growth of Foreign Securities Purchases which rose to 8.4 billion Canadian dollars in September and focused on Canadian shares. Foreign Securities Purchases became the highest for five months. Canadian investors decreased Investment in Foreign Securities by 1.5 billion dollars in September including shares and bonds.

By MasterForex Company

207

Overview of the main economical events of the current day - 20/11/2013

Bernanke Weakened the Dollar

The US dollar fell on Tuesday Vs the euro, Australian dollar and New Zealand dollar; grew Vs the yen and Canadian dollar and almost didn’t change Vs the pound. Fed chairman Bernanke’s speech led to further dollar’s weakening. The euro rose amid German economic sentiment growth up to 4-year high. The yen weakened before BoJ 2-day meeting which will start on Wednesday.

Speaking at the National Economists Club Fed chairman Bernanke said that interest rates would stay low significantly later than the unemployment rate reached 6.5%. After reaching 6.5%, employment, participation rate and other indicators will be of importance. The Fed will slow down bond purchases if the labour market and inflation meet the forecasts – but Bernanke didn’t give any exact terms, everything will depend on coming data.

Bernanke supported recent statements of the future Fed chair Janet Yellen that it is necessary to do everything possible today for a stable economic recovery. According to Bernanke, the Fed will adhere to stimulus policy as long as it will be necessary. Such mild comments had a negative impact on the dollar. On Wednesday the Fed meeting minutes will be published. Most experts expect the Federal Reserve to start decreasing monthly asset purchases not earlier than March, 2014.

The euro strengthened on Tuesday amid German economic sentiment growth up to 4-year high. German ZEW Economic Sentiment grew to 54.6 p. in November from 52.8 p. in October having exceeded expected growth to 54 p. The index turned out the highest since October, 2009. German Economic Sentiment has been high for the last several months, said ZEW president. Current Assessment turned out worse in November; it fell to 28.7 p. from 29.7 p. while it was expected to grow up to 31 p. On Friday there will be a release of IFO Business Climate.

ECB’s Praet supported the euro; he said on Tuesday that euro-zone economic state improved and the recovery was moderate but stable. Vice-President of the ECB Constâncio said that quantitative easing aimed to growth stimulation in the euro-zone was a possibility for the ECB and its introduction wasn’t discussed at the Governing Council on a technical level.

The yen weakened before BoJ 2-day meeting on Wednesday devoted to the discussion of monetary policy parameters. The dollar again rose above 100 yen. Almost three-quarter of economists polled by Bloomberg expect the central bank to expand stimulus programs in the first half of 2014.

Australian dollar grew on Tuesday after the publication of Reserve Bank of Australia meeting minutes which turned out neutral in general. The central bank doesn’t exclude further interest rate decrease but at the same time estimates economic state with large certainty. Australian CB Leading Index grew by 0.3% in September to 123.6 after the decrease by 0.2% in August.

By MasterForex Company

208

Overview of the main economical events of the current day - 21/11/2013

The Dollar Rose amid FOMC Meeting Minutes

The US dollar rose significantly on Wednesday Vs most major currencies amid the publication of FOMC Meeting Minutes and positive retail sales. The Fed can start QE tapering in the upcoming months already. The euro fell amid strengthened speculations on introduction of negative deposit rates. The pound grew after BoE Meeting Minutes publication but then dropped again.

FOMC Meeting Minutes showed that the Fed’s leaders expect improvement of economic situation in the country which will allow QE tapering in the upcoming months – but they also consider a possibility of tapering before the economic situation improves. The economic effect from the government shutdown was temporary and limited. Besides, unemployment threshold decrease and introduction of inflation threshold were discussed at the meeting.

The dollar was also supported by the statements of certain FOMC members. So, President of the Federal Reserve Bank of New York William Dudley said that despite fiscal problems this year, the economy continues recovering and it will grow at faster rate. Besides, he referred to October Non-Farm Payrolls, which showed the growth of new jobs, and to GDP growth in the third quarter which preliminarily accounted for 2.8%. President of the Federal Reserve Bank of St. Louis James Bullard said that the economy looked better and QE3 tapering would be discussed at the next meeting in December – and a strong employment report in October increases the chances for it.

The US macrostatistics data were mixed. The US retail sales rose more than expected while Existing Home Sales decreased and inflation data in the whole met the expectations. Retail sales rose by 0.4% in October while a growth by 0.1% was forecasted; Sales ex Autos increased by 0.2% while a growth by 0.1% was expected.

Existing Home Sales fell in October by 3.2% compared with the prior month – to 5.12 million houses at an annual rate while sales decrease by 2.9% - to 5.14 million was forecasted. Home Sales have been falling from more than 3-year high for two months. Consumer Price Index fell by 0.1% in October while no changes were expected – at an annual rate inflation fell to 4-year low of minus 1%.

The euro was traded downwards on Wednesday amid Producer Price Index decrease in Germany at a faster rate than expected – and then slumped to weekly lows Vs the dollar after Bloomberg News announced that the ECB considered introduction of a negative deposit rate at -0.1%. Recently, there aroused speculations on ECB’s introduction of a negative deposit rate, which can make commercial banks extend credits to companies and households more actively.

Earlier this month the ECB governor Draghi announced that the central bank was ready to new measures if it was needed to provide economic growth. Citi experts believe that a move towards negative deposit rates can cause a significant opposition among some ECB leaders. As an option the ECB can take into account other measures. German Bundesbank President Jens Weidmann said on Wednesday that there was no use for the ECB signaling about further softening of monetary policy now as it had just softened it.

The pound updated its monthly high after the publication of BoE Meeting Minutes but then dropped. On one hand, the meeting minutes indicated that acceleration of economic growth in short-term perspective is expected in the UK. Credit availability and the conditions for business spending have improved. The driving forces of growth acceleration are household spending and housing market. On the other hand, risk balance for the growth is shifted to the negative due to the situation in the euro-zone and balance recovery. And economic growth rate seems to decrease within the next 2-3 years.

By MasterForex Company

209

Overview of the main economical events of the current day - 22/11/2013

German Manufacturing PMI Reached 29-Month High

The US dollar rose on Thursday Vs yen and commodity currencies but fell Vs the euro and the pound. The euro strengthened amid PMI growth in Germany, the largest euro-zone economy. The pound grew after CBI positive report. The yen fell amid the end of BoJ 2-day meeting. Australian dollar had been falling for two days on the back of Chinese manufacturing PMI slowdown.

The US data released on Thursday were positive in general. Unemployment Claims dropped by 21 thousand last week to 7-week low of 323 thousand more than twice exceeding the expected decrease. The indicator that smoothes the volatility of weekly data - 4 Week Average of Initial Jobless Claims – fell to 338.5 thousand from 344 thousand.

The US Flash Markit Manufacturing PMI grew to 8-month high of 54.3 p. in November compared with forecasted 52.6 p. Producer price decrease in October met the forecasts while Producer Price Index Ex Food & Energy increased slightly more than expected. Only Philadelphia Fed Manufacturing Index turned out worse; it fell in November more than forecasted – to 6.5 p. in comparison with 19.8 p. in October while a decrease only to 16 p. was forecasted. New orders, shipments and employment fell significantly.

The euro strengthened on Thursday amid German PMI growth, the largest euro-zone economy. Manufacturing PMI rose to 29-month high 52.5 p. in November from 51.7 p. in October; Services PMI – to 9-month high; PMI Composite – to 10-month high. Meanwhile, the same indexes in France dropped against the expected growth. In euro-zone manufacturing PMI slightly grew having met the expectations – while Services PMI fell. Euro-zone PMI Composite dropped to 3-month low 51.5 p. from 51.9 p. in October. The euro rocketed after the ECB Mario Draghi weakened the expectations of deposit rate decrease. Draghi said that there was “no news” on possible negative deposit rates debates.

The pound grew amid a positive CBI report which showed that CBI Industrial Order Expectations and Production reached the highest level since 1995. CBI Industrial Order Expectations reached +11 in November Vs -4 in October. Industrial output balance amounted to +24 against +9 in October. According to CBI economy director, the data became a new promising sign of manufacturing sector recovery.

The yen fell significantly and USDJPY exceeded level of 101 for the first time since July 10 – after the announcement of 2-day meeting results of BoJ that kept monetary policy line and economic state estimate unchanged. The central bank said that economic recovery was moderate amid exports increase, business spending and public investment. The CB is intended to adhere to the way of quantitative and quality easing of monetary policy further to provide access to the target inflation level of 2% per annum. Yen weakening was supported by Japanese pension fund new plan on risk assets distribution.

Australian dollar fell to its low for almost 2.5 months Vs the dollar after HSBC Flash Manufacturing PMI which fell to 50.4 p. in November against 50.9 p. in October having considerably exceeded expected decrease to 50.8 p. An extra pressure on AUD was put by the speech of RBA governor Stevens who said that Australian dollar was higher the levels which RBA expected for mid-term perspective – and sooner or later the market will return AUD to the right levels. Besides, Stevens warned that currency interventions were still part of RBA’s armory, they are reasonable and acceptable in certain circumstances, and may be effective and useful.

By MasterForex Company

210

Overview of the main economical events of the current day - 25/11/2013

The Main Events of the Week

The US dollar dropped on Friday Vs the euro and the pound and grew against the yen and commodity currencies continuing the trend of the prior day amid no significant US macrostatistics. The euro grew after the release of positive Business Climate in Germany. IFO Business Climate rose by 1.9 p. to 109.3 p. in November against forecasted growth up to 107.7 p. IFO Current Assessment and Expectations also rose having exceeded the forecast significantly.

Canadian dollar fell on Friday to 3-month low Vs the dollar but then recovered some losses after Canadian report on retail sales which grew by 1% in September having exceeded the expected growth by 0.3%. However, the growth was caused mainly by auto sales increase – sales ex auto didn’t change compared with August. At the same time Canadian inflation data turned out worse: inflation slowed down in October to 0.7% at an annual rate while its decrease only to 0.8% was expected. Inflation data let the central bank keep interest rates at low further.

By the end of the week the US dollar had lost about 0.2% according to the dollar index, decreasing to DX for two weeks in a row. Last week fall happened mainly due to the growth of European currencies. The dollar fell against the Swiss franc (-0.80%), British pound (-0.62%) and the euro (-0.39%). The dollar grew against commodity currencies and the yen. Most of all the US dollar rose against the Australian dollar (+2.10%) and New Zealand dollar (+1.36%). A smaller growth was shown Vs the yen (+1.14%) and Canadian dollar (+0.82%).

The last week of the month, on Monday Pending Home Sales will be released; on Tuesday – Building Permits, Housing Starts (for two months at once – September and October), S&P/Case-Shiller and FHFA Home Price Index and CB Consumer Confidence; on Wednesday – Durable Goods Orders, Chicago PMI and Revised U. of Michigan Consumer Sentiment. Thursday is a day off in the USA and on Friday the activity at the American session may be minimal.

In the euro-zone on Thursday there will be a release of confidence indexes from the European Commission and on Friday – inflation and unemployment. In Germany Gfk Consumer Confidence will be released on Wednesday; on Thursday – labour market and inflation reports; and on Friday – retail sales. In Switzerland GDP for the third quarter will be published on Tuesday. In Japan retail sales report will be released on Thursday and on Friday – a large statistics block of the end of the month: inflation, unemployment and industrial output.

In the UK BBA Mortgage Approvals will be released on Monday; on Wednesday – the Second Estimate GDP for the third quarter; and on Friday - BoE Monetary & Financial Statistics. On Tuesday Inflation Report Hearings will be held where BoE governor Mark Carney and other central bank members will deliver a speech. On Thursday there will be a release of the BOE Financial Stability Report and BoE governor will make a speech.

In Australia Private Capital Expenditure report will be released on Thursday and on Friday - Private Sector Credit report. In New Zealand there will be a release of Trade Balance on Wednesday; on Thursday - ANZ Business Confidence Index and on Friday – Building Permits. In Canada Current Account will be released on Thursday; and on Friday - GDP for September and for the third quarter.

By MasterForex Company

211

Overview of the main economical events of the current day - 26/11/2013

The ECB Has Room for Interest Rates Decrease

The US dollar was traded upwards on Monday Vs most major currencies amid the yen fall Vs the dollar to almost 6-month low and correctional decrease of European currencies. On Monday there was little significant statistics and the dollar ignored weak housing market data. The pound fell amid weak real estate market data in the UK. The yen and Swiss franc dropped after the nuclear deal with Iran had been reached due to reduced demand for safe-haven currencies.

According to the National Association of Realtors the U.S. Pending Home Sales fell in October to its low from December, 2012. Pending Home Sales Index has been falling for five months and dropped by 0.6% in October while it was expected to rise by 1.3%. Prices and borrowing cost growth has a negative impact on housing market recovery.

Dallas Fed Manufacturing Activity also turned out worse than expected and fell to 1.9 p. in November compared with 3.6 p. in October. Meanwhile, according to the opinion poll of economists held by Philadelphia Fed, the US economy will grow at faster rates next year, which will lead to labour market strengthening. A faster decrease of unemployment rate will let the Fed accelerate QE tapering.

The pound fell considerably on Monday after the release of the UK weak housing market data. According to the British Bankers’ Association BBA Mortgage Approvals fell to 42.8 thousand in October from almost 4-year high of 43.2 thousand in September while its growth up to 45 thousand was expected. The euro was also traded downwards; it was negatively influenced by the statements of some ECB members. ECB Governing Council member Ardo Hansson said that the European central bank still had room to reduce interest rates and it is technically ready to take the deposit rate to the negative zone.

ECB’s Christian Noyer said that interest rates must stay low for an extended period, or even lower if need be, for price stability in the euro-zone. ECB’s Benoît Coeuré announced that inflation drop in the euro-zone continued – although there is a hope that it will not progress to deflation because the economy is recovering.

The yen fell to almost 6-month low against the dollar after reaching a nuclear deal with Iran. On November 24 after 10 years of negotiations in Geneva a deal on partial relief from some economic sanctions against Ian was reached in exchange for a partial shutdown of its nuclear program. Bank of Japan Governor Haruhiko Kuroda marked on Monday a progress on the way to reaching the target inflation level of 2% although he admitted the plan too ambitious considering 15 years of deflation in Japan. Deputy Minister of Finance said that deflation was coming to an end and the economy started recovering.

Canadian dollar reached 4.5-month low Vs dollar on Monday amid oil price decrease after Iranian nuclear program deal that allows weakening some economic sanctions against Iran. Swiss franc also dropped. Swiss National Bank chairman Jordan said on Monday that Swiss franc was still highly valued and the central bank was ready to unlimited currency interventions to defend the franc rate.

By MasterForex Company

212

Overview of the main economical events of the current day - 27/11/2013

The Dollar Fell amid the U.S. Weak Consumer Confidence

The dollar dropped on Tuesday against most major currencies after weak consumer confidence data which continued falling in November after a sharp decline in October connected with the government shutdown. The pound and the euro were traded upwards; the yen also strengthened a little. Australian and New Zealand dollars continued falling.

CB Consumer Confidence fell to 70.4 p. in November from 72.4 p. in October while it was expected to grow up to 72.9 p. Prior month indicator was revised from 71.2 p. to 72.4 p. The index has been falling for three months and like last month continues staying at low since this April. Expectations fell most of all.

Housing market data that were released before turned out positive in general. Building Permits in the US rose by 6.2% in October Vs prior month and amounted to 1034 thousand at an annual rate, which has become the highest level since June, 2008. Prior month indicator was expected to be at 930 thousand. Building Permits in September rose by 5.2% to 974 thousand also exceeding the expectations. New Housing Starts were not published on Tuesday. Ministry of Commerce referred to the fact that the exact figures couldn’t be collected in time.

S&P/Case-Shiller Home Price Index in 20 largest cities grew by 13.3% in September at an annual rate having exceeded the expected growth by 13%. At the same time FHFA House Price Index rose by 0.3% in September Vs prior month and turned out slightly worse than forecasted growth by 0.4%. Richmond Fed Manufacturing Index rose to 13 p. in November Vs 1 p. in October having significantly exceeded the expected growth to 4 p.

The pound was traded upwards on Tuesday having almost no reaction to BoE Inflation Report and the speech of BoE governor Mark Carney who said about a sharp economic recovery in the UK, about strong employment rate growth and improvement of business confidence. At the same time Carney said again that unemployment decrease to 7% wouldn’t be an automatic trigger for the CB to raise the rate.

The euro also strengthened on the back of Italian Consumer Confidence growth. Consumer Confidence rose to 98.3 p. in November, 2013 from 97.3 p. in October having exceeded the expected growth to 97.5 p. The euro was supported by The People’s Bank of China governor’s statement that the European currency is an important part of Chinese reserves. The Australian dollar continued falling after some growth at the beginning of the day caused by the statements of RBA Deputy Governor Philip Lowe who weakened growing expectations of currency interventions – having said that the threshold at which the central bank would make interventions at the currency market was high enough.

The yen strengthened a little on Tuesday from 6-month low Vs the dollar that was reached this week after the publication of Monetary Policy Meeting Minutes which showed that three members of BoJ Policy Board opposed some provisions of central bank inflation report, which was released in October. Member of the Policy Board Kiuchi said on Tuesday that it was unreasonable to plan reaching 2% inflation within 2 years and this target of the central bank towards prices growth was inadequate. It is another sign of disagreement among the leaders of the Bank of Japan.

By MasterForex Company

213

Overview of the main economical events of the current day - 29/11/2013

The Pound Rose to Its High for 27 Months

The US dollar was traded slightly downwards on Thursday Vs most major currencies amid a day-off in the USA and lack of any macrostatistics in the country. The pound rose amid new measures of the Bank of England on restriction of housing market boom. The euro was traded upwards amid positive inflation growth data in Germany and Spain and euro-zone confidence index.

The pound rose Vs the dollar to its high since August, 2011 after the publication of BoE Financial Stability Report which was introduced by the CB governor Mark Carney. Carney said on Thursday that he planned to reduce the support of mortgage lending in the UK to stimulate the banks to increase small business loans and to prevent the threat of financial stability from housing market. Since the next year concessional loans within the program of Funding for Lending Scheme (FLS) will be available only for small businesses and FLS won’t be able to be used for residential mortgage.

The euro was traded upwards on Thursday amid positive data of euro-zone confidence and inflation growth in Germany and Spain. Economic Sentiment Indicator (ESI) from the European Commission rose in November to its high 98.5 p. since August, 2011 compared with 97.7 p. prior month while a growth only to 98 p. was expected.

German inflation accelerated to 1.3% in November at an annual rate having exceeded the expected growth by 1.2%. Annual inflation in Spain rose to 0.3% in November Vs 0% in October. German weak labour market data were ignored. Unemployment rate in Germany increased by 10 thousand in November while no changes were expected. German Unemployment Rate has been 6.9% for three months in a row, which met the forecasts.

The Swiss franc strengthened after the release of GDP which exceeded the outlook. Swiss GDP for the third quarter increased by 0.5% compared with the prior quarter when there was a growth by the same 0.5% - while a growth only by 0.4% was expected. At an annual rate GDP rose by 1.9% while an increase by 1.8% was expected. Last quarter Swiss economy was supported by demand for its exports in Germany.

Australian dollar stopped falling after an unexpected growth of Private Capital Expenditure. The indicator rocketed by 3.6% in the third quarter compared with the prior period when its growth was only 1.6%. The indicator was expected to decrease by 1.2%. Canadian dollar also slowed down falling before Canadian GDP which is released on Friday.

Current account deficit decreased in Canada in the third quarter less than expected confirming weakness of exports. According to the National Bureau of Statistics of Canada, current account deficit dropped to 15.5 billion of Canadian dollars while it was expected to decrease to 14.4 billion. Raw Materials Price Index (RMPI) fell by 2.3% m/m in October amid the fall of prices for mineral fuel – the indicator was expected to fall only by 2%. The index has been falling for two months in a row showing the lowest decrease since June, 2012.

By MasterForex Company

214

Overview of the main economical events of the current day - 02/12/2013

The Main Events of the Week

The US dollar was traded differently on Friday, it grew Vs the euro, Swiss franc, yen and Canadian dollar but it fell Vs the pound, Australian and New Zealand dollars. The trades were calm and the currencies were traded at a narrow range amid lowered activity index because of the holidays in the USA. The euro stopped 3-day growth and fell amid an unexpected decrease of German retail sales by 0.8% in October while a growth by 0.5% was expected. Meanwhile, inflation and unemployment data in the euro-zone are better than expected.

Canadian dollar dropped to its low of early October, 2011 Vs the dollar after the release of Canadian GDP that turned out slightly better than expected. Canadian GDP rose by 0.3% m/m in September having exceeded the expected growth by 0.2%. Quarterly growth of economy annualized accounted for 2.7% in Canada Vs the forecast of +2.5% - the economy rose at the fastest rate for two years in the third quarter amid the increase of consumer spending, investment and inventory holdings while the exports decreased. Despite some improvement of economy it is unlikely to make the Bank of Canada to start finishing monetary stimulation earlier than the US Fed.

By the end of the week the US dollar slightly fell according to the dollar index having lost 0.07% and continued the trend of the prior week: the growth Vs the yen and commodity currencies and decrease Vs European currencies. The dollar dropped against the British pound (-0.81%) and the euro (-0.20%), it almost didn’t change Vs the Swiss franc and grew Vs Japanese yen (+1.12%), Canadian dollar (+0.93%) and New Zealand dollar (+0.68%) and Australian dollar (+0.59%). By the end of November the dollar rose by 0.45% according to the dollar index having shown the growth against the yen and commodity currencies; it decreased to the pound and almost didn’t change Vs the euro and Swiss franc.

This week, the first one of the month, a lot of important data will be released: GDP, Trade Balance, Non-Farm Payrolls, and PMI. There will be meetings of four main central banks: the Reserve Bank of Australia – on Tuesday, Bank of Canada – on Wednesday, Bank of England and ECB – on Thursday. However, the main event of the week will be Non-Farm Payrolls released on Friday which will make clear possible terms of QE3 tapering start. Unemployment rate is expected to fall by 0.1% to 7.2% and 183-185 thousand of new jobs. Strong Non-Farm Payrolls (about 200 thousand) can increase the chances that the Fed will make a step towards QE tapering at the meeting on December already.

In the USA ISM Manufacturing PMI will be released on Monday; on Wednesday - ADP Employment Change, Trade Balance, New Home Sales (for two months) and ISM Services PMI; on Thursday – revised GDP for the third quarter (a revision from 2.8% to 3.1% is expected) and Factory Orders; on Friday – Personal Income and Spending and Preliminary U. of Michigan Consumer Sentiment.

In the euro-zone the Final Manufacturing PMI will be released on Monday and Services PMI – on Wednesday; on Tuesday – Producer Price Index and on Wednesday – Retail Sales and revised GDP for the third quarter. In Germany Factory Orders will be released on Friday. In the UK during the first three days of the week there will be a release of Manufacturing PMI, Construction PMI and Services PMI. Chancellor of the Exchequer George Osborne will make an Autumn Forecast Statement on Thursday and introduce the main provisions of government’s policy for the next year.

In Switzerland industrial output for the third quarter will be released on Wednesday and on Friday – inflation. In Australia Retail Sales and Current Account will be released on Tuesday, on Wednesday – GDP for the third quarter and on Thursday – Trade Balance. In Canada Trade Balance will be released on Wednesday, on Thursday – Building Permits and Ivey PMI; on Friday - Labor Market Data.

By MasterForex Company

215

Overview of the main economical events of the current day - 03/12/2013

The U.S. Manufacturing PMI Rose Despite Forecasts

The US dollar grew on Monday Vs most major currencies amid the growth of manufacturing PMI in the USA which rose despite the forecasts. The data strengthened the expectations of an earlier QE tapering that puts a lowering pressure on the dollar.

ISM Manufacturing PMI rose unexpectedly in November to 57.3 p. against 56.4 p. in October - despite the expected decrease and it continues to stay at its high of April, 2011. In comparison with October - industrial output, new orders and employment have risen while inventories and prices dropped. Final Manufacturing PMI also turned out better in November than initially estimated 54.3 p. and grew to its high 54.7 p. since January. Construction Spending in the USA rose in October by 0.8% m/m against the expected growth by 0.4%.

The euro dropped on Monday considerably before the ECB meeting which results will be announced on Thursday – although euro-zone PMI in general turned out better than forecasted. Euro-zone final manufacturing PMI grew up to 51.6 p. in November from 51.3 p. in October having slightly exceeded the initial estimates of 51.5 p. However, the PMI of Spain, the fourth euro-zone economy, dropped below 50 p. for the first time for 4 months. French PMI also continues staying below this level.

Euro-zone PMI growth was mainly due to German manufacturing sector: the euro-zone largest economy PMI rose to 52.7 p. in November from 51.7 p. in October. However, according to German Engineering Federation (VDMA) that represents a significant part of medium business companies - German Factory Orders slumped by 10% y/y in October mainly due to demand decrease beyond the euro-zone. Official German Factory Orders will be released on Friday.

The pound updated its annual height Vs the dollar but then dropped. The UK Manufacturing PMI rose to its high since February, 2011 continuing the growth for the eighth consequent month. Manufacturing PMI rose to 58.4 p. in November from the revised reading of 56.5 p, in October. Industrial output and new orders rose to the highest levels for almost 19 years, employment growth also accelerated.

The yen continued falling and USDJPY rose above 103 for the first time since May 23 – after Bank of Japan governor Kuroda had said that the central bank would follow mild policy until inflation reached 2% and extra measures would be taken if needed. According to former Ministry of Finance official Eisuke Sakakibara, also known as “Mr. Yen”, the yen will drop to 108 per dollar in 2014. The Government Pension Investment Fund, whose assets rose last quarter to a record 124 trillion yen ($1.2 trillion), should follow an expert panel’s proposal to boost foreign holdings to as much as 35%, from 23%, according to Sakakibara.

Australian dollar was growing in the first half of the day after the release of stronger than expected Chinese manufacturing PMI on Sunday, but then it fell. NBS Manufacturing PMI amounted to 51.4 p. in November without any changes compared with October and exceeding the forecast. The index has been at its high of 1.5 year for two months. HSBC Final Manufacturing PMI fell in November from 50.9 p. to 50.8 p. having exceeded the estimates of 50.5 p.

New Zealand dollar rose on Monday amid Chinese positive data and Terms of Trade Index of New Zealand that reached 40-year high. According to the Bureau of Statistics of New Zealand Terms of Trade Index rose by 7.5% in the third quarter compared with the second quarter having considerably exceeded the expected growth by 2.9%. The growth of Terms of Trade Index to its high since 1973 was favored by the growth of exports prices for dairy products.

By MasterForex Company

216

Overview of the main economical events of the current day - 04/12/2013

The UK Construction PMI Grew to its High for More than 6 Years

The US dollar was traded downwards on Tuesday Vs most major currencies amid no significant macrostatistics in the USA. The pound strengthened on the back of the UK Construction PMI growth to its high since August, 2007. The yen rose amid fixed long positions on USD/JPY and stock markets decrease.

IBD/TIPP Economic Optimism rose by 1.7 p. in December or by 4.1% to 43.1 p. compared with 41.4 p. in November. The index has been growing for two months already after the decrease to 2-year low. The index is a good leading indicator for U. of Michigan Consumer Sentiment that will be released later.

ISM New York index in November rose by more than 10 points to 69.5 p. In October the index was 53.9. November index has become the highest since October, 2010. ISM New York index which mainly refers to non-manufacturing companies is released a day before the national ISM nonmanufacturing report.

The British pound strengthened on Tuesday amid the UK Construction PMI growth to its high of August, 2007. The UK construction PMI rose to 62.6 p. in November from 59.4 p. in October signaling a strong increase in the construction sector. The index above 50 p. indicates activity growth in the sector. The index has been above 50 p. for seven months in a row.

The euro also followed the pound and rose amid unemployment decrease in Spain in November for the first time for 4 months. Spanish Unemployment rate in November fell by 2.5 thousand in comparison with the prior month when it grew by 87 thousand – while unemployment rate was expected to grow by 50 thousand. The decrease has become the first one for November in the country’s history and probably it is a signal that the bottom of unemployment crisis in Spain has passed.

At the same time producer price index in the euro-zone was worse than expected and has fallen in October for the third month in a row, which may strengthen the concerns that a low inflation can threaten a fragile recovery in Europe. Producer price index fell in October by 0.5% in comparison with the prior month while a decrease only by 0.2% was expected. At an annual rate the prices dropped by 1.4% Vs the expected decrease by 1%.

Australian dollar fell after the Reserve Bank of Australia on Tuesday left the interest rates unchanged for the 4th consequent month but then it grew. RBA governor Glenn Stevens said that Australian dollar rate was still unreasonably high and there was a need of currency devaluation for a balanced growth of economy. The AUD was supported by retail sales data which grew by 0.5% m/m in October having exceeded the expected growth by 0.4%. At the same time current account deficit in Australia turned out higher in the third quarter than forecasted.

The yen rose amid the decrease of stock markets and fixation of long positions on USD/JPY within the upcoming annual heights. Another factor was the decrease of the world stock markets, which has increased the demand for safe assets. Dow Jones Industrial Average dropped by 0.6% on Tuesday, which has become the lowest decrease for almost a month.

By MasterForex Company

217

Overview of the main economical events of the current day - 05/12/2013

ADP Report Points to Strong Non-Farm Payrolls on Friday

The US dollar rose on Wednesday Vs commodity currencies, fell Vs the yen and almost didn’t change Vs the euro and the pound – amid contradictory statistics. The dollar grew after the release of strong ADP Non-Farm Employment Change but then lost all its growth amid the decrease of Services PMI that accounts for the largest part of the economy.

According to the Automatic Data Processing (ADP) Employment Change rose by 215 thousand in the USA in November while a growth by 170 thousand was forecasted and October growth by 130 thousand was revised to 184 thousand. The increase in November was the largest since the beginning of the year. ADP estimate is released before the official Non-Farm Payrolls of the Bureau of Labour Statistics this Friday and it can be considered preliminary.

According to the Institute for Supply Management the U.S. Services PMI dropped more than forecasted in November and fell to 5-month low 53.9 p. compared with 55.4 p. in October – while a decrease only to 55 p. was expected. The lowest decrease was shown by Business Activity Index/production, prices and employment.

The U.S. New Home sales rose at the fastest rate for 30 years on October – by 25.4% compared the prior month having reached 444 thousand houses at an annual rate. Such result became possible because New Home sales fell by 6.6% in September to 354 thousand, which was the lowest level since April, 2012. The U.S. Trade Balance deficit dropped by 5.4% in October to $40.6 billion - due to exports growth that reached the highest level for all history.

The pound was traded downwards amid the UK Services PMI decrease to 16-year maximum that was much more than expected but then recovered its fall. Services PMI fell to 60 p. in November from 62.5 p. in October while a decrease only to 62 p. was forecasted.

The euro had almost no reaction to a weak retail sales report that fell by 0.2% m/m in October against the expected growth by 0.1%. The euro-zone final Services PMI fell less than expected in November to 51.2 p. Vs preliminary estimate 50.9 p. and 51.6 p. prior month. Slightly better final results were only due to Germany – in France and Italy the index was worse than expected.

Australian dollar dropped to 3-month low Vs the US dollar after the release of a weak GDP for the third quarter. Last quarter Australian economic growth turned out slower than forecasted – the country’s dependence on the mining sector is high and other economic sectors are weak. Australian GDP rose by 0.6% q/q in the third quarter and by 2.3% y/y while a growth by 0.7% q/q and 2.6% y/y was expected. Despite eight decreases of interest rates for last two years record low interest rates didn’t stimulate the economy enough and left an opportunity for further rates decrease in 2014.

Canadian dollar fell on Wednesday to 3.5-year low Vs the dollar after the meeting of the Bank of Canada where, as expected, monetary policy was kept unchanged. However, Bank of Canada’s statement was considered milder as the central bank marked than lowering risks for inflation had strengthened – but significant stimulation measures taken by the Bank of Canada were still appropriate. The yen continued correction after it had weakened to half year low Vs the dollar amid the statements of BoJ member Sato who said that there was no need to further policy easing – which could hurt current efforts towards the exit from many years deflation.

By MasterForex Company

218

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

The Dollar Fell before the U.S. Non-Farm Payrolls

The US dollar dropped on Thursday Vs most major currencies before Non-Farm Payrolls on Friday despite positive statistics on GDP and Unemployment Claims – but GDP growth was mainly caused by inventories growth. The driving force of dollar’s weakening became growing yen amid stock markets decrease for a few days in a row.

GDP Second Release in the third quarter was raised from 2.8% up to 3.6% at an annual rate. It is the most significant growth since the first quarter of 2012 but the revision upwards was mainly due to the most considerable increase of warehouse inventories since early 1998 which added 0.85% into the GDP growth in comparison with the first estimate. Consumer Spending which brings about 2/3 of the whole share to the GDP – was lowered from 1.5% to 1.4% - it is the weakest growth since the end of recession.

Meanwhile, the U.S. labour market data continue improving. Unemployment Claims dropped by 23 thousand at once to 298 thousand last week – the lowest level for 12 weeks – while the indicator was expected to be 320 thousand. Initial Jobless Claims - 4 Week Average fell to 322.25 thousand from 331.75 thousand. Non-Farm Payrolls are released on Friday – 180-185 thousand of new jobs and unemployment decrease by 0.1% to 7.2% are expected.

The euro grew after the ECB meeting where interest rates were kept unchanged as expected – but no new measures on economic support were announced. ECB president Mario Draghi said that the ECB didn’t plan further monetary policy easing though negative deposit rate was briefly discussed. The central bank raised the euro-zone economic growth outlook for 2014 up to 1.1% from 1% and repeated GDP decrease estimate by 0.4% for 2013. In 2015 according to the expectations of the ECB economic growth rate will increase to 1.5%. Euro-zone inflation estimate was lowered: for 2013 to 1.4% from 1.5% and for 2014 – to 1.1% from 1.3%.

The pound was traded downwards on Thursday amid the BoE meeting, by the end of which the rate and asset purchase program had been left unchanged. Meanwhile, for the first time for three years the UK economic growth outlook was improved – which was announced by Chancellor of the Exchequer George Osborne on Thursday making a traditional Autumn Forecast Statement in the Parliament. The UK government raised GDP growth outlook for 2013 from 0.6% to 1.4%; and for 2014 – from 1.8% to 2.4%. Unemployment rate will drop to 7% in 2015 and to 5.6% in 2018. Osborne marked that the UK economy is growing faster than other developed economies.

Canadian dollar finished the day with a slight growth Vs the US dollar – before Canadian labour market data which will be published on Friday. According to Statistics Canada, Building Permits exceeded the forecasts considerably in October and grew by 7.4% Vs prior month against the expected growth by 1%. At the same time, Ivey PMI fell in November lower than forecasted – to 53.7 p. in comparison with 62.8 p. in October while a decrease to 59 p. was expected.

By MasterForex Company

219

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

Australian Consumer Confidence Fell

The US dollar was traded downwards on Wednesday Vs the euro, the yen and Canadian dollar but it rose Vs the pound, Australian and New Zealand dollars amid no significant macrostatistics. The euro continued growing while the pound corrected downwards. The yen rose for the second day on the back of stock markets decrease. Australian dollar dropped after Australian Consumer confidence weak data.

The dollar had almost no reaction to the news that budget negotiations in the US Congress ended with 2-year agreement that allows to escape another government shutdown on January 15 and to ensure stability in fiscal policy conduction. The agreement increases spending in internal programs and defense and also includes deficit decrease measures during a decade. The US federal budget deficit fell in November more than expected to $135.2 billion because of the government income growth due to tax revenues increase.

The euro has reached 1.38 to the dollar for the first time since October, 29. The ECB announced on Wednesday that it starts 7-day round to provide liquidity in U.S. dollars to reduce liquidity deficit formed recently in the euro-zone money market. ECB member Coeuré said that he didn’t exclude further policy easing but finds it unlikely. German inflation accelerated in November to 1.3% at an annual rate from 1.2% prior month. French Current Account deficit fell to 2.1 billion euro in October against 3.6 billion euro in September.

The pound was traded downwards on Wednesday after it updated an annual height Vs the dollar the day before. MPC Member Martin Weale said that the guidance accepted in August decreased the uncertainty about Bank of England intentions and probably postponed the expectations of further interest rates increase. Inflation expectations growth is not significant yet and is not a reason for concern. The guidance stimulates the UK economy but its effect is probably moderate – said Weale.

Australian dollar fell after Consumer Confidence weak data. Australian consumer confidence slumped in December to its low since July Westpac Consumer Sentiment dropped by 4.8% m/m to 105 p. in comparison with 110.3 p. in November. The main issue for concern is still employment. Chinese New Yuan Loans grew by 23% in November to 625 billion Yuan in comparison with 506 billion in October having exceeded the expectations. M2 Money Supply slowed down in China last month from 14.3% to 14.2% as expected.

The yen continued strengthening for the second day amid stock markets decrease – Nikkei fell by 0.6% on Wednesday. Swiss franc updated its annual height Vs the dollar before Swiss National Bank meeting on Thursday – no changes in policy are expected. Canadian dollar had been growing on Wednesday for three days. USD/CAD is corrected downwards from an important technical level 1.07.

By MasterForex Company

220

Overview of the main economical events of the current day - 13/12/2013

The U.S. Retail Sales Growth Supported the Dollar

The US dollar grew on Thursday Vs all major currencies after retail sales data that exceeded the expectations. The US retail sales showed the highest growth rates in November for 9 month and rose by 0.7% m/m Vs the expected growth by 0.6%.

The growth was mainly caused by auto sales increase by 1.8% - the highest for five months - Retail Sales ex Auto rose by 0.4% m/m having exceeded the expected growth by 0.2%. The sales of 8 from 13 major categories of retail goods increased in November, which can confirm a successful start of Christmas sales season in the USA. Consumer spending growth which is 2/3 of GDP, is a sign of economic improvement in the 4th quarter and it can bring the start of QE3 tapering closer.

At the same time employment market data showed an unexpected growth of Unemployment Claims which rocketed by 68 thousand last week to 368 thousand, the highest reading for two months. Initial Jobless Claims - 4 Week Average grew to 328.75 thousand from 322.75 thousand prior week. However, the US Department of Labor warned that the last week data could be a little distorted due to seasonal factors and holidays during the last two months of the years.

The Swiss franc had almost no reaction to the meeting of the Swiss National Bank (SNB) according to which the policy was kept unchanged as expected – but then it fell. SNB governor Jordan said that the franc rate was still high - downwards risks prevail in the economy, and its growth may slow down in the fourth quarter.

The euro fell after another futile test of $1.38 amid the decrease of euro-zone industrial output which fell by 1.1% m/m in October Vs the expected growth by 0.3%. The data released earlier this week showed industrial output decrease in October in France and Germany – the key countries of the European Union. Since November EURUSD has risen almost by 4% coming close to the height of 2013. ECB president Draghi said on Thursday that another LTRO line must be created to raise the chances that the program could reach real economy.

Australian dollar dropped Vs the dollar to the low of late August after Australian labour market data that showed unemployment growth to 4-year high in November. Employment Change grew by 21 thousand in November having exceeded the expected growth to 10 thousand. Extra pressure was put by the news that a number of companies are going to leave Australia or threaten with a significant reduction in the number of jobs. RBA Governor Glenn Stevens said that he expected Australian currency to fall to $0.85.

New Zealand dollar rose in the first half of the day after the RBNZ meeting where the key interest rate was kept unchanged but then it dropped. RBNZ said that inflation pressure started to rise and the necessity of further stimulation in the current volume is falling. The rate increase wasn’t considered yet but it can be raised if needed to support inflation about 2%. The rate must be increased by about 2.25% during the next two or so years – said RBNZ Governor Wheeler.

The yen again came close to annual heights Vs the dollar on Thursday. According to the QUICK poll, most Japanese analysts expect the Bank of Japan to start further monetary policy easing in spring of 2014. Canadian dollar stopped correctional growth of recent days and fell. Bank of Canada governor Poloz said again in his speech about the neutral position in regard to interest rate changes. He said that it might take two years for inflation to return to the target level of 2%.

By MasterForex Company

221

Overview of the main economical events of the current day - 16/12/2013

The Main Events of the Week

The US dollar grew on Friday Vs major European currencies but fell against the yen and commodity currencies. The euro and the pound continued correctional decrease of the prior day. The yen updated its annual low but then rose. Bank of Japan Governor Haruhiko Kuroda said that the central bank would take extra stimulation measures if consumer prices growth rates start weakening. Commodity currencies showed growth after a strong decrease of prior days.

The U.S. Producer Price Index turned out worse than expected and had dropped for the third consecutive month, which was mainly caused by energy prices decrease. Producer prices fell in November by 0.1% while no changes were expected. At an annual rate producer price growth accounted for 0.7% against the expected growth by 0.8%. The inflation fall can make it difficult for the Fed to take a decision of the start of QE tapering.

By the end of the week the US dollar had fallen slightly according to the dollar index by 0.10% having recovered almost all its decrease by the end of week after strong retail sales data, which strengthened the expectations of a possible start of QE3 tapering. The dollar grew Vs the Australian dollar (+1.52%), Japanese yen (+0.32%), British pound (+0.28%) and New Zealand dollar (+0.20%) – but it fell Vs the Canadian dollar (-0.51%), Swiss franc (-0.31%) and the euro (-0.27%).

The main event of the week and the whole month will be FOMC meeting on 17-18 December; its results will be announced on Wednesday – and also a quarterly press conference of the Fed governor Ben Bernanke will be held; and FOMC economic outlook for the GDP growth, inflation and rates will be published. It will be the last meeting of Bernanke as a Fed governor. And though most experts don’t expect QE3 tapering start – considering rather successful recent macrostatistics the process is possible to start. Last week President of the Federal Reserve Bank of St. Louis James Bullard insinuated it. Besides, the first reduction may be small, for example, by $5 billion.

There will be rather a lot of US data: on Monday - Empire State Manufacturing Index, Flash Markit Manufacturing PMI; on Tuesday – Consumer Price Index, Current Account and NAHB Housing Market Index; on Wednesday – Building Permits and Housing Starts; on Thursday – Existing Home Sales and Philadelphia Fed Manufacturing Index; on Friday - Final GDP for the third quarter. The US Senate will vote to pass or reject the nomination of Janet Yellen as Federal Reserve Chairperson.

In the euro-zone there will be Flash Manufacturing PMI & Flash Services PMI of France, Germany and the whole euro-zone; on Tuesday – the final inflation data; and on Thursday – Current Account. In Germany ZEW Economic Sentiment will be released on Tuesday; on Wednesday - IFO Business Climate; and on Friday - GfK Consumer Climate. ECB president Mario Draghi will make a speech on monetary policy in the European Parliament on Monday.

In the UK consumer price index and producer price index will be published on Tuesday, on Wednesday – BoE meeting minutes and labour market data; on Thursday – retail sales, on Friday – the final GDP for the third quarter and current account. The results of BoJ 2-day meeting will be announced on Friday. On Monday Tankan indices will be released; and on Wednesday – Japanese Trade Balance. In China HSBC Flash Manufacturing PMI will be released on Monday.

In Australia on Tuesday the Reserve Bank of Australia meeting minutes, New Motor Vehicle Sales and Conference Board Leading Index will be published; and on Wednesday - Westpac Leading Index. In New Zealand Westpac Consumer Sentiment for the fourth quarter will be released on Monday, on Wednesday - ANZ Business Confidence and Current Account; and on Thursday – GDP for the third quarter. In Canada Manufacturing Sales will be released on Tuesday, on Wednesday - Wholesale Sales and on Friday – inflation and retail sales.

By MasterForex Company

222

Overview of the main economical events of the current day - 17/12/2013

The Main Events of the Week

The US dollar fell slightly on Monday Vs the euro and the yen – and almost didn’t change Vs the pound and commodity currencies amid contradictory statistics. The US industrial output rose more than forecasted while manufacturing PMI strengthened less than expected. The euro was traded upwards amid the euro-zone manufacturing PMI growth to 31-month high.

The dollar recovered some loss after the U.S. industrial output release. Industrial output rose to 101.3 in November from 100.2 in October, having exceeded the top of recession for the first time and having shown the historical height – which has become another sign of the U.S. economic growth rate acceleration.

The U.S. industrial output rose by 1.1% in November compared with October while a growth by 0.6% was expected. This is the highest growth rate for a year. Prior month data were revised upwards. Capacity Utilization Rate grew by 0.8% to 79% above expectations.

At the same time manufacturing PMI turned out weaker than forecasted. Empire State Manufacturing Index rose to 0.98 p. in December compared with -2.21 p. in November while a growth to 5 p. was expected. Flash Markit Manufacturing PMI fell to 54.4 p. in December Vs the final reading 54.7 p. in November and forecasted growth to 55 p.

The euro grew on Monday after two days of decrease amid the euro-zone Manufacturing PMI growth. Euro-zone Flash Manufacturing PMI grew to 31-month high in December. At the same time euro-zone Services PMI dropped to 4-month low. Euro-zone Composite PMI maintained only to 3-month high. In France both manufacturing and services PMI decreased. In Germany only manufacturing PMI has risen which continues pulling the whole euro-zone.

The euro-zone trade balance surplus rose 1.6 times in October to 17.2 billion euro compared with 10.9 billion in September. ECB president Mario Draghi making speech in the European Parliament on Monday said again that economic recovery in the euro-zone was still fragile – price pressure would be still moderate and interest rates in the region would stay at the current low level for an extended period of time. Meanwhile, the ECB got 3-Year LTRO Repayment - for the loans given at the end of 2011 within LTRO first round – for the highest since February 22.7 billion euro.

The yen rose amid the decrease of Japanese stock market – Nikkei fell on Monday by 1.6%. Pressure was put by Chinese manufacturing PMI decrease. HSBC Flash Manufacturing PMI dropped to its low 50.5 p. for the past three months n December from 50.8 p. in November while the index was expected to grow. At the same time Tankan Large Manufacturing Index rose to its high in the fourth quarter since December, 2007. However, concerns managers worsened the forecasts of Business Spending for the current fiscal year and the next quarter estimate.

By MasterForex Company

223

Overview of the main economical events of the current day - 18/12/2013

Markets Wait for FOMC Meeting Results

The US dollar rose on Tuesday Vs the pound and Australian dollar, it fell Vs the yen and almost didn’t change Vs the euro amid the start of FOMC meeting which results will be announced on Wednesday. The pound dropped after a weak inflation report that showed a decrease of annual inflation rates to 4-year low. The euro had almost no reaction to German Economic Sentiment growth to its high for more than 7.5 years.

FOMC meeting on 17-18 December, the last one this year, may become conclusive. Many analysts estimate 50% probability of QE3 tapering at this meeting as American economy outlook is improving significantly. The markets wait for the Fed to take a decision on a small QE3 reduction – however, the probability of this step is not high.

More than 25% of analysts polled by The Wall Street Journal expect the Federal Reserve to announce QE3 tapering at December meeting already. More than 46% of analysts expect it till late January, 2014. According to December’s Bloomberg poll, 34% of respondents wait for the Fed to taper QE3 at this meeting. And another quarter believes that the reduction will start in January, the rest 40% wait for the reduction only in March.

The US inflation data were weaker than forecasted while current account and housing market data turned out better than expected. In November the US consumer prices didn’t change Vs October due to energy prices decrease – while a growth by 0.1% was expected. Annual inflation growth rates accelerated in November to 1.2% after a slowdown to 4-year low in October at 1% but turned out less than forecasted +1.3%. Weak inflation can make it difficult for the Fed to take a decision on QE3 tapering.

The US current account deficit fell to $94.8 billion in the third quarter, which turned out less than expected $100 billion. The deficit dropped to 2.2% GDP compared with 2.3% GDP in the second quarter. NAHB Housing Market Index rose in December by 4 p. to 4-month high of 58 p. – while a growth only to 55 p. was expected.

The pound dropped after a weak inflation report which showed a decrease of annual inflation growth rate in November to 4-year low of 2.1% from 2.2% in October while no changes were expected. Producer prices and retail prices also turned out worse than expected. The pound was slightly supported by BoE governor Mark Carney’s speech in the Parliament who said that the UK showed one of the fastest growth rates among G7 countries and there was no need in extra quantitative easing.

The euro had almost no reaction to German Economic Sentiment growth to the high since April, 2006 having recovered its fall by the end of the day. German ZEW Economic Sentiment grew to 62 p. in December against 54.6 p. in November having considerably exceeded the forecast 55 p. German ZEW Current Situation rose to 32.4 p. in December from 28.7 p. prior month.

Australian dollar dropped on Tuesday Vs the dollar to early August low after the release of RBA meeting minutes. The central bank said that it didn’t exclude the possibility of further interest rate fall – and further AUD rate decrease is necessary for economic growth. Besides, Australian Minister for Finance introduced a Mid-Year Economic and Fiscal Outlook providing a sharp decline of the budget and a weak economic growth in 2014. The budget is supposed to stay deficit-ridden for a decade.

In contrast to the AUD, the New Zealand dollar remained stable on Tuesday. New Zealand Finance Minister said that RBNZ was expected to raise interest rates in the first half of 2014. The yen continued strengthening for the third day in a row. BoJ governor Kuroda in the interview to the Financial Times made it clear that the central bank wouldn’t take new monetary policy measures besides those which are already used.

By MasterForex Company

224

Overview of the main economical events of the current day - 19/12/2013

Fed Started QE3 Tapering

US dollar sharply rose this Wednesday after the announcement of the results of the December FOMC meeting, during which it was decided to reduce the QE by $10 billion per month, to $75 billion. The reduction of the programme will be started by the Fed in January. This decision was undertaken due to the positive dynamics of the US labor-market and its forcoming perspectives. At the same time the Fed is ready to continue tapering at further meetings if the macroeconomic forecast will prove itself to be correct.

The key rate was also confirmed to stay at its present level 0-0.25% till the unemployment rate is higher than 6.5%, and the inflation rate is no more that 2.25%. The economic forecast was raised up to “moderate”. The results of the voting were 9-1. Eric Rosengren, Boston Fed President, voted against this decision referring to the fact that this decision was premature.

The FOMC refreshed forecast of GDP growth, inflation and unemployment rate was published this Wednesday. FOMC members lowered the unemployment forecast for 2013 and next years. The inflation rate forecast was also lowered for the upcoming year. The economic growth rate forecast was also a bit improved for next several years. The target unemployment level 6.5% will be probably reached in 2014; and in 2015 – one year earlier than it was planned before – the unemployment level will be lower than 6%.

Fed chairman Ben Bernanke during the last press-conference announced that he expected further recovery of the US economy and its confident rise. Bernanke expressed confidence in the fact that US job creation will be endured, and he specially emphasized the appearance of the new signs of consumers’ expenditures growth. Henceforth QE tapering is going to be held at a rate planned in December which was found moderate by the Fed governor.

This Wednesday the US senate approved the settled by mutual concession budget for the nearest 2 years, which is going to be helpful to avoid a new shutdown of the US government financing from January 15, 2014. The published data for US appeared to be quite positive as well. Housing Starts increased by 22.7% till the maximum rate over the last 6 years – 1.091 houses – this fact significantly exceeded the expectations. The building permits fell less than it was forecasted.

Only the pound demonstrated the rise Vs the US dollar this Wednesday and renewed its annual maximum after the publication of positive British labor-market report. Exceeding the expectations the unemployment claims decreased by 36.7 thousand. The unemployment level according to the standards of International Labor Organization (ILO) decreased to 7.4% between August and October, which is the floor from April, 2009. In previous 3 month it was 7.6%.

German IFO Business Climate rose to 109.5 p. in December from 109.3 p. in November as it was predicted. The December index was the highest from April, 2012. IFO Current Assessment fell, whereas IFO Expectations demonstrated increase.

By MasterForex Company