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Overview of the main economical events of the current day - 29/04/2013

USD rebounds, EUR and GBP are still under pressure

EUR continues to decline after an interview with the head of Bundesbank, who admitted that ECB might cut the rates if the economy continues to slow down, which set the union currency in a free fall. At the same time he said that monetary policy is not the key question and rather prefers to concentrate on reforms in Germany and EU, saying that the full recovery might take as long as 10 years.

GBP continues its decline, showing a record loss in 6 weeks vs USD after disappointing statistics from UK, that suggest rising unemployment level on the back of declining wages growth. British currency declined vs most of the major currencies after Bank of England meeting minutes were released, showing that Head of BoE supports the idea of expanding the asset purchase program by another GBP 25bn.

This comes as almost no surprise, given the fact that yesterday IMF cut the growth forecasts for UK and announced that BoE needs to increase its measures. Given the condition of the economy, we’d say that it is a really possible scenario – in that case, expect GBP to fall even further.

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Overview of the main economical events of the current day - 30/04/2013

EUR rises on declining political risks

EUR is rising vs most of the major currencies as a result of a 2 month long political crisis in Italy coming to its end. And while the European currency was under some pressure following a release of sentiment data which came a little under consensus, EUR bounced back after a successful bond placement by Italy.

Another factor helping EUR climb was a weakness in USD, which appeared after somewhat disappointing US data that shows an increase in unfinished housing deals coupled with declining rate of growth of personal income. And while the data comes as little surprise as most of it was already published in a 1Q13 GDP report, it looks like market participants took the news as an excuse to justify further EUR growth.

GBP is also rising, reaching a 10 week high vs USD fueled by a set of strong data from UK. According to the reports, housing prices are rising (decreasing risks of yet another recession) – which means that increased economy stimulation measures are off the table – at least for now, allowing GBP to show some gains.

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Overview of the main economical events of the current day - 02/05/2013

Federal Reserve failed to make the situation clear. ECB is next to talk

EURUSD raised above 1.32 on Tuesday after APD published private sector employment data that appeared to be worse than planned. US employment rate increased by 119 thousand last month, while planned value is 150-150 thousand. Private business employed less personnel in April than the economists have expected due to dismissals on plants. Moreover, March data was reconsidered to be downside.

US industrial production activity in April slowed down as well, though exceeding experts’ expectations. According to the report issued on Wednesday, Production industry procurement management index from ISM dropped to 50.7 in April from 51.3 in March.

This assured the market players that in 2013 the Fed won’t cut monthly bond purchasing, which put pressure on the greenback.

Fed Reserve’s two day meeting ended on Wednesday resulted, at large, as it was expected. Despite weak US data issued within the last few weeks, the Fed didn’t mark down the expected economy growth rate, and noted that the inflation rate is slightly lower than the planned value.

The Federal Reserve confirmed its plans to continue retirement of bonds in an amount equal to $85 bln monthly. The only thing that is new is the following statement: “The committee is ready to increase or decrease the assets acquisition rate in order to maintain proper market development and inflation changes”.

Market participants have different ideas on how to react to such a foggy statement. Some think this is in favor of the greenback, the others, vice versa, speak out against the American currency. The same way, the markets didn’t show any clear dynamics after the decision was declared. This increases importance of US employment report to be issued on Friday, for the Fed Reserve plans to adjust the monetary policy depending on economic situation.

The Pound kept increasing on Wednesday, recorded 11-weeks high against dollar after The British industry sector procurement management index turned out to be exceeding expectations. In April the index grown to 49.8 contrary to reconsidered March value 48.6, which is the same as planned.

Australian dollar lost quite a lot on Wednesday after Chinese production industry activity index was issued. Last month it dropped to 50.6 contrary to 50.9 in March. China is the main Australia’s partner.

Today the markets will follow the ECB’s key rate decision. It will determine following direction for Euro. However, it’s quite obvious that after the week of weakness for dollar we can expect some kind of retracement after the Fed Reserve meeting takes place. Technically, Euro reached critical levels around 1.32. Another thing is that stock and commodity markets also shown bad dynamics on Wednesday, which may contribute to the dollar’s rate increase in short-run.

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

The main events of the week

This week there won’t be a lot of important macroeconomic indicators. Market participants “digest” the results of the meeting of the two most important central banks of the world: the Federal Reserve and the ECB, as well as key data from the U.S. labor market, released on Friday.

These data turned out a little higher than it was expected. According to the Ministry of Labor the number of jobs in the U.S. economy in the past month increased by 165 thousand, with expectations of 145-150 thousand. The unemployment rate fell by 0.1% to 7.5% - the lowest unemployment rate since December 2008.

But a more important factor was a significant upward revision of the data for the previous two months - a total of 114thousand. In March up to 138 thousand instead of 88thousand, and in February - up to 332 thousand instead of 268 thousand previously reported. Revised February’s value is the strongest since May 2010.

The stock market reacted definitely with growth to the published data. The DJIA index for the first time in history has overcome the level of 15000. But there was no definite dynamic at the currency exchange market. At first the dollar rose under the influence of strong stats. But then it fell influenced by rising stock assets and its inclination to risk. The correlation of the dollar growth and stock assets that was observed lately seems to start breaking.

Traditionally, in the second week of the month data on industrial production and trade balance will be released. Data on industrial production will be presented by France on Tuesday, by Germany - on Wednesday, by Britain - on Thursday and by Italy - on Friday. Industrial orders will be released in Germany on Tuesday.

Industrial production and industrial orders are expected to decrease in Germany in March, which highlights the difficulties faced by the euro zone’s largest economy. And the UK industrial production can grow and the trade deficit can shrink in March.

Trading balance will be published on Tuesday by Australia and France, on Wednesday – by China and on Thursday – by Germany and Great Britain. Retail sales will be released on Monday in Australia and euro zone.

On Tuesday and Thursday meetings of central banks of Australia and Great Britain will be held. Also Australia, New Zealand and Canada will release its data of Labor market. At the end of the week on Friday and Saturday Great Britain will hold another G7 summit.

The bond market neither has many events that could have an impact on the currency market. On Thursday Spain will issue 10-year bonds. Bonds issue of southern Europe countries has become particularly relevant at the time of the European debt crisis.

But the main event will be a traditional for the second month’s week issue of long-term US bonds from Tuesday to Thursday. In theory, it can lead to the dollar’s rise and fall of stock and commodity assets and so have an indirect effect on currency markets.

[B]6-May (time UTC)[/B]
08:00 Netherlands place 84-day and 205-day bills
12:50 France places bills

[B]7-May [/B]
09:00 Austria issues 1.95% 2019 1.75% 2023 bonds
17:00 the USA issue 3-years notes

[B]8-May [/B]
09:30 Germany issues EUR5 billion 2018 bonds
17:00 the USA issue 10-years notes

[B]9-May[/B]
08:30 Spain issues 10-years notes
17:00 the USA issue 30-years bonds

[B]10-May[/B]
09:00 Italy issues bills
10:00 ECB announces the amount of the return on a 3-year LTRO loans

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

Euro reacted with a sharp fall to Draghi’s speech

Euro fell below support level of 1.31 on Monday during ECB head Mario Draghi’s speech when he said that the central bank would make a thorough examine of economic data of eurozone and it was also ready for further actions if required. In fact Draghi said that in future there may be further measures of easing monetary police.

“There are a lot of possible complications and consequences which need a thorough exam. The governing council decided to study and analyze these consequences to take measures in case of necessity” –said the head of ECB.

The statistical data released during the European session turned out to be mixed. Retail sales data in the eurozone showed a decline in sales for the 14th month in a row in the annual quantities. The data also turned out to be worse than expected and sales fell by 2.4%, with the forecast of decrease by 2.2%.

However the final PMI index for the service sector of European countries and eurozone turned out a little better than expected. So, the final index of business activity in the service sector of eurozone was 47.0 in April while the forecast was 46.6. But the indexes are still below the level of 50 points which indicates a further decrease of activity in the service sector.

The labor market in Spain shows some signs of improvement. The number of unemployed decreased by 46.1 thousand in April or 0.91% in comparison with the previous month and fell below the level of 5 million, which indicates that the recession in the crisis economy shows signs of weakening.

Statistical Office of Italy (Istat) lowered its economic forecast on Monday for 2013 due to reduction in domestic demand. According to the forecast in 2013 economy can decrease by 1.4% in real terms against earlier forecasts of 0.5%.

On Monday the U.S. dollar rose a little against almost all currencies continuing to win back the labor market strong data that were released at the end of last week.

The Australian dollar fell on Monday after retail sales weak data. The retail sales volume in Australia fell by 0.4% in March while growth by 0.1% was expected. Decrease of retail sales turned out the first within the last three months.

Also it was announced on Monday that the treasury of Australia decreased the forecast of GDP growth for the current and next financial years. Morgan Stanley recommends selling AUD due to the disappointing situation in China while the USA data start to show signs of improvement.

However the Canadian dollar managed to resist the general trend and rose a little on Monday after the release of strong data on building permits in Canada.

The number of building permits in Canada rose by 8.6% in comparison with February.
This is the largest growth rate for the last 5 months. But the published data mainly concerned construction of non-residential premises. The growth of residential quarters construction continues to be slow.

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Overview of the main economical events of the current day - 08/05/2013

Australia’s central bank lowered its key interest rate to its historic low

At a monthly meeting on Tuesday the Reserve Bank of Australia lowered its key interest rate from 3% to 2.75% - the lowest level in its more than 50-years history. The bank referred to a slowdown in the economy, absence of inflationary pressure and a high rate of national currency.

For the last months the situation at the Labor market of Australia has been getting worse – the number of job advertisements decreased in April for the second month in a row. The interest rate decrease was the seventh for the last 19 months. This decision became a surprise as almost no one from the analysts forecast it.

In the final statement the RBA marked that it would use the interest rate decrease to encourage a stable growth of economy in line with achieving the inflation target.

Besides, the central bank also expressed its concern about an “extraordinary” power of the local currency, which makes AUD higher of parity rate against the US dollar for a long time.

The AUD fell dramatically after that but it was supported by the data on trade balance. Trade surplus was is restored for the first time from December, 2011 up to 307 million of Australian dollars due to the growth of coal and iron ore exports.

The euro was rising in the first part of the day after strong data on production orders in Germany were released. But then fell sharply after the release of a disappointing report of IBD/TIPP on economic optimism in the USA.

Industrial orders in Germany rose by 2.2% in March while a fall by 0.4% was expected. The released figures show that the situation in the industrial sector of the largest economy of Europe is getting stable.

However not all data of eurozone turned out so bright. According to the data of French statistical agency Insee industrial production of France fell by 0.9% while a fall by 0.2% was expected. This decrease turned out to be the most dramatic since October, 2012. According to annual basis the figure fell by 2.5%. The economy of France is still under pressure due to the reduction of the national budget and a weak demand from eurozone.

Almost no data on the USA were released on Tuesday except IBD/TIPP report on economic optimism. In May economic optimism index fell by 2.4% to 45.1 from 46.1 in April. Index value higher than 50 indicates consumer sentiment index growth and lower than 50 – pessimism growth. At the moment the index is 2.1 points lower its average value for 12 months which is 47.2.

The pound lowered on Tuesday due to technical factors. The decrease was supported indirectly by the released data of British Retail Consortium (BRC) which showed that the index of retail prices fell by 0.8% in April. It rose only by 0.4% in annual basis in comparison with 1.4% last month.

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Overview of the main economical events of the current day - 13/05/2013

The main events of this week

The end of the week showed that the dollar made an impressive growth against major world currencies. The largest drop was shown by the Australian dollar (-2.95%), followed by New Zealand Dollar (-2.65%), Japanese yen (-2.63%) and Swiss franc (-2.32%).

The growth trigger was the data on initial applications for unemployment benefits, which came out better than expected, and reached levels that were marked before the recession. These data reminded market participants about a key employment report in the U.S., published nearly a week ago, which dispelled some fears about the U.S. economy, which appeared recently due to the macrostatistics decline.

This week will be more intense in the coming out macro data than the last one. There will be data on retail sales (Monday - China, Switzerland and the USA, Tuesday - New Zealand), industrial production (Monday - China, Tuesday - Eurozone, Wednesday – USA) and GDP (Wednesday - Eurozone, Thursday - Japan) and quite a lot of stats on the USA.

The main event of the week for the eurozone will be the publication of preliminary data on GDP for the first quarter of this year of both individual countries and the whole eurozone, which will take place on Wednesday. The GDP reduction of the Eurozone and individual countries may not be as significant as observed in the last quarter of last year.

However, if the data turn out worse than expected, it may give an additional impulse to continue the decline of the euro, which was observed recently. Also markets will pay special attention to the ZEW economic expectations index for Germany coming on Tuesday. According to the forecast investors’ confidence has risen after the decline in April.

There are not a lot of data on Britain. On Wednesday a labor market report will be published. Also on the same day the Bank of England inflation report for the second quarter will be released. Along with the publication the head of the Bank of England Mervyn King will make a speech.

And there will be quite a lot of important data on the USA. Monday - retail sales. Inflation data: production inflation - on Wednesday and consumer inflation – on Thursday. Capital inflow data and industrial production – on Wednesday.
Construction permits and laying of new foundations; manufacturing index, the Philadelphia Fed - on Thursday. And a preliminary index of consumer sentiment in May from the University of Michigan will be released on Friday.
And of course, on Thursday there will be a release of weekly applications for benefits - data that have been gaining more and more weight recently.

The main placements of bonds of the eurozone’s countries (UTC time):

[B]13-May[/B]
09:00 Italy places 3-years bonds
09:30 Germany places EUR4 bln 6-months bills
13:00 France places bills

[B]14-May[/B]
08:00 Netherlands places up to € 2.5 bln 2018 bonds
08:45 Spain places 6 and 12-months bills
09:30 Belgium places bills

[B]15-May[/B]
09:30 Portugal places 6 and 12-months bills
09:30 Germany places EUR5 bln 2015 bonds

[B]16-May[/B]
09:00 France places I/L bonds/notes

[B]17-May[/B]
08:00 Belgium places bonds

By MasterForex Company

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Overview of the main economical events of the current day - 14/05/2013

Retail sales data supported the dollar

The dollar rose on Monday against almost all main currencies. It was supported by the U.S. retail sales data that turned out a little higher than expected and strengthened the optimism about the largest world’s economy.

According to the data of Department of Commerce retail sales rose unexpectedly by 0.1% in April while a drop by 0.3% was expected. In comparison with the last year sales grew by 3.7%. Base sales, except for auto sales, decreased only by 0.1% with an expectation of 0.2% growth.

Besides, the dollar was supported by speculations on rapid closing up of economic stimulus programme. Last week Wall Street Journal published an article according to which FED is considering the ways of QE-3 programme phase-down.

USD/JPY reached the level of 102 – the highest level since 2008 – after finance minister of Japan Taro Aso had declared that G7 didn’t criticize the monetary policy of Japan at the meeting that ended at the weekend. And probably G7 countries will continue to regard with favor the accommodative monetary policy of the Bank of Japan.

In China there was a release of mixed macroeconomic data which showed acceleration of retail sales growth rates and industrial production in April but growth rates of industrial production turned out a little lower that it was forecasted (9.3% of annual growth instead of expected 9.4%). Investment amount into main Chinese funds increased by 20.6% since January to April but it didn’t reach the expected figures of 21% growth.

The Australian dollar dropped on Monday due to the poll held by the National Bank of Australia which showed a business confidence decline in April in anticipation of the publication of the annual federal budget which will take place on Tuesday. The NAB business confidence index fell to 2 in April from 2 in March.

There were no any significant statistics in Europe but there was another meeting of eurogroup where also support packages for Cyprus and Spain were discussed. By the evening it had been announced that the European Stability Mechanism (ESM), stabilization fund of the European Union had allocated the first financial support tranche in the amount of 2 bln euros. Also the Eurogroup approved a support package for Greece in the amount of 7.5 bln euros.

On Monday Italy placed bonds with the total amount of 8 bln euros, which was coincident with the upper planned level while the funding costs decreased. However this auction didn’t attract any special attention.

The dollar has been rising for three days already but after such growth it can show some correction. Economic expectation index of Germany ZEW will be released on Tuesday and it is expected to rise, which can favor such correction. Also industrial production data in eurozone will be published at that time.

By MasterForex Company

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

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

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

[B]German ZEW Economic Sentiment[/B]

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

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

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

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

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

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

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

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

By MasterForex Company

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

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

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

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

Source: epp.eurostat.ec.europa.eu

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

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

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

The index of industrial production in the USA

Source: federalreserve.gov

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

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

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

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

By MasterForex Company

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

The dollar shows its strength despite weak macrostatistics data

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

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

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

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

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

Philadelphia Fed Manufacturing Index

Resource: phil.frb.org

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

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

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

By MasterForex Company

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

The main events of this week

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

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

Resource: conference-board.org

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

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

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

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

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

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

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

20-May

13:00 France to Sell Bills

21-May

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

22-May

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

23-May

08:30 Spain to Sell Bonds

By MasterForex Company

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

The dollar is corrected before the key events of Wednesday

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

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

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

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

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

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

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

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

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

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

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

The pound slumped at the inflation data

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

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

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

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

[B]UK CPI Percentage change over 10 years:[/B]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Source: ons.gov.uk

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

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

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

Manufacturing PMI shows a decline in China

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

HSBC Flash Manufacturing PMI

Source: markiteconomics.com

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

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

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

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

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

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

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

Consumer sentiment in Germany reached multi-year highs

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

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

Source: gfk.com

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

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

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

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

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

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

The main events of this week

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

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

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

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

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

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

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

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

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

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

[B]28-May[/B] (UTC Time)

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

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

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

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

[B]29-May[/B]

09:00 Italy to Sell Bills

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

[B]30-May[/B]

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

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

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

Consumer Confidence in the USA reached a 5-year high

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

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

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

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

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

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

By MasterForex Company