Daily Forex market overviews by MasterForex.com

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84

Overview of the main economical events of the current day - 30/05/2013

The dollar is going down

The dollar weakened significantly recovering from its growth on Tuesday. There were no any important data about the USA on Wednesday. One of the main causes of the adjustment decline was a fall of stock markets which influenced the decrease of USDJPY. And then the dollar continued to weaken against all currencies. Taking profit and bad labor market data of Germany had an influence on the fall of stock markets.

Unemployment change in Germany rose by 21 thousand people against the forecast of 4 thousand. The prior month reading was also revised downward from 4 thousand to 6 thousand. Unemployment rate hasn’t change and accounted for 6.9% Nevertheless, the labor market in Germany is still strong despite a deep recession in eurozone where the unemployment level was 12.1% in March. Private loans in eurozone fell by 0.9% in April against the prior month reading of -0.7%. Meanwhile Italian Business Confidence turned out much better in May than it was expected – 88.5 against 87.9 in April.

The data concerning Great Britain were not brilliant. CBI Realized Sales (CBI - Confederation of British Industry) fell to -11 in May, which is the lowest reading since January, 2012. By the end of the day the euro and the pound had risen despite some confusing data. According to the Commerzbank poll released on Wednesday, German companies are more optimistic about the outlook for the euro in the next three months than they were in April and March.

The euro growth was probably supported by an article in the German newspaper Die Welt which referring to unnamed ECB representatives reported that Jens Weidmann, Jörg Asmussen and Yves Mersch were against bond purchases on ECB balance secured by assets. Jörg Asmussen voted against rate lowering in May and Mersch opposed the use of non-standard measures. Another board member Christian Noyer announced on Tuesday that he was not sure whether reducing of deposit rate had sense. All this will complicate the head of the ECB Mario Draghi’s further easing of monetary policy although anyway sooner or later it will be necessary.

The franc rose on Wednesday on the back of consumption growth. UBS consumption indicator rose significantly in April up to 1.46 in comparison with March reading 1.24 revised downward. A positive trend was supported by the registration of new cars, consumer sentiment and demand for hotel accommodation.

UBS Consumption Indicator

Source: ubs.com

The Canadian dollar rose on Wednesday amid falling U.S. dollar and the planned meeting of the Central Bank of Canada. The Bank of Canada left the interest rate at the level of 1% having said that it “had sense” but further it may need a rate increase. Canada’s GDP growth in the first quarter will be stronger than the expected 1.5% but the total and core inflation will remain subdued.

Organization for Economic Co-operation and Development (OECD) decreased its world economy growth forecast from the previous estimate 3.4% to 3.1% in its semi-annual Economic Outlook published on Wednesday. Besides the eurozone and China’s economy growth forecast was decreased. However the OECD appeared optimistic towards the USA expecting that its economy would rise in 2013 by 1.9% and by 2.8% in 2014. The forecast for Japan was also increased up to 1.6% from 0.7% and the next year estimate was 1.4%.

By MasterForex Company

85

Overview of the main economical events of the current day - 31/05/2013

EURUSD again trades above the 1.30 level

The dollar continued falling on Thursday amid rather weak macrostatistics data. Preliminary GDP, unemployment claims and pending home sales data turned out worse than expected. Weaker data can be considered a signal to continue the American economy incentive program, which is, no doubt, negative for the dollar.

According to the preliminary data the U.S. GDP grew in the first quarter of 2013 by just 2.4% year-on-year, not by 2.5% as expected. A slight decline of growth rate could be linked to a weaker inventories growth than it was initially expected.

The number of unemployment claims rose up to 354 thousand while the reading was forecasted to maintain at the level of 340 thousand. It is the third growth for the past four weeks, which can prove that the labor market may have lost its momentum of recovery.

[B]The Number of Initial Unemployment Claims[/B]

According to the National Association of Realtors survey pending home sales index grew by 0.3% in April up to 106 – the highest level since April, 2012 – which hasn’t reached the forecasted growth by 1.5%.

The euro grew against the dollar on Thursday up to its 3-week high having risen above 1.30. In the first half of the day the euro was supported by the data from the European Commission. According to the data businesses and consumers in 17 countries of the euro-zone are less pessimistic about the outlook showing the first improvement of confidence since February. Economic Confidence which covers business and consumer confidence of the euro-zone rose up to 89.4 in May against 88.6 in April.

[B]Euro-Zone Economic Confidence[/B]

The pound and the franc also showed growth on Thursday following the euro. According to the country’s largest mortgage company Nationwide Building Society, House Price Index in Great Britain rose by 1.1% in May, which became the highest annual rates of growth since November, 2011. The GDP of Switzerland rose by 0.6% q/q in the first quarter, which significantly exceeded the expected growth by 0.2%. The quicker rates of growth were mainly linked to the growth of private consumption expenditures and increased investment in the construction sector.

The Canadian and Australian dollars also strengthened on the back of rising prices for commodities. Canada’s deficit of current account decreased to 14.1 billion Canadian dollars in the first quarter in comparison with the revised upwards reading of 14.6 billion in the fourth quarter with expectations of 15.3 billion.

The number of building approvals in Australia rose by 9.1% m/m in April while the growth by 4% was expected. However Private Capital Expenditure suddenly dropped by 4.7%, while it was expected to rise by 0.5%. The number of building permits in New Zealand rose by 18.5% in April in comparison with March, which also significantly exceeded the expectations.

By MasterForex Company

86

Overview of the main economical events of the current day - 03/06/2013

The main events of this week

The euro dropped on Friday after the release of unemployment data in the euro-zone which reached a new record high 12.2% in comparison with 12.1% in March. In Italy unemployment rate rose up to 12% in April, which is the highest reading for 36 years. Realized sales in Germany fell by 0.4% in April - the third month in a row.


Source: epp.eurostat.ec.europa.eu

The dollar grew on Friday on the back of a positive macrostatistics data release. Thus, Chicago PMI rose up to its highest level of 58.7 since March, 2012 while the level of 50 was expected. Revised upwards U. of Michigan Consumer Sentiment reached the highest reading 84.5 since July, 2007 after 76.4 in April.

At the same time, consumer income and expenditure report was a little disappointing. The incomes of the Americans didn’t change but the expenditure fell by 0.2%, which didn’t reach the forecasted readings.

Over the past week the dollar lost 0.41% according to the dollar index which shows its relation towards the basket of six major currencies. Most of all the Japanese yen rose against the dollar (+0.78%). Then follow European currencies: the Swiss franc (+0.64%), the euro (+0.50%) and the British pound (+0.49%). Commodity currencies dropped amid falling oil prices – the Canadian dollar (-0.55%), the Australian dollar (-0.83%) and the New Zealand dollar (-1.89%). But at the end of the month the dollar has shown growth in the dollar index by 1.93%. It is interesting that the US stock index DJIA rose exactly the same.

The first week of the month will be rich in macrostatistics data. Besides three meetings of the central banks, the US traditional labor market report is released on the first week and it will be one of the main events of the week. Preliminary ADP data will be received on Wednesday.

Also there will be a release of PMI, trade balance index (the USA, Canada, Australia, Germany, France, Great Britain, China) and realized sales index (Australia, euro-zone). And at the end of the week, on weekend, a large block of statistics of China will be released.

In the debt market an important day will be Thursday when the medium-and long-term bonds are sold by Spain and France. On Tuesday and Thursday Japan will sell 10-Year and 30-Year bonds.

3-Jun (time UTC+4)

12:00 the Netherlands to Sell 86-Day and 208-Day Bills

17:00 France to Sell Bills

4-Jun

07:45 Japan to Sell 10-Year Bonds

13:00 Austria to Sell 4.3% 2017 and 1.75% 2023 Bonds

13:30 Belgium to Sell Bills

5-Jun

13:30 Germany to Sell Up to EUR4 bln 2018 Bonds

6-Jun

07:45 Japan to Sell 30-Year Bonds

12:45 Spain to Sell Bonds

13:00 France to Sell 3.50% 2020, 1.75% 2023 and 2.75% 2027 Bonds (OAT)

By MasterForex Company

87

Overview of the main economical events of the current day - 04/06/2013

Manufacturing PMI in the USA turned out the lowest for almost four years

The dollar slumped on Monday after the release of weak manufacturing PMI data. ISM Manufacturing PMI fell to 49 points since April’s 50.7 points – having dropped for the first time this year lower than the level of 50 which separates the activity growth from its fall. The index in May turned out the lowest since August, 2009. The output and new orders subindex dropped most of all.

Construction expenses turned out also lower than expected having risen by 0.4% against the forecasted growth by 1.0%. The dollar fell lower than 88 yen – for the first time since May, 9. It may turn out too early to expect scaling back of QE-3 incentive program with such statistics.

At the same time the euro-zone PMI is a little better than expected although it is still lower 50 points which separate recession from recovery. Final manufacturing PMI reached 48.3 in comparison with 46.7 in April having reached the 15-month high. The index movement justifies the ECB forecasts about the euro-zone economic recovery in the second half of the year, which significantly reduces the probability of rate reduction at the ECB meeting this Thursday.

The pound grew on Monday also after the release of the same PMI statistics data which rose to 14-month high in May. Manufacturing PMI reached 51.3 level while the growth up to 50.3 was expected. The reading of March was also revised upwards up to 50.2 from 49.8. It reduces the probability of extra easing of the monetary policy at the nearest meetings of the Bank of England.


Source: markiteconomics.com

The Australian and New Zealand dollar grew on Monday amid rising commodity prices. The official manufacturing PMI of China released by the National Bureau of Statistics of China on Saturday rose up to 50.8 points in May from 50.6 in April. The Australian dollar fell by 7.7% in May, which has become the most significant drop among all major currencies. Although no change of rate is expected in June, interest rate swap market forecasts its fall in September with a probability of 57%.

Meanwhile San Francisco Fed president John Williams announced on Monday in Stockholm that the Fed was likely to start reducing the volume of bond redemption this summer and finish the quantitative easing program at the end of the year. But Williams is not a voting member of the FOMC this year.

By MasterForex Company

88

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

Calm before the storm

The dollar almost didn’t change against the euro and the pound on Tuesday and rose against the yen and commodity currencies after a considerable drop on Monday. The euro and the pound traded in rather narrow ranges and trading is likely to be so till Friday waiting for a key report on the USA labor market which can make clear possible future actions of the Fed towards an earlier exit from incentive programs.

There were almost no important data on the USA except the trade balance which turned out a little better than expected. Trade balance deficit rose up to $40.3 bln in April while a growth up to $41 bln was expected. However the deficit rose significantly in April by 8.5% in comparison with prior month due to a higher growth of import. IBD/TIPP Economic Optimism Index grew up to 49 in June vs 45.1in May but didn’t reach the forecasted level of 50.

The pound had almost no reaction towards the release of construction PMI which is again better than forecasted and shows a growth along with the PMI of other economic sectors. After six months of decline when the index was lower 50, British construction PMI rose up to 50.8 against 49.4 earlier. A rise up to 49.6 was expected. There is a chance that on Wednesday service PMI will be also better than forecasted.


Source: markiteconomics.com

Spanish unemployment change decreased significantly by 98.3 thousand people while it was expected to fall only by 50 thousand. However producer prices of the euro-zone fell in April for the second month in a row and its decline rate was the fastest for almost four years. Producer price index dropped by 0.6% m/m with a forecast of decline by 0.2%. Weak inflation data can give Mario Draghi more opportunities in future to ease monetary policy.

The Australian dollar fell significantly on Tuesday after the Reserve Bank of Australia had kept the key interest rate at the same lowest level 2.75% but had marked that the Australian dollar was still high. It also didn’t rule out the possibility of further rate decline according to a favorable forecast on inflation.

Meanwhile the negative balance of the Australian current account has considerably decreased for the first quarter, having fallen by 42% for the first quarter and having reached the forecasts. Australia Net Exports of GDP amounted to 1.0%, which turned out higher than the experts’ estimate 0.8%.

The dollar rose against the yen and again exceeded 100 yens per dollar amid the rise of the Nikkei 225 which rocketed by 2.1% on Tuesday. The experts of the Morgan Stanley Bank believe that USDJPY correction can last all summer. The decline in stock markets and the increased bond market volatility shake faith of market participant in success of «abenomics» and in the ability of the Bank of Japan to manage the deflation.

By MasterForex Company

89

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

ADP labor market data are again worse than forecasted

Statistics data from the USA on Wednesday again didn’t please the bulls of the US currency. Preliminary ADP labor market data turned out worse than expected and haven’t been reaching forecasted reading for the third month in a row. Besides, factory orders also turned out worse than expected. Revised unit labor costs also slumped for the past quarter.

Service PMI in May was a little better than forecasted – which almost didn’t support the dollar. As a result, the dollar significantly weakened against the pound and the yen, it almost didn’t change against the euro and CAD and continued growing only against the AUD and NZD.

Automatic Data Processing (ADP) survey released on Wednesday showed that nonfarm private payroll employment rose by 135 thousand against forecasted 170 thousand. Prior month data were also lowered from 119 thousand to 113 thousand. ADP survey is often considered preliminary before a key labor market report which is released two days later on Friday.

[B]ADP Non-Farm Employment Change[/B]

Factory orders rose by only 1% in April in comparison with the prior month while a more significant growth was expected – by 1.4%. March data also became worse to -4.7% while before it was reported to decline only by 4%. Revised unit labor costs dropped by 4.3% for the first quarter having shown the sharpest decrease since 1947. Earlier the reading was reported to rise by 0.5% and no changes were expected.

ISM Non-Manufacturing PMI grew up to 53.7 in May in comparison with 53.1 in April and a little beat the forecast of 53.5. PMI growth rate increased but the employment subindex fell.

[B]ISM Non-Manufacturing PMI[/B]

The same service PMI of Great Britain was much better than forecasted, which allowed the pound to show a steady growth against all currencies. Service PMI rose up to 54.9 in May from 52.9 in April – it is the highest reading since March, 2012. Service sector is about ¾ of the UK economy.

The euro continued to trade flat - a little lower 1.31. It didn’t manage to maintain above this level due to weak data. The final services PMI of the euro-zone decreased to 47.2 from 47.5 in May. Meanwhile in Spain the PMI rose, in Italy it fell, in France it remained unchanged and in Germany slightly decreased. Realized sales in euro-zone fell more than expected in April by 0.5% and they have been decreasing for the third month in a row as in Germany.

The yen rose on Wednesday amid a sharp Nikkey decline which fell by 3.8% after the prime minister of Japan had introduced a new plan of reflation – so-called «third arrow» of economic policy. He promised to raise the per capita GDP by 3% and more every year during next 10 years, to create special economic zones and so on. But investors were not inspired by such plan and they greeted it by selling securities.

The Australian dollar continued the prior day’s fall on Wednesday, which was supported by the GDP data. The Australian GDP rose only by 0.6% for the first quarter while a growth by 0.8% was expected. Year-on-year the growth was 2.5% while 2.7% growth was expected.

By MasterForex Company

90

Overview of the main economical events of the current day - 07/06/2013

Dollar dropped ahead of the key US employment data report issue

On Thursday, the dollar’s rate fell dramatically against all majors, though no external force contributed to it. Probably, market players reacted to Friday’s adverse employment data in advance by correcting their positions ahead of this primary event. And dramatic drop of dollar along with stock markets disruption started just after the beginning of ECB head Mario Draghi’s press-conference concerning ECB’s meeting results.

ECB decided to leave the rate unchanged. Strain of Mario Draghi’s comments remained unchanged as well. Once again he pointed at economic problems and risks, but, therewith expressed his hope that business activity will recover within one year. Inflationary expectations still remain low, and stimulatory measures will be utilized as long as necessary.

This year’s Euro Zone GDP forecasts got worse due to remaining downward risks. But Mario Draghi let everyone know that the key interest rate decrease is not something to wait for as of now. EURUSD pair reacted to the statement by growing significantly.

Bank of England also decided to leave the rate and the assets acquisition program unchanged. The Pound was also supported by the Britain’s housing prices that were growing this May faster than ever within the 2.5 years period. The Halifax housing prices index increased by 0.4% in May though it was expected to grow just by +0.2%, which confirms housing market’s recovery.

Thursday’s Euro Zone data was mostly negative. Quarterly unemployment rate in France increased from 10.5% to 10.8% at once, thus, reaching its maximum since 1997. Order volume in Germany’s production industry decreased in April by 2.3% against the background of expected -1.0%.

At the same time the US data was not so bad. Quantity of initial applications for unemployment compensation in US decreased last week by 11 thousand: to 346 thousand against the expected decrease to 345 thousand.

The average 4-week initial applications quantity is 352.5 thousand in May, which exceeds the April’s value by about 10 thousand. And Non-Farm Payrolls (NFP) to be issued on Friday is expected to be almost the same as in the last month (165-168 thousand). It’s most likely that NFP will turn out to be less by 20-30 thousand: about 140-150 thousand. But mostly, this reduction was already reacted to on Thursday. But in case the data will be in accordance to the forecasts, dollar stands a good chance for upwards correction after the recent sales.

By MasterForex Company

91

Overview of the main economical events of the current day - 10/06/2013

The main events of this week

Last week the dollar showed the largest decline over the year and fell by 2% in the dollar index which shows its relation towards the basket of six major currencies. During the week the dollar leveled the entire May increase. The largest decrease was on Wednesday and Thursday after the ADP report when bad labor market data which must have been released on Friday were worked out.

The data of the USA Department of Labor turned out rather contradictory. On the one hand Non-Farm Employment Change rose by 175 thousand which is the largest increase since February. The data turned out a little higher than the forecast of 163-168 thousand and almost coincided with the growth of employment change for the last 12 months which is 172 thousand per month.

[B]Non-Farm Employment Change[/B]

On the other hand unemployment rate increased by 0.1% up to 7.6% from 7.5% in April. Although, unemployment rate growth can be explained by the fact that the population has started to return to the labor market. It is indirectly proved by the growth of participation rate from 63.3% to 63.4% and by the decrease of population not in labor force by 231 thousand. Underemployment rate (U6), which includes discouraged workers and part time workers, has fallen from 13.9% to 13.8% for the past month.

[B]Unemployment Change in the USA[/B]

In general the USA labor market data turned out a little better than expected. The dollar was decreasing in anticipation of bad data and now its corrective bounce can go on this week facing 2-day meeting of the Fed which will be held next week June 18,19.

On weekend there was a release of a large Chinese data block. Inflation continued to fall and new loans also dropped. Industrial production and trade balance were as forecasted. However, imports and exports decreased significantly. The released data are negative for the Australian dollar as the currency of the main trade partner of China.

This week there will not be a lot of important macrostatistics data. Market participants will think over the key data of the US labor market released on Friday. There will be two meetings of Japanese and New Zealand central banks.

As usually, on the second week of the month industrial production and inflation data will be released. There will be a release of the UK and Australian labor market data. On Wednesday the German Federal Constitutional Court is due to announce a ruling regarding the constitutionality of the ECB’s Outright Monetary Transactions policy (OMT). The hearings will be held two days – on Tuesday and Wednesday.

The USA realized sales will be released on Thursday; and producer prices and Prelim U. of Michigan Consumer Sentiment - on Friday. Traditionally, on the second week of the month long-term US bonds will be sold from Tuesday to Thursday. In theory, it may lead to the dollar increase and reduce of risky assets.

[B]10-Jun (UTC+4)[/B]

13:00 Germany to Sell EUR4 bln 182-day Bills

17:00 France to Sell Bills

[B]11-Jun[/B]

12:00 the Netherlands to Sell Up to EUR3.5 bln 2016 Bonds

13:00 Greece to Sell EUR1.25 bln 182-day Bills

21:00 the USA to Sell $32 bln 3-year Notes

[B]12-Jun[/B]

13:00 Italy to Sell 3- and 12-month Bills

13:30 Germany to Sell EUR5 bln 2015 Bonds

21:00 the USA to Sell $21 bln 10-year Notes

[B]13-Jun[/B]

13:00 Italy to Sell 3-year Bonds (BTP)

21:00 the USA to Sell $13 bln 30-year Bonds

[B]14-Jun[/B]

07:45 Japan to Sell 5-year Bonds

14:00 Belgium to Sell Bonds

By MasterForex Company

92

Overview of the main economical events of the current day - 11/06/2013

Standard & Poor’s rating agency raised the outlook for the USA credit rating

By the end of Monday the dollar almost had not changed in the dollar index, it had risen to the yen and Australian dollar but had fallen to the euro a little. There were no any significant data on the USA on Monday, besides the markets of China and Australia were closed. The dollar tried to rise against the euro at the beginning of the day but during the second half of the day it lost all growth. Fed representative Bullard supporting asset purchases said on Monday that low inflation indicated that the Fed could still continue buying bonds. Inflation is still low due to low commodity prices, a slowdown in Chinese economy and weakness in Europe.

The dollar rose against the yen on the back of the start of 2-day meeting of the Japanese central bank and amid the release of Japanese GDP data for the first quarter revised upwards. It allowed Japanese stock index Nikkei to rise by 4.9% and to show the largest per cent rise since March, 16, 2011.

In the first quarter of 2013 the GDP of Japan was revised upwards (+4.1% year-on-year, earlier it was reported about 3.5% growth) and it proves the effectiveness of Abe Sondzo’s economic policy. In the fourth quarter of 2012 the GDP of Japan rose only by 1.2% year-on-year. Also in Japan a current account surplus was recorded in April at the level of 750 bln yens, which turned out twice more than expected.

The decision of the Standard & Poor’s to raise the outlook for the USA sovereign credit rating from negative to a stable one had almost no effect on the markets. S&P announced that such decision shows a stronger economic momentum in the USA this year and the improvement of government’s budget situation.

The euro rose on the back of mixed industrial production data in France and Italy and also the growth of Sentix index of investors’ confidence. The euro was also supported by the statements of Fed president Mario Draghi who said that “the euro-zone will not get out of the debt crisis through inflation and that the ECB will not intervene only in order to help countries to maintain solvency”.

Industrial production growth in France amounted to 2.2% m/m, while 0.2% growth was expected and in annual terms industrial production decreased only by 0.5% with the forecast of 4% fall. At the same time industrial production in Italy decreased by 0.3% m/m in April while no changes were expected. Italian GDP rates of growth were revised downwards for the first quarter to -0.6% q/q from -0.5% before. Sentix investors’ confidence index rose up to -11.6 in June in comparison with -15.6 in May having shown the second monthly growth in a row but it turned out a little weaker than forecasted.

Sentix euro-zone investors’ confidence index


Source: sentix.de

ECB board member Joerg Asmussen said in the interview with the newspaper Bild that the potential decision of the German court against the ECB program of buying back government bonds of troubled euro-zone countries could mean new risks for the single currency. On Tuesday in Karlsruhe starts a two-day session of the Federal Constitutional Court of Germany, the highest judicial body of the country. The judges will consider the legitimacy of government bond purchase program “Outright Monetary Transactions” (OMT), which was announced by the ECB President Mario Draghi in September 2012. The court will also consider the question of the constitutionality of euro-zone stabilization fund - the European Stability Mechanism (ESM).

The Australian dollar dropped on Monday and fell lower 0.94 for the first time since October, 2011 after the publication of foreign trade data and inflation in China on weekend. Imports unexpectedly fell by 0.3% in May, while exports grew by only 1%, and the result was significantly lower than expected. Base metals imports decreased including copper and aluminum and also there was a sharp decrease of coil imports. The main supplier of these goods is Australia. Goldman Sachs lowered the outlook for Australian GDP for 2013 to 2.0% from 2.4% and expected that the AUDUSD would trade at 0.85 against 0.90 in 12 months.

By MasterForex Company

93

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

The Bank of Japan disappointed the market participants

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

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

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

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

The UK industrial production index

Source: ons.gov.uk

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

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

By MasterForex Company

94

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

Dollar keeps on falling

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

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

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

Euro zone’s industrial production index


Source: epp.eurostat.ec.europa.eu

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

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

Westpac Australian consumer confidence index


Source: westpac.com.au

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

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

By MasterForex Company

95

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

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

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

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

[B]US retail sales change (M/m)[/B]

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

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

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

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

By MasterForex Company

96

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

[B]Main events of the upcoming week[/B]

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

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

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

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

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

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

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

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

[B]By MasterForex Company[/B]

97

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

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

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

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

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

Indexes from report of Federal Reserve Bank of New York

Source: ny.frb.org

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

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

By MasterForex Company

98

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

The markets wait for FRS meeting’s results

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

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

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


Source: zew.de

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

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

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

By MasterForex Company

99

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

Dollar gets its power back

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

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

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

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


Source: federalreserve.gov

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

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

By MasterForex Company

100

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

Dollar keeps on raising

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

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

Philadelphia Fed Manufacturing Index

Source: phil.frb.org

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

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

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

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

By MasterForex Company

101

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

The main events of the week

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

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

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

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

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

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

By MasterForex Company

102

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

Business confidence in Germany improved only slightly in June

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

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

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

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

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

[B]Chicago Fed National Activity Index: Three Month Moving Average[/B]

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

By MasterForex Company

103

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

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

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

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

[B]Changes of Durable Goods Orders (m/m)[/B]

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

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

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

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

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

By MasterForex Company