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Overview of the main economical events of the current day - 27/06/2013

The dollar grew despite the GDP report

The dollar rose on Wednesday against most major currencies but decreased a little against commodity currencies and the yen. The dollar continued its prior days’ growth despite the country’s first quarter GDP revised downwards in the third final reading. These data reflected already passed period of the beginning of the year while the markets are guided by more recent and advanced data of recent months which have more positive signals from the U.S. economy.

The U.S. Commerce Department lowered its estimate of GDP growth in the first quarter of 2013 to 1.8% at an annual rate from 2.4% while no changes were expected. The estimate worsening shows weaker than expected before rates of consumer spending and corporate investment amid increasing taxes in the USA. The estimate of consumer spending increase was lowered to 2.6% from 3.4%. Consumer spending accounts for two thirds of GDP and it is the driving force of economic growth.

The euro fell considerably on Wednesday and dropped lower than 1.30 against the dollar for the first time in 3.5 weeks after the ECB President’s speech in the French parliament. Mario Draghi said about his intention to follow a soft monetary policy in the nearest future and warned about existing risks for the economic growth in the euro-zone.

Draghi didn’t exclude any tools and said again that the ECB was ready to act in case of necessity. The positions of two CB stand in contrast – while Fed is going to scale back incentive measures, ECB announces its readiness to take them at any quantities.

The pound followed the euro and fell considerably on Wednesday on the back of semi-annual BoE Financial Stability Report and the comments of MPC Member David Miles who said that Great Britain might need a further stimulus and central banks had not made “bubbles” yet. In the semi-annual Financial Stability Report the Bank of England warned its borrowers and financial institutions about the sharp growth of interest rates, which could jeopardize the financial stability.

Commodity currencies grew slightly on Wednesday amid easing tensions in the credit market of China. Interbank rates decreased after the People’s Bank of China pledged to provide banks with the necessary liquidity. Chinese CB announced its readiness to provide liquidity to all the banks that have temporal problems; it also said that it had already provided a number of banks with liquidity.

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Overview of the main economical events of the current day - 28/06/2013

William Dudley tamed bull’s temper about the dollar

By the end of Thursday the dollar almost hadn’t changed according to the dollar index although it had some attempts to grow after the release of positive statistics data from the US housing market. However the speech of the Fed representative William Dudley prevented the dollar to continue this offensive. By the end of the day the dollar had risen against the pound and the yen, had fallen a little against the euro and almost hadn’t changed against commodity currencies.

According to the National Association of Realtors report the volume of pending home sales reached its high for more than six years in May. The pending home sales index (PSHI) rose by 6.7% in May up to 112.30 while a growth only by 1% was expected. The income of the US population grew by 0.5% in May while a growth by 0.2% was forecasted and the population’s spending increased by 0.3% as expected. Unemployment claims fell by 9 thousand to 346 thousand last week with the forecast of decrease to 345 thousand.

[B]The Pending Home Sales Index[/B]

The Fed representative William Dudley announced on Thursday that the markets misinterpreted the Fed statement having assumed that the tightening of the policy would happen in the nearest future. There is still a long way to go. And “the Fed might have reasons to continue bond purchases for a longer period of time”. Dudley is the deputy head of the U.S. Central Bank and permanently retains the right to vote on decisions concerning monetary policy.

The euro managed to resist the dollar on Thursday higher than the important level of 1.30, which was supported by good German labor market statistics and euro-zone economic confidence from the European Commission. Unemployment change in Germany decreased suddenly by 12 thousand in June (8 thousand growth was expected) and unemployment rate remained at the level of 6.8% as in the previous month (0.1% growth was expected). The composite index of business and consumer confidence towards the euro-zone economy grew up to 91.3 points in June in comparison with the revised reading in May – 89.5 points while an increase up to only 90.4 points was expected.

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

The pound fell after the publication of the final UK GDP for the first quarter although the data showed that the British economy had managed to escape recession. At a quarterly rate the country’s economy increased by 0.3% as forecasted but at an annual rate the reading turned out worse than expected and grew only by 0.3% with an initial forecast of 0.6% growth. The deficit of the current account in the first quarter turned out higher than expected and accounted for 14.5 bln pounds.

Commodity currencies continued to correct after a strong fall of prior days. New Zealand dollar tried to grow after ANZ Business Confidence release which grew up to 50.1 in June from 41.8 last month. However New Zealand trade surplus suddenly dropped to 71 mln dollars in May due to exports fall.

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Overview of the main economical events of the current day - 01/07/2013

The main events of the week

The dollar continued to grow on Friday after the release of the U. Michigan Consumer Sentiment in the USA which was considerably revised upwards. Friday finished the month and the whole second quarter of the year. The dollar grew according to the dollar index by 1% for the past week. But the monthly and quarterly growth turned out the lowest: only 0.1% and 0.3% respectively.

Revised U. of Michigan Consumer Sentiment for June, which was released on Friday, was revised upwards up to 84.1 in comparison with the previous 82.7 and expected growth to 83. The index still maintains at its 6-year high although in comparison with the prior month the current conditions subindex has fallen slightly but subindex of expectations has grown. At the same time Chicago PMI, usually well correlated with the national dynamic, considerably decreased in June and fell to 51.6 in comparison with 58.7 in May.

Some statements of the Fed representatives supported the dollar. FOMC Member Jeremy Stein spoke at the US Foreign Relations Council and assumed that the American CB would start to decrease the asset purchase program in September of this year. But the decision to reduce the QE will be based on the data for the period from the last year autumn, and not just the last few months - he said. FOMC Member Jeffrey Lacker announced that the further growth of the American CB balance increased the risks connected with the necessity of QE scaling back as the US economic recovery was limited by structural factors which are not controlled by the Fed.

This week as the first week of the month will be rather saturated with important events. It will be a week of PMI and the US labor market data. There will be scheduled meetings of three central banks: the Reserve Bank of Australia - on Tuesday, the Bank of England and the European Central Bank - on Thursday. No changes of the monetary policy are expected but as always the attention will be attracted by the ECB head Mario Draghi’s press conference by the end of the meeting.

The meeting of the Bank of England will be significant as for the first time it will be headed by the former governor of the Canadian CB, Mark Carney who will replace Mervyn King. During the first three days UK data will be released: industrial, building and service PMI reports. A slight growth of indexes is expected except for the service sector.

Also industrial and service PMI of European countries – Spain and Italy – will be released on Monday and Wednesday. The final readings of the indexes of France, Germany and the whole euro-zone will be also released. On Monday euro-zone unemployment data and preliminary inflation data will be published. Retail sales of the euro-zone will be released on Wednesday and factory orders of Germany – on Friday.

Euro-zone data are expected to testify the continuation of recent trends: the production recovers from the low, the unemployment continues to grow and the inflation will also rise. Unemployment rate in the euro-zone for May is forecasted to reach a new record high.

Concerning the USA there will be also very important indexes of PMI and ISM in industrial and service sectors – on Monday and Wednesday respectively. Factory orders will be released on Tuesday and trade balance – on Wednesday. Thursday is a day-off in the USA – Independence Day. So, all the Thursday data are released on Wednesday. But the main event of the week is the Friday publication of a traditional for the first week of the month US Non-Farm Payrolls for June which can correct investors’ expectations for future Fed policy. The preliminary ADP data will be released on Wednesday.

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Overview of the main economical events of the current day - 02/07/2013

Decrease of the employment components didn’t allow the dollar to continue to grow

On the first day of the week, month and quarter the US dollar couldn’t continue its growth that was seen before – after the release of ISM report which showed that manufacturing index of the USA grew higher than expected after its sudden decrease in May lower 50 for the first time in six months. Manufacturing PMI rose up to 50.9 in June against 49.0 in May with the forecasted growth up to 50.5.

[B]ISM Manufacturing PMI of the USA[/B]

However employment subindex fell to 48.7 against 50.2 in May. Market participants liked this decline as it can indicate the decrease of key labor market data which are expected on Friday. Employment report is in the center of attention not only because it says about the economy state but also because it signals the Fed’s future decisions concerning monetary policy. More negative data may delay the start of scaling back bond purchases.

[B]ISM Manufacturing PMI employment subindex[/B]

The euro growth was supported by similar PMI indexes released in the euro-zones that turned out better than expected (except Germany) and by revised downwards unemployment data in the euro-zone. The final manufacturing PMI in the euro-zone rose to 48.8 points in June compared with the first estimate of 48.7 points.

Manufacturing PMI in Spain rose to its 2-year high in June: 50.0 against 48.1 in May. In Italy the same index grew to 23-month high - 49.1, in comparison with 47.3 in May. April unemployment rate in the euro-zone was revised downwards by 0.2% from 12.2% to 12%. In May it grew to 12.1% not to forecasted 12.3%.

The pound didn’t manage to rise and lost most its positions despite the fact that the British PMI turned out much better than expected and grew up to 52.5 in June – the highest level since May, 2011 against 51.5 in May. Besides the number of mortgage approvals has reached its high since December, 2009 and has grown up to 58.2 thousand from 54.4 thousand in April.

The Australian dollar rose on Monday before the Australian CB meeting and amid the release of June official Chinese PMI that is 50.1 although it was expected to be lower 50. Besides AIG manufacturing PMI grew to 49.6 against 43.8 prior month.

The dollar continued to grow against the yen on the back of the continuing recovery of the Japanese stock index Nikkei, which was supported by the BOJ Tankan survey which showed that the major Japanese manufacturers are more optimistic than ever for the last two years. According to the Bank of Japan forecast the country’s economy will continue to recover till the second quarter of 2014.

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Overview of the main economical events of the current day - 03/07/2013

EURUSD fell below 1.30 for the first time in June

The US dollar showed a significant growth on Tuesday against all major currencies and exceeded the level of 100 yens per dollar for the first time since the beginning of June on the back of better than expected factory orders data for May and also the speech of the Fed head William Dudley. In his speech on Tuesday Dudley repeated that bond purchases could be decreased this year and the Fed could finish buying bonds in the middle of 2014 if the unemployment rate would drop to 7%. He said that he could see strong reasons to accelerate the USA economy growth in 2014.

According to the Ministry of Commerce report released on Tuesday factory orders rose by 2.1% in May in comparison with the prior month, which exceeded the expected growth by 2.0%. April data were also revised upwards to +1.3% from +1.0%. The orders had been rising for three of the last four months. Car sales growth, housing construction increase and energy consumption growth in the USA help the American companies to manage the decline in exports.

The euro fell against the dollar below 1.30 for the first time in June amid the release of the manufacturing inflation report which showed that producer price index had fallen more than expected – by 0.3% at a monthly rate against the forecasted drop by 0.2%. An extra pressure was made by a statement of the EC Eurostat that the unemployment rate in May was 12.2% and not 12.1% as it was announced on Monday. Besides, political tensions in Portugal added some negative as its Minister of Foreign Affairs had offered his resignation and the day before it the Minister of Finance had resigned.

The pound also followed the euro amid the release of construction PMI that showed some growth in comparison with the previous month but didn’t reach the forecasted readings. Construction PMI rose up to 51 in June against 50.8 in May with the forecasted reading 51.2. Some pressure was put by the BoE Deputy Governor Paul Tucker who said that high levels of household debt constrained the growth of the British economy.

The Australian dollar slumped on Tuesday after the Australian Reserve Bank kept the key interest rate at 2.75% for the second time in a row but left the possibility of its decrease in further months open. RBA Governor Glenn Stevens announced that “the inflation outlook may provide some scope for further policy easing if it is necessary to support the demand". ABN Amro Bank forecasts that by the end of 2013 RBA would have decreased the rate to 2.25%.

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Overview of the main economical events of the current day - 04/07/2013

Non-Manufacturing PMI in the USA suddenly fell

The US dollar took a break in its growth on Wednesday amid ambiguous statistics and positions balance before the ECB meeting and a holiday in the USA on Thursday. Weak non-manufacturing PMI which accounts for more than 80% of all the economy also helped the decline.

According to the ISM survey Non-Manufacturing PMI in the USA fell to its annual low 52.2 points in June in comparison with the reading in May - 53.7 while it was expected to rise up to 54.1. The subindex of new orders and PMI subindex have fallen while employment subindex has risen. Other US data released on Wednesday also were ambiguous.

According to the data released by the Ministry of Commerce the U.S. trade deficit in May rose to $45 billion while it was forecasted to drop to $40.1 billion. The imports grew by 1.9%, the exports decreased by 0.3% - as a result the US trade deficit has risen by 12%. At the same time labor market data turned out good.

Unemployment claims decreased by 5 thousand to 343 thousand last week although a growth up to 345 thousand was expected. ADP employment change rose by 188 thousand in June with the forecast of +160 thousand.

[B]ADP Employment Change in the USA[/B]

The euro rose on Wednesday before the ECB meeting on Thursday despite the ambiguous data and the growth of political tensions in Portugal. Retail sales in the euro-zone grew by 1% m/m with the forecasted growth only by 0.3%; and within the year the sales decreased only by 0.1% while they were forecasted to fall by 1.9%. Meanwhile the final services PMI grew less than expected – to 48.3 against the initial estimate of 48.6 points.

The pound showed a significant growth after the release of positive services PMI which is ¾ of all the country’s economy. In June services PMI grew from 54.9 in May to 56.9 – the highest level since March, 2011 while a decrease to 54.5 was expected. New orders growth rate turned out the highest since June, 2007.

The yen grew on Wednesday amid the correction of stock markets and Nikkei futures decrease. The strengthening of the yen was also supported by growing tensions in Portugal. This week several ministers of Portugal offered a resignation including the minister of finance. The yield of 10-year Portuguese bonds rose on Wednesday above 8% for the first time since November, 2012.

The Australian dollar fell on Wednesday to the August, 2010 low after the RBA governor Stevens had announced that AUD was still at a high level despite the decrease by almost 10% since early April. Besides, the further decline of the Australian currency was possible, which would support the economy growth. Retails sales in Australia also turned out worse than expected. The decrease of non-manufacturing PMI growth rate also had a negative effect. Non-manufacturing PMI dropped to 53.9 points in June from 54.3 in May.

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

The euro slumped after Mario Draghi’s comments

On Thursday it was a holiday in the USA and the main events of the day were the results of two central banks’ meetings; the Bank of England and ECB. The euro slumped during traditional press conference after the ECB meeting when Mario Draghi said about the outlook of the central bank monetary policy for the first time ever. Earlier the ECB tried not to decide anything in advance. Draghi announced that interest rates would remain at a current record low level or lower for an extended period of time –as long as it would be necessary.

At the meeting the ECB kept the base interest rate unchanged at a record low level – 0.5%. Currently downward risks prevail for the euro-zone economy while inflation risks are generally balanced – he said. This time the ECB sees no risks linked to low interest rates. Inflation expectations in the euro-zone are still restrained and the inflation outlook justifies the appearance of a guide concerning the policy prospects, Draghi said. There was a discussion of a possibility to decrease the rate – 0.50% is not the lowest limit and the ECB was technically ready to the negative rate – he declared.

The first meeting of the Bank of England headed by Mark Carney also made a surprise. The Bank of England decided not to change Quantitative Easing (QE) volume and kept the rates unchanged but suddenly issued MPC Rate Statement which used to be released earlier only in case of changes in the monetary policy, whether it were a rate or QE volume.

The pound slumped after the release of the MRC rate statement that was soft – in particular the attention of the market participants was attracted by the words about a sharp growth of market rates and its negative influence on the economic recovery prospects. Also according to the statement the increase of interest rates is unreasonable from the British economy point of view. Morgan Stanley experts predict a fall of GBPUSD to $1.41 by the end of the year.

The markets are waiting for a key non-farm payrolls report of the USA which is important not only because it signals the economy state, it also can throw light upon the further decisions of the Fed concerning the monetary policy. A more positive report than expected can draw the Fed nearer to the discussion of scaling back QE program. There is an expectation of employment growth by 160-165 thousand people and unemployment rate decrease by 0.1% to 7.5%.

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Overview of the main economical events of the current day - 08/07/2013

The main events of the week

The US non-farm payrolls released on Friday turned out significantly better than expected, which allowed the dollar to continue growing over the whole market. According to the Labor Department survey non-farm payrolls increased by 195 thousand in June while a growth by 165 thousand was expected. Besides, the data for the past two months were revised upwards by as much as 70 thousand.

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

Despite a faster than expected growth of non-farm payrolls the unemployment rate didn’t change in June in comparison with May and it accounted for 7.6% as in the previous month although it was predicted to drop by 0.1%. Average hourly earnings per month have showed the highest growth since the last year end - by 0.4% up to 24.01 dollars. In comparison with the last year it grew by 2.2% - the highest reading since July, 2011.

An average growth of non-farm payrolls for the second quarter amounted to 196 thousand per month, which is a little lower than the first quarter reading that was 207 thousand per month. An average growth for the past six months is 202 thousand. The improvement of the situation at the labor market can draw nearer the start of QE3 scaling back. All this forms a contrast with the positions of the ECB and the Bank of England which announced their intention for extra monetary policy easing last week. JPMorgan and Goldman Sachs experts believe that the Fed could decrease bond purchases in September already and not in December as it had been forecasted before.

The dollar grew for the last week by 1.55% according to the dollar index. Most of all it has risen against the British pound (+2.01%), Japanese yen (+1.99%) and Swiss franc (+1.95%). For the second week already the dollar has been rising along with the American stock market which has risen the same 1.5% for the week according to the DJIA index. During this second week of the month there won’t be so many important events that can influence the balance of forces at the market. There will be a meeting of the Japanese CB and also a release of industrial production data, trade balance and inflation data.

In the euro-zone there will be a release of trade balance data and Germany’s industrial production data. Industrial production of Italy and France is released on Wednesday and the whole euro-zone’s one - on Friday. The industrial production is expected to fall in May in Germany and generally in the euro-zone and to show a slight growth in France and Italy. Concerning Great Britain trade balance data and industrial production data will be released on Tuesday; and a moderate growth of industrial production is expected in May. On Thursday non-farm payrolls of Australia will be released. Inflation data of China are released on Tuesday; and trade balance of the PRC – on Wednesday.

Concerning the USA - FOMC Meeting Minutes will be released on Wednesday, which is likely to confirm a more aggressive attitude of the central bank. On Friday producer price index and a preliminary U. of Michigan consumer sentiment will be released. At the debt market there will be a traditional for the second week of the month the US long-term bond auction. The 8th of July is a start of the quarterly earnings season of American companies for the second quarter which will last till the middle of August.

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Overview of the main economical events of the current day - 09/07/2013

The dollar made a pause in its growth

The dollar was correcting on Monday after prior days significant growth and without any considerable macrostatistics data on the USA at the beginning of the week. Having reached important technical levels of many pairs market participants corrected their positions. Correction can continue but on Wednesday FOMC meeting minutes will be released and also the Fed governor Ben Bernanke will make a speech about the coming 100th anniversary of the American central bank which will be celebrated in December of this year.

The euro rose moderately on Monday amid the Eurogroup meeting and the achieved agreement on financing of Greece, stabilization of political situation in Portugal and the speech of the ECB head Mario Draghi in the European Parliament – despite weak trade balance and industrial production data of Germany and investors’ confidence in the euro-zone. At the end of Monday finance ministers of the euro-zone achieved an agreement on bailout aid to Greece. The first sum of 2.5 billion euros will be paid to Athens in July, which will allow the country to escape the crisis of financing threat.

The ECB governor Mario Draghi making speech in the European Parliament repeated again that the monetary policy would stay mild as long as it would be necessary and interest rates would be kept at low levels for a long period of time. Although the situation in the euro-zone hasn’t stabilized yet and downside risks for the economy maintain, the ECB is awaiting a gradual economic recovery in the second half of the year although at a slow rate.

Germany’s trade balance surplus for May decreased to 14.1 bln euros from 17.5 bln prior month – exports fell by 2.4% m/m instead of a sluggish growth. Industrial production of Germany fell by 1% in May in comparison with the previous month while it was expected to decrease only by 0.5%, which was linked to a considerable drop in construction and energy sectors. The recovery of the largest European economy is still unstable amid uncertain prospects of the foreign trade. Sentix confidence index of European investors also dropped in June to -12.6 in comparison with the reading in May -11.6.

The political situation in Portugal stabilized on weekend after the prime minister had appointed the former Minister of Foreign Affairs, who resigned recently, the vice prime minister, which allowed to save the ruling coalition and avoid new elections. S&P rating agency lowered the forecast of Portugal current rating to negative one due to the growing political uncertainty which could undermine the county’s return to the debt market.

Meanwhile the Bank of France increased the prospects of the economic growth in the second quarter up to 0.2% in comparison with 0.1% which was predicted before. Also the Bank’s report released on Monday showed the growth of business confidence in June. Manufacturing business confidence of France grew to 96 in June in comparison with 94 in May.

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Overview of the main economical events of the current day - 11/07/2013

FOMC and Bernanke crashed the dollar

Two key events of Wednesday and the whole week – the publication of the FOMC Meeting Minutes and the speech of the Fed chairman Bernanke – led to a sharp weakening of the dollar. Probably it will last till the middle of the next week when Bernanke will deliver a semi-annual report to the two houses of the U.S. Congress.

The released FOMC Meeting Minutes were estimated weak by the market, which lead to fixation of long dollar positions after almost a month of its growth. The minutes showed that FOMC members disagreed about the terms of QE scaling back. About a half of the Fed leaders believe that the central bank must finish the asset purchase program by the end of the year. The rest think that it would be reasonable to continue purchasing till 2014.

FOMC wants Bernanke to make it clear that the increase of interest rates is an issue of a distant future. Almost all the committee members support a soft monetary policy. Many Fed leaders want to see a higher employment rate before decreasing bond purchases.

Ben Bernanke delivered his speech in two hours after the minutes release and also signaled a larger tendency to soft monetary policy. He said that “extra-soft monetary policy is necessary in the near future”. Besides, Fed is likely to raise short-term interest rates only some time after the unemployment rate reaches 6.5%. “The US dollar seems to be doing well recently”, said Bernanke.

The dollar started to weaken since early Wednesday when trade balance negative statistics data of China were released raising the stock markets drop and the yen fall. The yen showed its maximum growth for the month on Wednesday against the dollar amid the start of the Bank of Japan 2-day meeting which was not expected to expand incentive programs.

The signs of the Japanese economic recovery also decrease the prospects of further monetary policy easing this year. Trade balance weak data of China helped the yen to grow. The imports decreased by 0.7% in June in comparison with the same period last year while it was expected to grow by 6%. The exports also fell by 3.1% y/y against the forecasted growth by 3.7%.

The euro grew on Wednesday despite industrial production mixed data. The industrial production in France fell by 0.4% m/m in May, which turned out a little better than the forecasted drop by 0.8%. The industrial production of Italy grew only by 0.1% m/m against the forecasted growth by 0.3%. Germany’s inflation data showed its growth up to its high since December, 2012. Consumer price index rose by 0.1% in June at a monthly rate and by 1.8% at an annual rate.

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Overview of the main economical events of the current day - 12/07/2013

Bank of Japan raised its assessment of the country’s economy

The yen showed growth for the second day in a row after the Bank of Japan kept its monetary policy unchanged on Thursday but lifted the assessment of the economy. Economic recovery is cumulating momentum, the exports are growing due to the yen weakening, consumer spending is rising and deflationary pressures are gradually weakening.

So, Core Machinery Orders for May released on Thursday showed growth by 10.5% m/m with the forecast of 1.7%. It will not allow extending incentive measures this year, that’s why the yen reacts with strengthening. USDJPY is likely to maintain at the level of Y100 till the elections in Japan which will be held 21, July and till the consumer price index publication which is expected on 25, July.

The US dollar continued falling on Thursday, which started after the publication of FOMC Meeting Minutes and Ben Bernanke’s speech although at the beginning of the day the dollar tried to correct. For two days it has already lost 2.3% according the dollar index. Extra negative affect was made by the labor market statistics released on Thursday that turned out worse than expected.

According to the US Labor Department data unemployment claims grew by 16 thousand last week up to 360 thousand while a drop to 340 thousand was expected. The 4-week moving average of Unemployment Claims started to grow again and had risen by 6 thousand for the past week. Besides, import prices decreased in June more than expected, which puts downwards pressure on the USA inflation.

After Bernanke’s speech the forecast concerning the first increase of the Fed interest rates was revised at the interest-rate futures market from February to April, 2015. Barclays’ analysts consider the dollar’s decline another correction but doubt whether it is long waiting for a soon American currency growth. They predict the EURUSD rate at the level of $1.27 by the end of the third quarter and at the level of $1.26 by the end of the year. Credit Suisse currency strategists believe that the dollar growth resumption will require time and the reduction of a large number of the US currency long positions.

EURUSD is again traded above 1.30. The ECB Monthly Bulletin released on Thursday explains that the horizon of interest rate changes by the ECB will be flexible and will depend on economic readings of the euro-zone. Last week ECB head Mario Draghi promised to keep the rates low as long as it will be necessary. Meanwhile German Bundesbank President Jens Weidmann making a speech in Munich on Thursday declared that that promise was not a serious change of the strategy. The ECB can raise base interest rates in future if the inflation pressure becomes evident.

The Australian dollar lost all the growth of the start of the day and had even decreased by the end. The pressure was put by the labor market survey in spite of seemingly strong figures of employment change growth by 10.3 thousand in June while no surplus was expected. But the entire employment rate growth was due to the increase of part time employment change which grew by 14.8 thousand. Besides, unemployment rate grew by 0.1% to 5.7% - the highest level since September, 2009. New Zealand dollar also fell. Business NZ Manufacturing Index dropped to 54.7 in June from 59 in the previous month.

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Overview of the main economical events of the current day - 15/07/2013

The main events of the week

The dollar grew slightly on Friday after two days of sharp decrease. Consumer confidence data released on Friday didn’t help the dollar’s correction. Preliminary U. of Michigan consumer sentiment dropped to 83.9 in July in comparison with the final reading 84.1 for June while a growth to 84.7 was expected. Consumer sentiment subindex decreased for the nearest 6 months probably due to the recent rise of interest rates on mortgages and retail petrol prices.

At the same time producer price index showed a significant growth – the highest one at a monthly rate for the past nine months, which was caused by the energy prices growth. Producer price index grew by 0.8% in June while it was expected to rise only by 0.5%.

The euro was negatively affected on Friday by the growth of political tensions in Portugal; its authorities appealed to the international lenders to defer payments for credits from the middle of July to the end of August. Besides, on Friday evening the Fitch Ratings has downgraded France’s Long-term foreign and local currency Issuer Default Ratings (IDR) to ‘AA+’ from ‘AAA’. The Outlook is Stable. The Fitch is the only agency of the “Big Three” to retain the highest rating on the euro-zone’s second largest economy.

For the past week the dollar suffered significant losses having fallen by almost 1.9% according the dollar index. All the major currencies except the Australian dollar have grown. The largest growth was shown by the Japanese yen (+2.00%), the euro (+1.88%), Swiss franc (+1.82%) and the Canadian dollar (+1.81%).

This week the meeting of the Central Bank of Canada will take place and there will be a release of two Central Banks Meeting Minutes: the Bank of Japan and the Bank of England; there will be a release of inflation data (New Zealand, Great Britain, the USA, Canada and Germany); retail sales data (Great Britain and the USA); housing market data (the USA) and labor market data (Great Britain); a large China information block – at the beginning of the week.

The final euro-zone’s consumer price index and trade balance data will be released on Tuesday and also German ZEW Economic Sentiment which is expected to grow. Current Account of the euro-zone will be released on Thursday and Germany’s Producer Price Index – on Friday.

The UK’s producer price and consumer price index will be released on Tuesday and a growth of an annual inflation is forecasted. On Wednesday – labor market data and on Thursday – retail sales data. A special attention will be drawn by the BOE Meeting Minutes which can demonstrate that fewer members of the BOE Monetary Policy Committee voted for the QE program increase. If the Central Bank new governor Mark Carney turns out to vote for keeping the policy unchanged, it may put pressure on the pound.

There will be a lot of important data on the USA. On Monday – retail sales and Empire State Manufacturing Index. On Tuesday – consumer price index, industrial production and Treasury International Capital (TIC) Flows. On Wednesday – housing market data and the Beige Book. On Thursday - Philadelphia Fed Manufacturing Index. But the main event of the week can become the Fed governor Ben Bernanke’s presentation of Monetary Policy Report to U.S. Congress, which will take place on Wednesday and Thursday. The first speech on Wednesday is considered more important. On the second day usually the main points of the first speech are repeated but something new also can be said.

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Overview of the main economical events of the current day - 16/07/2013

US retail sales fell short of expectations

The US dollar grew on Monday against the yen, franc and Canadian dollar; it fell against the Australian dollar and New Zealand dollar and almost didn’t change against the euro and the pound. The dollar tried to rise at the first part of the day but its further growth was prevented by weak retail sales data which turned out worse than expected. Retail sales increased by 0.4% in comparison with the prior month, which turned out almost twice lower than the forecasted growth by 0.7%.

[B]Change of the US retail sales m/m[/B]

However the entire increase in June was due to the motor vehicles: the sales of auto dealers rose by 1.8%. Core Retail Sales excluding the volatile categories of autos, which demonstrate consumer spending trends better, remained unchanged while 0.4% growth was expected.

At the same time Federal Reserve Bank of New York released the first factory report of regional Fed banks for July which turned out to be good. Empire State Manufacturing Index reached 9.46 against 7.84 in June while it was forecasted to decrease to 5. New orders, supply and employment subindices have increased.

The euro was falling at the beginning of the day amid growing political tensions in Portugal and Spain. Late Sunday the leading political parties of Portugal set a July 21 deadline to agree to a “national salvation pact”. The opposition leaders urged Spanish Prime Minister Mariano Rajoy to resign after the newspaper El Mundo had published information that put the official in a bad light.

The Australian dollar has risen after the release of economic statistics data of China, the yen also has weakened. Chinese GDP growth rate accounted for 7.5% at an annual rate in the second quarter of 2013, which coincided with the expectations but many market participants feared unpleasant surprises from the report. Last week the Finance Minister of China made it clear that economic growth by the end of the year could be even lower 7%, which is a little lower than the official forecast of the State Council of the People’s Republic of China that accounted for 7.5%. China is the largest trade partner of Australia.

The Canadian dollar didn’t support on Monday the commodity currencies’ trend to corrective strengthening and decreased before the Canadian Central Bank meeting which will take place on Wednesday. The Canadian newspaper Globe and Mail published an article which said that the Bank of Canada might surprise financial markets this week and signal a long period of low interest rates as the ECB has done recently. Earlier the Bank of Canada was thought to raise the rate before the Fed since the end of 2014 but now it may make it clear that it will wait till 2015 as the Fed.

By MasterForex Company

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Overview of the main economical events of the current day - 17/07/2013

Markets wait for Bernanke’s testimony to Congress

The dollar was traded downwards on Tuesday against all major currencies before the Fed Chairman Ben Bernanke’s Monetary Policy Report to U.S. Congress on Wednesday. Even good US data and slightly weak data on New Zealand, Great Britain and Germany didn’t help the dollar. The markets made an allowance that Bernanke would probably demonstrate the same tendency to loose monetary policy as he did it last week.

According to the US Labor Department consumer prices grew by 0.5% in June having shown the most significant growth for five months. The price growth was mainly caused by a petrol price hike. NAHB Housing Market Index reached 57 in July, the highest reading since January, 2006 having been growing for the third month in a row. The US industrial production increased by 0.3% m/m in June, which coincided with the expectations.

The euro has risen despite a sudden fall of Germany’s economic sentiment in July. German ZEW Economic Sentiment for the nearest six months dropped by 2.2 points to 36.3 points in July (expected growth to 40 points) although German ZEW Current Situation rose to 10.6 points (expected growth to 9 points). Economic sentiment worsening reflects a negative attitude towards the world economy, said ZEW president.

Meanwhile Euro-Zone ZEW Economic Sentiment rose by 2.2 points in July up to 32.8 (a moderate growth to 31.8 was expected). The euro-zone trade surpluce decreased to 14.6 bln euros in May from 15.2 bln euros in April due to the exports fall by 2.3% compared with the prior month. The exports have been falling sharply for the second month in a row.

The pound recovered the losses of the first part of the day after weak inflation data and even managed to close the day by growth. According the Office for National Statistics (ONS) the inflation accelerated in the UK to 2.9% in June at an annual rate, which, however, didn’t reach the forecasted growth by 3% y/y. Some expected 3% level to be exceeded. At a monthly rate consumer prices dropped by 0.2% offsetting a prior month growth by 0.2%. Meanwhile according to the ONS data released on Tuesday housing prices in Great Britain in May reached its record high since 2002.

The Australian dollar rocketed after the publication of the Reserve Bank of Australia Meeting Minutes. They specifically said that the sharp decline of the Australian currency could push up the inflation a little in time as import prices would grow. It was also mentioned about a positive effect of low rates to all economy sectors. It was the first time the RBA acknowledged that the national currency lowering could increase inflation risks. Market participants used those words as a motive for reducing of excessive number of short positions on AUD.

New Zealand dollar also has risen despite a weaker quarterly report on inflation than expected. According to the Bureau of Statistics of New Zealand quarterly growth rates of consumer price index in the second quarter accounted for 0.2% while a growth by 0.3% was expected. In comparison with the same period last year the index has risen by 0.7% (expected growth by 0.8%) – it was the slowest annual growth for 14 years.

By MasterForex Company

[MasterForex_Broker]

Overview of the main economical events of the current day - 18/07/2013

The US housing market shows weakness

The dollar had risen slightly by the end of the volatile trading on Wednesday against all major currencies despite the initial momentum of decline which happened after the release of a weak housing market report and the publication of the Fed chairman Ben Bernanke’s speech to the Congress that was published 1.5 hours before his testimony.

The housing market report turned out surprisingly weak. Building Permits decreased by 7.5% m/m in June to 911 thousand at an annual rate against 1000 thousand forecast. Housing Starts decreased by 9.9% in regard to the prior month and amounted to 836 thousand at an annual rate against the forecast of 950 thousand.

[B]Building Permits (left) and Housing Starts (right) in the USA[/B]

Speaking in the House of Representatives of the U.S. Congress Bernanke didn’t say anything new on the whole; and just an increased volatility was observed. At first the dollar fell during the publication of the statement and then it grew during Bernanke’s speech and his answers to the questions. Bernanke again said about the FOMC’s intention to gradually reduce QE3 in the first part of 2014 and scale back the program absolutely by the middle of the next year if the situation in the American economy would develop according to the current forecasts.

However QE3 will last till the situation at the labor market shows a significant improvement. Bond purchase program doesn’t follow a predetermined plan and its volume can be decreased or increased depending on the economic terms. If they worsen, bond purchase in its current volume can be kept further, said Bernanke.

The pound rocketed on Wednesday after the release of a strong labor market report and the publication of Bank of England Meeting Minutes. According to the Office for National Statistics (ONS) of Great Britain Claimant Count Change fell by 21.2 thousand in June (a drop by only 8 thousand was expected) against -16.2 thousand in prior month, which became the strongest decline for three years. Unemployment rate fell by 0.1% to 4.4%, while no changes were expected. Average Weekly Earnings (3M/y) have risen by 1.7% within three months against the prior reading 1.3% and the forecast of 1.4%.

The published Meeting Minutes of Monetary Policy Committee of the Bank of England in July showed that all the members of the Committee had voted unanimously for keeping asset purchase program unchanged. Such unanimity has been shown for the first time since October, 2012. Last meeting David Miles, Paul Fisher and the Central Bank governor King voted for an increase of QE.

Bank of Italy decreased on Wednesday the forecast on economic growth for current 2013 and Bank of Portugal lowered the economic growth outlook for the next year. Meanwhile the Goldman Sachs experts believe that EURUSD may rise up to 1.34 within three months and up to 1.40 during 12 months.

The Canadian dollar dropped amid the announcement of the results of Canadian Central Bank meeting which was headed by a new governor Stephen Poloz for the first time. As it was expected the Bank of Canada kept the interest rate unchanged at the level of 1.00% and declared that such level and the current considerable monetary policy stimulus would remain appropriate. The Central Bank lowered inflation and GDP forecasts for 2014. At the press conference Poloz announced that the economic growth in Canada was expected to be uneven that’s why the stimulus of economy was still appropriate. And the increase in rates would not be tied to any terms.

By MasterForex Company

[MasterForex_Broker]

Overview of the main economical events of the current day - 19/07/2013

Philadelphia Fed Manufacturing Index exceeded 2-year high

The US dollar was traded slightly upwards on Thursday against most major currencies amid the second speech of the Fed chairman to the Congress and positive US statistics data on the labor market and manufacturing PMI. Replying to the questions in the U.S. Senate Banking Committee Bernanke said that QE reducing at the Fed meeting in September was not a settled issue and it was too early to say when the first QE3 reducing would take place as the data released after the meeting in June turned out contradictory.

Unemployment Claims decreased by 24 thousand to 334 thousand last week while a drop to 345 thousand was expected. Philadelphia Fed Manufacturing Index grew up to 19.8 in July while it was forecasted to fall to 6.8 – and it reached the highest reading since March, 2011.The Number of Employees, Shipments and Delivery Times have risen. Future General Activity Index in 6 months also has risen from 33.7 to 44.9.

Philadelphia Fed Manufacturing Index

Source: phil.frb.org

The pound recovered after the release of retail sales report for June. The growth of the reading by 0.2% at a monthly rate coincided with the expectations but at an annual rate the data turned out much higher than the forecasted estimates: 2.2% compared with the expected 1.7% - mainly due to the revised upwards data for May from 1.9% to 2.1%. Besides, retail sales for the second quarter rose by 0.9%, which can add 0.1% to the GDP growth for the second quarter – according to the representative of the Office for National Statistics (ONS).

The euro was traded downwards; the pressure was put by the surplus decrease of the euro-zone current account which seasonally adjusted dropped to 19.6 bln euros in May from the revised upwards reading of 23.8 bln in April. The decrease was mainly due to a higher deficit in current transfers and income decline, the European Central Bank declared.

The yen weakened significantly before the G-20 meeting which will take place on Friday and Saturday in Russia and also before the elections to the upper house of Japan’s parliament on Sunday. At the meeting of G-20 finance ministers ultra-loose monetary policy is not expected to be criticized as a competitive devaluation. According to the opinion poll the ruling coalition of Prime Minister Shinzo Abe is expected to win at the elections to parliament, which will allow it to get the control over both houses of parliament and to increase its chances for the economic policy promotion.

AUD and NZD were traded downwards on Thursday amid the concerns about economic growth rates in China. International Monetary Fund marked increasing risks that Chinese economic growth rates would fall short of the forecasts this year, having called on the government of China to continue reforms to support economic development.

NAB Quarterly Business Confidence of Australia

Source: business.nab.com.au

Besides, NAB Quarterly Business Confidence of Australia dropped to a negative reading in the second quarter while in the first quarter it was positive. ANZ Consumer Confidence fell by 3.3% in July. At the same time CAD grew after the wholesale sales which showed the highest growth rates in May for two years.

By MasterForex Company

[MasterForex_Broker]

Overview of the main economical events of the current day - 22/07/2013

The main events of the week

The dollar was traded downwards on Friday against the yen and commodity currencies amid a sharp decline of Japanese stock market and the decision of the People’s Bank of China to abandon restrictions concerning lending rates. Japanese stock index Nikkei 225 dropped by 1.48% on Friday before the elections to the parliament on Sunday, which has become the largest decline for the month. The People’s Bank of China canceled its floor limit for lending interest rates. This measure is considered a key step in liberalizing its national interest rate regime.

By the end of the week the dollar had decreased against all major currencies except yen and lost 0.5% according to the dollar index after 2-day testimony of the Fed chairman to the US Congress which led the market participants to the conclusion that QE3 tapering off shouldn’t be waited in the nearest time. The largest growth against the dollar was shown by the New Zealand dollar (+2.11%), Australian dollar (+1.61%) and British pound (+1.11%). Then it is followed by the euro (+0.60%), Swiss franc (+0.58%) and Canadian dollar (+0.23%).

There won’t be so much macrostatistics data this week – the first two days of the week and Friday are almost empty. On Wednesday there will be a release of Flash Manufacturing PMI & Flash Services PMI of France, Germany and euro-zone. A weak indices growth is expected, which indicates a slow recovery although they are still below the level of 50 which separates economy’s expansion from its contraction. On Wednesday the same HSBC Flash Manufacturing PMI of China will be released. On Thursday IFO indices will be released and also there is an expectation of a slight growth connected with the improvement of the current situation.

The main event of Great Britain will be the publication of preliminary GDP for the second quarter on Thursday. A slight speedup of economic growth is expected up to 0.6% compared with the prior quarter due to the retail sales increase and construction sector recovery. On Tuesday there will be a release of BBA Mortgage Approvals and on Wednesday - CBI Industrial Order Expectations.

In Australia second quarter inflation survey will be published on Wednesday. The data are expected to be tempered, which meets a recently announced Central Bank’s position which says that the bank has enough room to reduce interest rates if it is necessary for the economy. On Thursday a meeting of the New Zealand Central Bank will take place, no policy changes are expected; On Wednesday trade balance will be published. In Canada retail sales will be published on Tuesday. In Japan trade balance will be published on Wednesday and consumer inflation data – on Friday.

In the USA Existing Home Sales (Monday) and New Home Sales (Wednesday) will be released. On Thursday Durable Goods Orders will be published. On Monday Chicago Federal National Activity Index will be released, on Tuesday - Richmond Manufacturing Index and on Friday - Revised U. of Michigan Consumer Sentiment.

By MasterForex Company

[MasterForex_Broker]

Overview of the main economical events of the current day - 23/07/2013

The US existing home sales rate dropped unexpectedly

The dollar was traded downwards on Monday against all major currencies on the back of weak housing market and economic activity data. The dollar was negatively influenced by the statement of the head of the largest bond fund PIMCO Bill Gross who announced on Sunday that he was sure that Fed wouldn’t start tightening its monetary policy at least until 2016.

Meanwhile according to the Bloomberg poll held among economists last week – half of the respondents expect QE3 tapering off already in September. It is more than 44% in June opinion poll. According to the opinion poll held by Reuters 38 from 56 economists expect Fed to reduce bond purchases in September.

The report of the National Association of Realtors, published on Monday, showed that the USA Existing Home Sales dropped by 1.2% in June to 5.08 million houses at an annual rate compared with the revised downwards reading for May 5.14 million houses. Sales growth by 1.4% up to 5.25 million was expected. The sales are falling due to supply decrease and price growth. The number of homes for sale in June is the lowest since 2001. A median existing-home price in June has grown by 13.5% for a year up to $214.2 thousand.

Source: realtor.org

Though Chicago Federal National Activity Index rose in June to -0.13 in comparison with -0.29 in May – yet it didn’t reach forecasted zero and remained in the negative territory for the 4th month in a row. A negative reading indicates below-trend economic growth. Employment and production subindices have grown while consumption, housing, sales, orders and inventory dipped.

The euro reached its monthly low against the dollar. Portuguese President backed the centre-right coalition past weekend, having rejected the opposition’s demand to dissolve the parliament and call snap general election thus ending the political uncertainty in the country. Meanwhile according to the Bundesbank June survey published on Monday economic growth in Germany seems to slow down by the end of the third quarter of the year.

The pound has grown higher 1.53 against the dollar for the first time since the end of June. Export activity in Great Britain grew to 6-year high in the second quarter – according to the British Chamber of Commerce and logistics company DHL. Export sales and orders growth is marked. According to the Markit report the UK household sentiment in July reached its highest reading since February, 2009.

The yen rose on Monday after the ruling Liberal Democratic Party of Japan had won a landslide victory in last Sunday elections to the upper house of parliament, thereby getting the control over both houses of parliament, which significantly facilitates reforms promotion. However this victory was widely expected and in fact led to profit taking.

By MasterForex Company

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Overview of the main economical events of the current day - 24/07/2013

Retail sales in Canada exceeded expectations

The Canadian dollar rocketed after the release of retail sales report which turned out much better than expected. Retail sales grew by 1.9% in May compared with the prior month, which is almost 5 times more than forecasted and it has become the largest monthly growth since March, 2010. Core Retail Sales have grown by 1.2% against the forecasted growth by 0.1%. Besides, April data were revised upwards by 0.1%.

Retail sales in Canada

Source: statcan.gc.ca

The US dollar continued falling on Tuesday against almost all major currencies on the back of weak manufacturing index and not enough strong data from the housing market – although at the beginning of the day it made attempts to grow. FHFA House Price Index though grew by 0.7% m/m in May yet didn’t reach forecasted growth by 0.8%. Besides, April data were revised downwards to +0.5% from +0.7%.

The report of the Federal Reserve Bank of Richmond, one of the five major Federal Reserve Banks reports for the month, showed that manufacturing index significantly decreased in July and again moved to the negative territory.

Richmond Fed Manufacturing Index

Source: richmondfed.org

The index plunged to -11 compared with +7 in June. There was a significant decrease of shipments, volume of new orders, and backlog of orders. Index above zero means activity growth. Manufacturing indices in other US regions show signs of improvement in July.

The euro grew on Tuesday amid the growth of consumer and business confidence in the euro-zone. Euro-Zone Flash Consumer Confidence grew up to -17.4 in July against -18.8 in June (with the forecast of -18.3), which is the highest reading since July, 2011. The index has been growing for the 8th month in a row. French Business Confidence Indicator rose to 95 in July against 93 in June, which also exceeded the forecasted reading 94.

The pound recovered from the early day decrease and even had grown by the end. According to the British Bankers’ Association BBA Mortgage Approvals grew to 37.3 thousand in June (against 36.3 in May) having reached the highest reading since 2012 although they turned out less than forecasted 38.3 thousand.

By MasterForex Company

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Overview of the main economical events of the current day - 25/07/2013

US New Home Sales Jumped to 5-year High

The Australian dollar fell significantly on Wednesday after the release of quarterly inflation data that turned out lower than forecasted. According to the Australian Bureau of Statistics consumer prices in the second quarter of this year grew only by 0.4% against the forecasted growth by 0.5%. At an annual rate inflation has risen by 2.4%, which also turned out lower than expected 2.5%. The BlackRock analysts believe that in the nearest six-nine months AUDUSD could fall to $0.80.

Extra pressure on AUD was put by the decrease of manufacturing index in China. HSBC Flash Manufacturing PMI dropped to 11-month low 47.7 in July against 48.2 in June. The index has been lower 50 points for the third month already, which proves activity decrease and indicates further slowdown of the world’s second largest economy. Almost all sub-indexes fell, especially new orders, inventories and employment components.

HSBC Flash Manufacturing PMI of China

Source: markiteconomics.com

The US dollar was traded upwards on Wednesday against all major currencies amid strong housing market and manufacturing index statistics and also PMI decrease in China, which led to commodity and stock assets fall. The U.S. Markit Flash Manufacturing PMI rose to 53.2 in July compared with 52.2 in June.

According to the Commerce Department new home sales reached 5-year high in June, which increases the chances of American policy stimulus program prompt possible reduce. New home sales grew by 8.3% in June compared with May (497 thousand homes at an annual rate) while a sales growth only by 1.7% (to 484 thousand) was expected.

The US New Home Sales

The euro was traded upwards at the beginning of the day after the release of strong Manufacturing and Services PMI but then lost all the growth. The Euro-Zone Markit Flash Composite PMI rose to 18-month high 50.4 in July from 48.9 in June having exceeded the expectations at 49.1. It is the first time in 1.5 years the indicator has exceeded the key level of 50 points which demonstrates PMI increase in the economy.

PMI of Germany and France, the euro-zone largest economies, have also exceeded the expectations. German Composite PMI has reached 5-month high and in France – 17-month high. Despite the situation improvement Commerzbank’s poll showed that 70% of German companies forecasted the euro’s fall against the dollar during the nearest three months.

The pound also fell before the release of the UK preliminary GDP for the second quarter on Thursday despite CBI Industrial Order Expectations growth to 7-month high. The companies wait for further orders growth in the nearest months - according to the Confederation of British Industry poll. CBI Industrial Order Expectations increased to -12 in July compared with -18 in June. The result, however, coincided with the expectations.

By MasterForex Company