Daily Forex market overviews by MasterForex.com

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124

Overview of the main economical events of the current day - 26/07/2013

The Dollar Falls before Fed Meeting

The dollar weakened significantly on Thursday amid the release of contradictory US statistics. Despite a considerable growth of durable goods orders which exceeded the forecasts - Durable Goods Orders Ex Transportation remained unchanged. Besides, unemployment claims rose by 7 thousand for a week. Market participants seem to regain beforehand the results of the Fed meeting which will take place July, 30-31 and probably weaker US GDP data and Non-Farm Payrolls which will be also released next week.

Dollar sales increased at the end of the American session, which was caused by the article in Wall Street Journal which said that according to the results of the meeting next week the Fed would probably keep unchanged its asset purchase program of 85 bln dollars at a month. And Fed can lower unemployment and inflation threshold to predict rates and indicate that the rates can stay at a record low level longer than it was supposed earlier.

According to the U.S. Department of Commerce Durable Goods Orders grew by 4.2% in June compared with the prior month against the forecasted growth by 1.1%. However, Durable Goods Orders Ex Transportation didn’t change although a growth by 0.5% was expected. Almost all the orders increase was due to the growth of civilian aircraft orders and orders for defense.

Durable Goods Orders Ex Transportation

The euro again approached 1.33 against the dollar for the first time since June, 20 amid the growth of German business climate, consumer confidence in Italy and unemployment decrease in Spain, which indicates an acceleration of economic growth rates in the second half of the year. According to the German institute IFO, IFO - Business Climate grew in July to its high 106.2 from March compared with 105.9 in June having shown the third monthly growth in a row and having slightly exceeded the expectations. IFO - Current Assessment rose more than forecasted but IFO – Expectations fell a little.

IFO indices

Source: cesifo-group.de

Consumer Confidence Index in Italy grew to 97.3 in July against 95.8 in June, which is the highest reading for two years. In Spain for the first time in two years an unemployment decrease was recorded. By the end of the second quarter the reading dropped to 26.3% compared with 27.1% in the prior quarter.

The pound grew amid the release of preliminary GDP for the second quarter although the first reaction was a decrease as the data coincided with the expectations. The UK GDP has risen by 0.6% in comparison with the past quarter when its growth only by 0.3% was recorded. And at an annual rate the growth accounted for 1.4% (the largest increase since the first quarter of 2011) against 0.3% growth in prior quarter.

New Zealand dollar rocketed after the Reserve Bank of New Zealand meeting where the policy was kept unchanged but RBNZ Rate Statement turned out tougher. The head of RBNZ Graeme Wheeler announced that the economic growth of New Zealand had increased and removal of monetary stimulus would likely be needed in the future although he expected the rate to be kept unchanged through the end of the year. Monetary stimulus will depend on inflation in housing and construction sectors but an annual inflation is expected to rise during the nearest year. After that statement the probability of rate increase by March, 2014 rose to 92% against 76% earlier.

By MasterForex Company

125

Overview of the main economical events of the current day - 29/07/2013

The main events of the week

The US dollar was traded almost unchanged on Friday against the euro and the pound but it fell against the yen and commodity currencies despite the US consumer confidence growth that reached its high for 6 years. Revised U. of Michigan Consumer Sentiment rose to 85.1 in July against 84.1 in June and preliminary reading 83.9 for July having exceeded the expectations at 84. The dollar lost almost 1.2% according to the dollar index for a week. A slight growth against the dollar was shown by the yen and New Zealand dollar.

This week falls on the start of the month and may become the most important one in the whole coming month and set the direction of trading till the end of the summer. This week meetings of three most important central banks of the world will be held and the US labor market report will be published. On Wednesday the results of 2-day Fed meeting will be released and on Thursday – the results of the European Central Bank and the Bank of England.

On Wednesday all the attention will be drawn to the FOMC Statement. Last week there appeared rumors that the Fed would probably lower unemployment and inflation thresholds to start tightening monetary policy. If they are lowered, QE tapering off may be delayed for a longer term. No changes in the policy of the ECB and the BoE are expected but the attention as always will be drawn by the press conference of Mario Draghi by the end of the meeting. The Bank of England can again publish a rate statement as at the previous meeting.

In the euro-zone Spanish Flash GDP for the second quarter and confidence indexes from the European Commission will be published on Tuesday. Euro-zone business confidence is expected to rise a little in July again. On Wednesday the euro-zone unemployment data and inflation preliminary data will be released. On Thursday there will be a release of manufacturing PMI of Spain and Italy and the final readings of these indexes of France, Germany and the whole euro-zone.

In Germany GfK Consumer Climate and preliminary inflation data will be released on Tuesday; retail sales and Non-Farm Payrolls – on Wednesday. In Great Britain Manufacturing PMI & Construction PMI will be released on Thursday and Friday respectively. On Monday there will be a release of BoE lending report and CBI Realized Sales. On Tuesday - GfK Consumer Confidence.

In Australia Building Approvals data will be released on Tuesday and Private Sector Credit data - on Wednesday. Quarterly reports of import prices, export prices and producer price index will be released on Friday. In Canada GDP data will be released on Wednesday. In Japan preliminary industrial production data will be released on Tuesday. In China official Manufacturing PMI will be released on Thursday and Non-Manufacturing PMI – on Saturday.

There will be a release of a lot of US important data. Pending Home Sales are released on Monday. CB Consumer Confidence and S&P/Case-Shiller Composite-20 HPI – on Tuesday. Preliminary GDP for the second quarter and ADP Employment Change – on Wednesday. ISM Manufacturing PMI – on Thursday. And very important Non-Farm Payrolls statistics data will finish the week on Friday.

By MasterForex Company

126

Overview of the main economical events of the current day - 30/07/2013

FOMC meeting starts on Tuesday

FOMC meeting starts on Tuesday and its results will be announced on Wednesday. Meanwhile, the dollar was traded quietly on Monday with a slight growth against almost all major currencies except the yen. Further growth was prevented by rather weaker housing market data. Although Pending Home Sales dropped less than expected – previous month data were revised downwards.

According to the National Association of Realtors the Pending Home Sales Index fell slightly in June by 0.4% compared with the prior month to 110.9. However, the reading for May was revised most of all – from 112.3 to 111.3 – when the index reached 6-year high. Dallas Fed Manufacturing Index also decreased to 4.4 in July against 6.5 in June and forecasted 7.3 – new orders and production have dropped.

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

The pound was traded downwards amid the Bank of England lending report release. Despite the Central Bank efforts to facilitate lending conditions, mortgage approvals suddenly dropped to 57.7 thousand against the forecast of 59.7 thousand and May reading of 58.1 thousand. Despite mortgage approvals growth, consumer credits were rising at a slower rate in June to ₤0.5 bln compared with ₤0.8 bln in May.

The yen has risen to its monthly high on the back of the Japanese stock market decrease after the release of a weak Japanese retail sales report. Japanese Nikkei 225 lost 3.3%, which has become the sharpest decline since June, 13. Retail sales in Japan dropped by 0.2% in June compared with May with the forecasted growth by 0.8%. At an annual rate the sales have risen by 1.6%, which turned out lower than the expected growth by 2.1%.

The yen growth was also supported by the speech of the Bank of Japan Governor Haruhiko Kuroda where he said that achieving 2% inflation goal would take more time than expected. According to the experts of the ING bank USDJPY may drop to Ұ92 as the outlook of this pair has worsened to bearish one.

The Australian dollar was traded downwards on Monday amid the concerns about the unstable situation in China. According to the National Bureau of Statistics of China Industrial Profits (y/y) grew only by 6.3% in June having slowed down after the upturn in May by 15.5%. Industrial Profits (year to date) also slowed down to 11.1% compared with 12.3% prior month. A negative effect was also made by the decision of the Chinese government to oblige more than 1.4 thousand companies of various industries to reduce excess capacity by the end of this year to achieve a more stable and sustainable economic growth.

By MasterForex Company

127

Overview of the main economical events of the current day - 31/07/2013

The Markets are Waiting for the FOMC Meeting Results

The dollar was traded upwards on Tuesday against almost all major currencies before the announcement of the FOMC meeting results which will be held on Wednesday. The Federal Reserve is supposed not to reduce stimulus volumes in July but it will clear up further plans concerning the strategy of the exit from the stimulus programs. ScotiaBank experts believe that the FOMC can declare straightly about the reduce of QE3 in September lowering at the same time the target level of unemployment from 6.5% to 6%, its achievement will serve as guidemark for the first rates increase.

The US data released on Tuesday were rather weak. So, CB Consumer Confidence decreased more than expected in July – to 80.3 points while a drop to 81.1 points was expected. S&P/Case-Shiller Composite-20 HPI rose by 12.2% in May compared with the same period in the previous year while a growth by 12.4% was expected. Although housing price data turned out a little lower than forecasted, price growth was marked in all 20 countries.

At the same time euro-zone statistics data have been generally positive, which allowed the euro to maintain and not to fall by the end of the day. Euro-Zone Economic Confidence from the European Commission grew in July to its high since May, 2012 and amounted to 92.5 p. against 91.3 p. in prior month. Spanish economy decline rates slowed down – Spanish GDP decrease in the second quarter accounted for only 0.1% after the fall by 0.5% in the previous quarter, which suggests that the recession should be over soon and the economy could return to growth.

Inflation in Germany grew more than expected in July to 1.9% at an annual rate while its drop to 1.7% was expected. German consumer sentiment rose to almost 6-year high in August amid a good situation at the local labor market and moderate inflation. The leading GfK Consumer Climate rose to 7 p. in August compared with 6.8 p. in July.


Source: gfk.com

The yen dropped after the release of weak Japanese data but then recovered. Industrial production in Japan fell by 3.3% compared with the prior month after 6-month growth, which has become the worst reading since October, 2012. Household Spending decreased by 0.4% in June at an annual rate, while a growth by 1.3% was expected. At the same time unemployment rate dropped to its low 3.9% in June since the end of 2008 from 4.1% that maintained a few months in a row.

The Australian dollar slumped after the speech of the RBA Governor Glenn Stevens. Speaking just a week before the next RBA meeting he said that despite the AUD decline, the current inflation couldn’t prevent the further interest rates decrease if it would be necessary for economic stimulus. He added that further fall of the Australian dollar wouldn’t be a surprise. The AUD was also negatively affected by a sharp decline of Building Approvals in June, which fell by 6.9% against the expected growth by 2%. At an annual rate the reading dropped by 13% while no changes were forecasted.

By MasterForex Company

128

Overview of the main economical events of the current day - 01/08/2013

The Dollar Dropped after the FOMC Statement

The dollar was traded upwards on Wednesday after the release of strong employment data and GDP for the second quarter. However, then it lost all positions after the publications of FOMC Statement by the end of the meeting. The monetary policy was kept unchanged but there were no hints on tapering off of QE in September, which was expected by some market participants.

Inflation and unemployment target levels were kept unchanged at the same levels of 2% and 6.5% respectively. The decision was approved on 11-1 votes with the president of the Federal Reserve Bank of Kansas City Esther George dissenting from the majority opinion as she was still concerned about financial imbalances and inflation which may result from the continuation of QE.

The text of the FOMC Statement itself almost wasn’t changed. Although it was marked that economic activity in the country during the first half of the year was raised at a modest rate, not moderate one – as the economic growth was determined before. Besides, it was said that a stable low inflation, which has been lower than the target 2% level for a long time, can jeopardize the country’s economy. Due to weak inflation the terms of QE tapering off may be put off for a longer period of time.

In the US rather strong data were released. According to the report of the research organization ADP Employment Change increased by 200 thousand in July while a growth only by 180 thousand was forecasted. The data for June were also revised upwards. Now all the market attention is drawn by the official employment data which will be published on Friday.

[B]ADP Employment Change[/B]

The US economic growth rate in the second quarter, according to the first estimate, accounted for 1.7% at an annual rate while a growth only by 1% was expected. Consumer spending, which is up to 70% of the US GDP, grew by 1.8% in the second quarter, which has exceeded the growth expectations by 1.6%. Chicago PMI, which grew to 52.3 p. in July with the forecasted growth to 53.7 p., turned out a little worse.

The released euro-zone good non-farm payrolls supported the euro on Wednesday, which allowed closing the day with a slight growth despite weak retail sales data in Germany, which fell by 1.5% m/m. Unemployment Change in Germany decreased by 7 thousand unexpectedly in July while the reading was forecasted to maintain, which testifies the acceleration of economic growth rate of the largest European economy. Unemployment rate in the euro-zone hasn’t changed in comparison with the revised May reading while its growth to 12.2% was expected. Unemployment rate also dropped in Italy by 0.1% to 12.1% against the forecasted growth to 12.3%.

The report on Canada’s GDP published on Wednesday managed to support the Canadian dollar. According to Statistics Canada, the country’s gross domestic product rose by 0.2% in May from April. Canadian economic growth has been witnessed for the fifth month in a row. At an annual rate the GDP grew by 1.6% and the data coincided with the expectations. The growth in retail sales and wholesale trade was evened by the weakness in the commodity sector. On the contrary, AUD continued falling and broke through a significant level of July support at 0.90.

By MasterForex Company

129

Overview of the main economical events of the current day - 02/08/2013

The US Manufacturing PMI Reached Its High for More than Two Years

The US dollar showed a significant growth on Thursday, the highest for more than a month according to the dollar index after the release of non-farm payrolls and manufacturing PMI statistics data which turned out much better than expected. All this happened before Friday release of the US non-farm payrolls report which might turn out better than forecasted after the ADP report.

Unemployment claims dropped to 5-year low by 19 thousand at once to 326 thousand last week while a growth to 345 thousand was forecasted. An average indicator’s reading for 4 weeks, which smooths out short-term fluctuations, also fell by 4.5 thousand to 341.25 thousand.

The ISM manufacturing PMI in the USA rocketed in July to its high of 55.4 since June, 2011against 50.9 in May with the forecast of 52. The reading higher than 50 indicates expansion of industrial activity. Production, new orders and employment sub-indices rose significantly while inventories and prices dropped.

The ISM Manufacturing PMI in the USA

The euro was traded downwards on Thursday amid the ECB meeting which resulted, as expected, in the central bank keeping the interest rates unchanged. The ECB president Mario Draghi announced during the press conference that the balance of risks for the economic growth outlook was still shifted to the negative side, that inflation expectations in the euro-zone remained moderate; and he also repeated that interest rates were likely to be near record lows within a long period of time.

Meanwhile, the euro-zone manufacturing PMI in July grew for the first time in two years: the final PMI exceeded the threshold of 50 p. and reached 50.3 p. while the preliminary reading of 50.1 p. was forecasted to maintain unchanged. Production growth in Germany was the fastest in 1.5 years and Italian manufactures said about activity growth for the first time in two years.

The pound lost all its growth which was observed after the release of manufacturing PMI that reached 28-month high 54.6 points from the revised upwards reading of 52.9 in June. Production and new orders growth in the UK was the highest from February, 2011. As it was expected, according to the results of the meeting the Bank of England left both the interest rate and the Asset Purchase Facility volume unchanged. However, unlike the previous month, no rate statement was published.

The yen decreased considerably amid Japanese stock market growth after the release of more positive Chinese manufacturing data than expected. The official report showed that Chinese manufacturing PMI had risen to 50.3 by the end of July compared with 50.1 in June. Meanwhile, the same HSBC index mismatched the official one – it dropped to 47.7 from June reading of 48.2.

By MasterForex Company

131

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

The Main Events of the Week

The US dollar fell on Friday against all major currencies except commodity ones after the release of Non-Farm Payrolls for July that fell short of expectations. Despite unemployment rate decrease by 0.2% from 7.6% to 7.4% at once (the lowest since December, 2008) Non-Farm Employment Change amounted only to 162 thousand against the forecast of 185 thousand. Besides, the reading for two past months was revised downwards by 26 thousand at once. Average hourly earnings dropped by 0.1% m/m, the decrease happened for the first time since December, 2011.

[B]Non-Farm Employment Change and Unemployment Rate in the USA[/B]

Income growth in June also fell short of expectations. Personal Income grew only by 0.3% while a growth by 0.4% was forecasted. Besides, both personal income and spending for the past month were revised by 0.1% downwards. Factory orders for June turned out worse than forecasted – they rose by 1.5% compared with the prior month against the forecasted growth by 2.3%.

By the end of the week the dollar had risen by 0.3% according to the dollar index. It showed a growth against all currencies except the euro and Swiss franc. Most of all fell the Australian dollar (-3.89%), New Zealand dollar (-3.06%) and Canadian dollar (-1.13%). This week there will be meetings of two central banks (of Australia and Japan), there will be a release of non-farm payrolls, industrial production data, trade balance and retail sales data; early month Chinese information block will be published.

In the euro-zone on Monday there will be a release of service PMI (a slight growth is expected in comparison with the prior month) and retail sales. Industrial production of Italy will be released on Tuesday, on Wednesday – Germany, on Thursday – Spain and on Friday – France; also a slight growth at a monthly rate is expected. Trade balance of France will be released on Wednesday, on Thursday – Germany and on Friday – Italy. On Tuesday there will be a release of industrial production of Germany and Prelim GDP of Italy for the second quarter. The GDP in the second quarter is expected to decrease a little less than in the first one.

In the UK on Monday there will be a release of service PMI, on Tuesday – industrial production and on Friday – trade balance. On Wednesday the Bank of England governor Mark Carney will introduce a BoE Inflation Report. The Bank of England is expected to introduce a Forward Guidance which will increase the transparency of future monetary policy and show the guide marks concerning both terms and conditions under which the policy will be tightened and thresholds of unemployment and other indicators.

In Australia on Tuesday there will be a release of trade balance, on Thursday – non-farm payrolls and on Friday - RBA Monetary Policy Statement. The meeting of the Australian Reserve Bank will be held on Tuesday and a rate decrease is expected. In New Zealand there will be a release of quarterly non-farm payrolls on Wednesday. In Canada a trade balance will be released on Tuesday and labor market report – on Friday. Japanese central bank meeting will be held on Wednesday. On Thursday Chinese trade balance will be released, on Friday – inflation data, industrial production and retail sales data.

There won’t be a lot of significant data on the USA. On Monday there will be a release of ISM Non-Manufacturing PMI and on Tuesday – trade balance. Also it should be marked that FOMC Members will start making reports since August, which they almost didn’t do in July. Besides, from Tuesday to Thursday there will be a traditional for the second week of the month long-term U.S. Treasury bonds auction.

By MasterForex Company

132

Overview of the main economical events of the current day - 06/08/2013

UK Services PMI Growth Rate Reached More Than 6-Year High

The US dollar was traded on Monday downwards against most major currencies despite service PMI growth. The pressure was put by the Friday labor market report that turned out worse than expected, which may make the Fed put off the start of QE tapering off. ISM Non-Manufacturing PMI rose significantly in July having reached the level of 56 p. (the highest since February) from June reading of 52.2 p. while a growth to 53.1 p. was forecasted. PMI, prices and new orders showed the highest growth while employment decreased by 1.5 p., which has become a negative moment.

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

The pound grew amid a significant increase in the UK service sector – up to more than 6-year high. Non-Manufacturing PMI rose to 60.2 p. in July from 56.9 p. in June having exceeded the forecast of 57.3 p. considerably – and it reached the highest reading since December, 2006. The index has been higher than 50 p. for seven months in a row already, showing a constant growth all this time.

[B]UK Services PMI[/B]

The euro was traded downwards on Monday after it didn’t manage to overcome the level of 1.33 against the dollar despite service PMI growth. The released statistics turned out neither the worst nor encouraging. The euro-zone service PMI rose to 49.8 p. in July against 48.3 in June having exceeded the preliminary reading slightly but still not having reached 50 p. that separated the growth from reduce. At the same time the euro-zone composite PMI exceeded 50 p. for the first time since January, 2012 and grew to 50.5 p. in July against 48.7 p. in June. Euro-zone retail sales dropped by 0.5% in June while a decrease by 0.7% was forecasted; and at an annual rate the sales fell by 0.9% with the forecasted decrease by 1.3%.

The yen rose after the decrease of the Japanese stock market amid the US weak employment data – Nikkei 225 fell 1.4%. The Australian dollar recovered after it had updated new 3-year lows after the release of weak retail sales data. Retail sales in June maintained unchanged compared with the prior month while sales growth by 0.4% was expected. Besides, Australian Minister of Industry declared on Monday that the Australian dollar must slump and local producers needed AUD at $0.80.

New Zealand dollar was traded downwards on Monday amid the export suspension of some dairy products to China due to bacteria in them – although it had partly recovered its lost positions by the end of the day. The world’s largest exporter of dairy products, New Zealand’s Fonterra, announced on Saturday that some of its products might contain bacteria that caused botulism. As far as Fonterra, the largest company of New Zealand provides 25% of the country’s exports, any course of events that can reduce the exports, has a negative impact on the rate of the national currency.

By MasterForex Company

133

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

The Euro-Zone Statistics Data Are Encouraging

The US dollar was traded downwards on Tuesday against most major currencies amid the release of positive euro-zone data despite the US trade balance improvement. Also the statements of some FOMC members had a negative effect on the dollar. Thus, though Atlanta Fed President Dennis Lockhart announced on Tuesday that the statement concerning tapering off of the bond purchase program might be done at any Fed meeting this year, he added that the Fed was ready to put off and reconsider the issue about bond purchase tapering off if the data was disappointing. FOMC member Evans also said that asset purchase could last under “certain conditions” – even if the unemployment rate is lower 6%.

According to the US Department of Commerce trade balance deficit decreased by more than 22% in June from $44.1 bln to $34.2 bln – the lowest reading since October, 2009- which may lead to the revision of the GDP growth for the second quarter upwards at the end of the month. The exports grew by 2.2% (the largest growth since September, 2012) mainly due to the export of manufacturing equipment and services at a record cost. The imports fell by 2.5%, which has led to a sharp decrease of the trade balance deficit. At the same time IBD/TIPP Economic Optimism Index showed a decrease of consumer confidence in August by 2 p. to 45.1 against 47.1in July.

[B]The USA Trade Balance[/B]

The euro rose higher 1.33 on Tuesday against the dollar amid positive German and Italian data which say about a possible recovery of the European economy in the second half of the year. German factory orders rose significantly by 3.8% in June compared with the prior month against the expected growth only by 1%. At an annual rate the growth accounted for 4.3% while a growth only by 0.3% was forecasted. Italian GDP in the second quarter fell less than forecasted. The decrease accounted for 0.2% at a quarterly rate and 2% at an annual rate – against the expected drop by 0.4% and 2.2% respectively. Though Italian economy is still in recession, GDP rate data are encouraging.

The pound slowed down its growth and finished the day unchanged before the BoE Inflation Report publication despite industrial production growth that had considerably exceeded the forecasts. According to the Office for National Statistics industrial production of the UK rose by 1.1% in June compared with May against the forecasted growth by 0.7%. Manufacturing production increased by 1.9% against the forecasted growth by 1% - which turned out the highest growth within the year. Halifax House Price Index also considerably rose in July by 0.9% in comparison with June while a growth only by 0.5% was forecasted. The signs of the economy improvement have a positive у impact on consumer confidence.

The yen was traded upwards on Tuesday before the Japanese central bank meeting and on the back of stock market decrease. The Bank of Japan is expected to refrain from expanding stimulus programs at its meeting on 7-8 of August. The Australian dollar grew significantly after the Australian Reserve Bank decision to lower the base interest rate by 0.25% to record low of 2.50%. The decision was expected and therefore fully included in prices, which led, in fact, to profit-taking on short positions. The AUD net short position, according to the CFTC, has reached new record levels.

New Zealand dollar also grew after the fears of dairy exports from the country had been slightly reduced. The message of the Fonterra Company about its readiness to double any quality standards forwarded by China and also a successful GlobalDairyTrade auction where the prices had fallen relatively moderately, were supportive. Though Russia and China suspended the import of some New Zealand dairy products, the prime minister of New Zealand declared about his intentions to visit China to persuade Chinese authorities to change the decision. The Finance Minister Bill English said that the banned exports cost was not high and he didn’t expect it to impact the country’s GDP.

By MasterForex Company

134

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

The Bank of England Announced a New Strategy of Monetary Policy

The US dollar continued being traded downwards on Thursday against almost all major currencies amid the yen growth and the release of euro-zone strong macroeconomic indicators which show the signs of economic improvement. After 4-day decrease the dollar dropped according to the dollar index to its low since June, 20. There were no any significant US statistics data on Wednesday. The president of the Federal Reserve Bank of Cleveland Sandra Pianalto marked in her speech that there happened a significant improvement at the labor market and in case of its further recovery, they were ready to start QE tapering off but when it would happen, she didn’t specify.

The euro was supported after the release of German positive data which considerably exceeded the forecasts. German industrial output growth rate in June turned out the highest since April, 2012 – 2.4% m/m with the forecasted growth only by 0.3%. At an annual rate the reading has grown by 2% with the forecasted drop by 0.3%. Besides, Fitch affirmed Germany’s AAA rating with a stable outlook and raised GDP growth outlook to 1.5% in 2014 from 0.4% in 2013. Fitch declared that German government had beaten some budget targets with structural budget balance having moved into surplus this year for the first time since reunification.

The pound grew on Wednesday after the release of the BoE Inflation Report where the Bank of England provided a Forward Guidance for the monetary policy in the form of unemployment threshold. The Bank governor Mark Carney announced that the British CB had no intention to raise a base rate until unemployment rate fell lower 7% - and it is unlikely to happen before early 2016. The Bank of England expects inflation to slow down to the target level of 2% by the 4th quarter of 2015.

However, Mark Carney noted that price stability was in priority for the CB: if the growth rate of consumer prices exceeded the target level by more than 0.5% in the nearest 1.5-2 years, the bank’s promise about the rate wouldn’t not be in force. At first the pound reacted with a decrease but then it rocketed after the outlook for country’s economy growth for the nearest years had been raised. The CB raised the UK GDP growth outlook for 2013 up to 1.5% from 1.2% expected in May and the forecast for 2014 – up to 2.7% from 1.9%.

The yen strengthened significantly and reached 6-week high Vs the dollar after 4-day rise – before the announcement of the BoJ meeting results on Thursday and amid the decrease of Japanese stock market which slumped according to Nikkei 225 by 4% at once on Wednesday.

New Zealand dollar continued recovering having almost no reaction on employment report which turned out within expectations though unemployment rate in the second quarter rose by 0.2% to 6.4%. The scandal concerning the quality of dairy products gradually fades.

The Canadian dollar dropped on Wednesday amid the release of negative statistics. Building Permits in Canada dropped in June for the first time for the last six months by 10.3% which has exceeded the expectations by more than 8 times. Ivey PMI moved to a negative territory in July and dropped to 48.4 from 55.3 in June.

By MasterForex Company

135

Overview of the main economical events of the current day - 09/08/2013

China’s import rocketed in July

The US dollar was traded downwards on Thursday against all major currencies and fell to 7-week low according to the dollar index amid Unemployment Claims which according to the US Labor Department rose by 5 thousand last week from 328 thousand to 333 thousand. Last week data were revised for the worse by 2 thousand. Meanwhile FOMC member Richard Fisher said again on Thursday in the interview to German newspaper Handelsblatt that he considered reducing of assets purchase in September possible if the situation in the economy worsened significantly.

The euro continued rising and approached to the level of 1.34 Vs dollar. According to the Federal Statistics Office of Germany trade surplus grew significantly in June up to €15.7 bln Vs revised upwards May reading €14.6 bln, consensus €15.2 bln. German Current Account Surplus also turned out higher in June than forecasted. It grew from €11.2 bln in May to €17.3 bln having exceeded the forecast of €16 bln.

The yen rose at first after 2-day meeting of the Bank of Japan that finished on Thursday where its policy was kept unchanged in expectation of new economic growth data which will be published next week. However, then the yen lost all its growth amid stock indexes strengthening. Bank of Japan Governor Kuroda introduced a more positive economy estimate on Thursday and called upon increasing sales-tax.

The Australian dollar had grown by the end of the day having almost no reaction on bad non-farm payrolls. Employment rate in Australia decreased by 10.2 thousand in July while a growth by 6 thousand was expected. However, unemployment rate didn’t change and maintained the same 5.7% Vs growth to 5.8% consensus. The AUD was also supported by other commodity currencies – Chinese trade balance for July. Though Trade Surplus dropped from $27.1bln prior month to $17.8 bln – China’s import grew by 10.9% and the export from Australia to China increased by 25%.

The Canadian dollar rose significantly in anticipation of Canadian non-farm payrolls having shown the most considerable one day growth almost within a month. Extra 10, 000 jobs are expected to have been added in the Canadian economy in July and unemployment rate have remained at the same 7.1%. The released New Housing Price Index grew in June a little more than expected by 0.2% Vs growth by 0.1% Consensus.

By MasterForex Company

136

Overview of the main economical events of the current day - 12/08/2013

The Main Events of the Week

The US dollar was traded downwards on Friday Vs the yen and commodity currencies and slightly upwards Vs major European currencies. The Canadian dollar had ignored the employment report for July by the end of the day which turned out worse than expected. Employment rate in Canada fell unexpectedly by 39.4 thousand (expected growth by 10 thousand) and unemployment rate increased by 0.1% up to 7.2%.

Chinese statistics data supported commodity currencies which showed industrial output growth and moderate inflation. Industrial output grew by 9.7% in July at an annual rate (Vs Consensus 8.9%) and fixed-asset investment rose by 20.1%. The euro was traded downwards after having reached 7-week high against the dollar. Some pressure was put by French industrial output which shrank by 1.4% m/m while a growth by 0.3% was expected.

By the end of the week the dollar had lost 1% according to the dollar index still being under pressure after the publication of key Non-Farm Payrolls report that turned out disappointing. The largest growth Vs US dollar was shown by the Australian dollar (+3.28%), Japanese yen (+2.81%), New Zealand dollar (+2.73%) and British pound (+1.44%). This week there will be a release of GDP, inflation, industrial output and retail sales data.

The main event of the week may become Wednesday release of preliminary GDP for the second quarter of major countries and the whole euro-zone. Euro-zone GDP is expected to grow for the first time in 6-quarter recession. German and Euro-Zone ZEW Economic Sentiment and euro-zone industrial output will be released on Tuesday – indicators’ growth is expected. It is a day off on Thursday in France and Italy and on Friday there will be a release of euro-zone inflation, trade balance and current account data.

On Wednesday in Great Britain there will be a release of Bank of England Meeting Minutes and non-farm payrolls report. MPC Official Bank Rate Votes and Asset Purchase Facility Votes will attract attention. The Meeting minutes are expected to show a unanimous vote to keep everything unchanged. Unemployment rate will also draw attention as the Bank of England tied its monetary policy to this indicator and promised to toughen the policy until unemployment fell to 7%. Producer and Consumer Price Indexes will be released on Tuesday and retail sales – on Thursday.

In New Zealand also a quarter retail sales report will be published on Wednesday and Business NZ Manufacturing Index – on Thursday. In Australia NAB Business Confidence Index will be released on Tuesday and Westpac Consumer Confidence Index – on Wednesday. Japanese Flash GDP for the second quarter will be released on Monday.

There are rather a lot of US data. On Tuesday – retail sales. Producer Price Index will be released on Wednesday and Consumer Price Index – on Thursday. On Thursday capital inflow, industrial output and Philadelphia Fed Manufacturing Index will be published. On Friday House Price Balance (Building Permits and Housing Starts) and also Prelim U. of Michigan Consumer Sentiment will be published.

By MasterForex Company

137

Overview of the main economical events of the current day - 13/08/2013

Japanese GDP Growth Rate Slowed Down in the Second Quarter

The US dollar was traded upwards on Monday having continued its Friday corrective growth amid a poor news background in anticipation of the release of various US macrostatistics data planned for this week which can support the expectations concerning Fed incentive measures reduce. In particular, US retail sales data will be published on Tuesday.

On Monday there were almost no significant statistics data except Japanese Preliminary GDP for the second quarter. According to the preliminary estimate Japanese GDP for the second quarter rose only by 0.6% while a growth by 0.9% was expected. Prelim GDP Annualized accounted for 2.6% (Consensus growth by 3.6%) Vs 3.8% in the first quarter.

[B]Comparison of quarterly GDP growth rates in Japan and the U.S.[/B]

Prelim Nominal GDP has risen by 0.7% at a quarterly rate which turned out lower than forecasted growth by +1.0%. Consumer Spending increased by 0.8%, which exceeded the expectations but Business Spending decreased by 0.1% against the expected growth by 0.6%. However economic growth of Japan for the first six months has been the best for the past three years.

Japanese revised Industrial Production for June decreased by 3.1% at a monthly rate, which coincided with the expectations. At an annual rate Industrial Production in June dropped by 4.6%. At the same time Domestic Corporate Goods Price Index (DCGPI) (analogue of the PPI) grew by 0.5% m/m in July, which exceeded forecasted growth by 0.2%.

The euro continued its correction downwards and tested the level of 1.33 Vs dollar. Preliminary GDP of Greece for the second quarter showed economic growth rate decrease by 4.6% at an annual rate although turned out better than forecasted -4.8%. Meanwhile former ECB president Jean-Claude Trichet declared on Monday that Europe had made progress and the risk of the euro-zone collapse had probably disappeared but the reforms must be continued further.

The Australian dollar reached 2-week high on Monday’s Assian session but then slightly dropped after the dollar’s growth. Some support at the beginning of the day was provided by good Chinese economy statistics published last week which dispelled the fears concerning Chinese economic growth slowdown. New Zealand dollar was also traded downwards. According to Real Estate Institute of New Zealand (REINZ) report housing prices fell in July for the first time for the past 6 months. REINZ Housing Price Index dropped by 0.5% compared with June.

By MasterForex Company

138

Overview of the main economical events of the current day - 14/08/2013

US Retail Sales Have Been Rising for 4 Months in a Row

The US dollar was traded upwards on Tuesday against most major currencies amid the release of a positive retail sales report and increasing US treasury bonds yields. Retail sales grew by 0.2% in July compared with the prior month, which almost coincided with the expectations of 0.2-0.3%. However, prior month sales were raised: June growth accounted for 0.6%, not 0.4%.

[B]US Retail Sales m/m[/B]

Retail Sales ex Auto, which show consumer spending trends better, rose by 0.5%, Consensus 0.4%. Its growth in July has been the best since early 2013. Employment growth and consumers welfare improvement due to house price and stock quotes growth have a positive effect on consumer spending growth, which may offset the negative impact of government spending cuts on the U.S. economy.

The euro dropped on Tuesday despite German Economic Sentiment growth. According to the Centre for European Economic Research ZEW, German ZEW Economic Sentiment grew up to 42 in august compared with 36.3 in July anticipating the forecasted growth to 39.9. Euro-zone Economic Sentiment has also rocketed to its high since 2010. According to Dr. Michael Schröder - Head of the Research Department of ZEW – the worst part of the recession in the euro-zone has already been passed. At the same time, euro-zone industrial output rose only by 0.7% in June, which turned out lower than forecasted +0.9%.

The pound had almost no reaction on inflation data for July which turned out close to the expectations. Consumer Price Index dropped to 2.8% from 2.9% in June. Core inflation that excludes energy and food prices slowed down more than forecasted to 2% from 2.3% prior month. But the pound was traded better than the euro – housing market data provided support. RICS House Price Balance grew to 36 in July against 21 in June having reached the highest level since November, 2006. ONS House Price Index was rising at the fastest rate in June since December, 2012 – by 3.1% at an annual rate.

The yen continued weakening on Tuesday for the second day amid Japanese stock market growth which increased by 2.6% according to Nikkei. Some support was provided by both statistics data and Nikkei newspaper message that the government of Japan considered a possibility of corporate income taxes reduce to mitigate the effect of the planned sales tax increase. Core Machinery Orders dropped only by 2.7% in June while a fall by 7% was expected. Besides, the Bank of Japan published BoJ Monetary Policy Meeting Minutes on Tuesday where the estimate of state of the economy has been raised to a “moderate recovery”.

The Australian dollar was traded downwards on Tuesday amid the Business Confidence decrease. NAB Business Confidence dropped below zero in July to -3 (the lowest in 6 months) Vs 0 in June.

By MasterForex Company

139

Overview of the main economical events of the current day - 15/08/2013

Euro-Zone Economy Comes Out of Recession

According to the official statistics agency ЕС Eurostat data released on Wednesday the euro-zone economy is coming out of the longest post-war recession. The euro-zone GDP growth recovered in the second quarter of this year after its decline within 6 quarters. Total GDP of 17 euro-zone countries grew by 0.3% in comparison with the first quarter, which exceeded the expected growth by 0.2%. Almost all the statistics data released recently in the region indicated euro-zone economic recovery.

[B]Quarterly GDP growth of the Euro-zone and the USA[/B]

Euro-zone economy has risen mainly due to good German and French indicators. Two largest euro-zone economies showed a more significant rise last quarter than expected. German GDP grew by 0.7% Vs consensus +0.6%. French economy increased by 0.5%, which has exceeded expected growth by 0.2% even more. The euro had almost no reaction towards positive statistics and it was traded in a narrow range all day.

The pound grew considerably on Wednesday after the release of positive labor market report and BoE Meeting Minutes. Claimant Count Change dropped by 29.2 thousand in July while a decrease only by 15 thousand was expected. Prior month data were also revised fore the better. Unemployment rate had been falling for nine months in a row last month, in June and July it had been especially significant since March, 2010, which has become another proof of a strengthened British economic recovery.

Claimant Count Rate last month dropped by 0.1% to its low 4.3% since February, 2009 while no changes were expected. According to the end of the second quarter ILO Unemployment Rate maintained at 7.8%, which coincided with the expectations. Bank of England Meeting Minutes showed a unanimous vote on the rate and the QE size but one of the MPC members Martin Weale opposed the policy of providing Forward Guidance concerning the monetary policy outlook as he had a hard-line attitude towards inflation.

The dollar turned out under pressure on Wednesday due to unexpected drop of Producer Price Index which didn’t meet the forecast. Producer Price Index published on Wednesday didn’t change last month although its growth by 0.3% m/m was expected. Core Producer Price Index which excludes volatile components (energy and food) also has risen only by 0.1% m/m Vs 0.2% growth Consensus.

FOMC Member Bullard making speech on Wednesday evening referred to low inflation and said that FOMC outlook seemed to be too optimistic. Fed needs to analyze a lot of information before taking a decision concerning asset purchase tapering off. Besides, according to him, key factors concerning QE issue will be inflation data, GDP, employment and FED balance. All this seems to put off the terms of possible QE reduction from September to October as far as the Fed will have too little reliable information about the third quarter.

New Zealand dollar rose on Wednesday after the release of a positive retail sales report for the second quarter which showed sales growth by 1.7% at a quarterly rate, which exceeded the expected growth by 1.4%. The Australian dollar also strengthened amid consumer sentiment increase. Westpac Consumer Sentiment rose by 3.5% in August to 105.7 Vs 102.1 prior month.

By MasterForex Company

140

Overview of the main economical events of the current day - 16/08/2013

UK Retail Sales Exceeded Expectations

The pound reached 8-week high on Thursday Vs dollar and 6-week high Vs euro after the release of UK retail sales report which considerably exceeded the expectations. Retail sales in July rose by 1.1% compared with the prior month while an increase by 0.7% was expected. Retail sales in July grew for the third month in a row, which was recorded for the first time in 3 years. Retail sales grew by 3% at an annual rate (Consensus +2.4%) – it is the fastest growth rate since January, 2011.

[B]Retail sales change in the UK and the USA (m/m)[/B]

The US dollar dropped on Thursday against most major currencies amid the release of macrostatistics data which mostly were negative although the dollar made attempts of growth at first after the release of strong unemployment claims data. Unemployment Claims in the USA fell more than expected last week – by 15 thousand to 320 thousand – the lowest level for more than 5 years since early 2008.

But all the other data on the capital inflow, industrial output and manufacturing PMI turned out worse than expected. Thus, foreign investors sold a net $81.6 billion in US long-term treasury bonds and bills in June, which turned out almost twice more than the last record level documented in May. Industrial output didn’t change in July compared with the prior month while its growth by 0.3% was expected. June growth was revised downwards to 0.2% from 0.3%.

Empire State Manufacturing Index dropped to 8.24 in August compared with 9.46 in July Vs expected growth to 10. A more important Philadelphia Fed Manufacturing Index also dropped more than expected – it fell to 9.3 in August against 19.8 in July while a drop only to 15 was expected. Consumer Price Index turned out as forecasted; and only NAHB Housing Market Index has risen significantly. FOMC member James Bullard who made a speech on Thursday repeated again as he did on Wednesday that the Fed needed more data to examine before taking a decision concerning bond purchase decrease.

Stock market fall, 10-Year Treasury Note Yield growth to 2-year high and a sharp rise of the gold also influenced dollar’s weakening. The yen grew significantly on Thursday amid a sharp decline of stock markets and Nikkei future. Stock index DJIA closed at a maximum fall since June, 20 by 1.47%.

New Zealand dollar reached 3-week high on Thursday on the back of manufacturing PMI increase to its high since June, 2004. Business NZ Manufacturing Index grew to 59.5 in July compared with 55.2 in June. Consumer confidence also grew - ANZ Consumer Confidence Index rose by 2.7% in August to 123Vs its decline by 3.3% prior month.

By MasterForex Company

141

Overview of the main economical events of the current day - 19/08/2013

The Main Events of the Week

he dollar was traded slightly upwards on Friday against most major currencies despite consumer confidence decline in the USA. Building Permits and Housing Starts also grew in July a little less than forecasted. Prelim U. of Michigan Consumer Sentiment fell unexpectedly to 80 p. in August from the highest reading 85.1 p. prior month since July, 2007. Mortgage rate rise can bring down the momentum of the real estate market growth which contributes to economic development.

By the end of the week the dollar had grown slightly by 0.2% according to the dollar index that shows its attitude towards the basket of six major currencies. The dollar showed the largest growth Vs yen (+1.38), Swiss franc (+0.44%) and Canadian dollar (+0.44%); it almost didn’t change against the Australian dollar (+0.10%) and the euro (+0.08%) and dropped against the pound (-0.77%) and New Zealand dollar (-0.77%).

Meanwhile according to the Bloomberg poll, 65% of the experts expect the Fed to announce tapering off of bond purchase program at the nearest Fed meeting in September and probably the first step will be a decrease by $10 billion. Important events for the dollar are expected in September: Fed meeting on September 18, the federal elections in Germany on September 22, continuation of US discussions on the next fiscal year budget.

The coming third week of the month is poor for significant data. The main event in the euro-zone will be Thursday release of French, German and the whole euro-zone Flash Manufacturing PMI and Flash Services PMI. German Producer Price Index will be released on Tuesday and German Final GDP for the second quarter – on Friday.

The UK Second Estimate GDP for the second quarter will be released on Friday. On Wednesday Public Sector Net Borrowing and CBI Industrial Order Expectations will be released on Wednesday and BBA Mortgage Approvals – on Friday. In Canada retail sales data will be released on Thursday and Consumer Price Index – on Friday. Trade balance of Japan will be released on Monday. HSBC Flash Manufacturing PMI will be released on Thursday.

In Australia on Tuesday there will be a release of the last meeting minutes of Australian Reserve Bank. Westpac and Conference Board Leading Indexes will be released on Wednesday and Thursday respectively. In New Zealand there will be a release of quarterly reports: Producer Price Index – on Monday and expected inflation in two years – on Tuesday.

FOMC Meeting Minutes will be released on Wednesday. Existing Home Sales will be released on Wednesday and New Home Sales – on Friday. Chicago Fed National Activity Index will be published on Tuesday and House Price Index – on Thursday. Annual Economic Symposium will be held in Jackson Hole, Wyoming from on August, 22-24. As expected, the Fed governor Ben Bernanke will not take part in it, which may lower the significance of this event for the markets.

By MasterForex Company

142

Overview of the main economical events of the current day - 20/08/2013

Australian dollar may drop to $0.80

US dollar was traded slightly downwards on Monday against the euro and the pound but almost didn’t change against the yen and rose Vs commodity currencies amid a poor news background - no US data were released on the first day of the week. FOMC member Jeffrey Lacker said that the first six months data proved that asset purchase hadn’t helped economic growth. 10-Year Treasury Bonds Yield continued to grow and reached its high since July, 2011. Dallas Fed president Richard Fisher believes that a sharp US Treasuries price fall is linked to the expectations of soon QE tapering off.

The euro grew after the publication of Bundesbank Monthly Report but then it lost all its growth. According to the report German economic growth in the second half of the year must stabilize after the second strong quarter. Central Bank of Germany also declared that ECB promises to keep low rates within a long period of time didn’t exclude the possibilities of rates increase in case of inflation pressure strengthening. Meanwhile, according to the Reuters Bad Loans Data in Spanish banks in June reached its historical high 11.6% Vs 11.2% in May.

The pound was traded upwards and updated its monthly height amid the increase of British economic growth outlook. Confederation of British Industry (CBI) raised its outlook for 2013 from 1% to 1.2% and for 2014 from 2% to 2.3%. The expectations for the current year turned out twice better than the budgeted level. “The economy has started to gain momentum for growth, the confidence recovers but all this is in the early stages”, - said director-general of the CBI John Cridland. Meanwhile according to the Rightmove House Prices dropped by 1.8% m/m in August – the first time this year amid a traditional fall in summer.

The yen dropped after the publication of Japanese Merchandise Trade Balance but then it recovered amid stock markets decrease. Trade deficit in July increased to 1.02 trillion yens (the third largest in history). The deficit has been fixed for 13 months in a row. Both exports and imports growth rates turned out the highest since 2010. The exports rose by 12.2% at an annual rate although it turned out weaker than expected. The imports exceeded the outlook and rose by 19.6%. Japanese exports recovery has continued in July for the fifth month in a row due to yen weakening.

The Australian dollar reached its high within three weeks at the Asian session on Monday but then it traded downwards before the publication of Australian Reserve Bank Meeting Minutes. New Motor Vehicle Sales in Australia fell by 3.5% in July compared with the prior month. Extra pressure was put by the statements of one of the PIMCO’s board members Scott A. Mather who said that AUD might fall to $0.80 during the next year as RBA would be forced to lower the key interest rate to 2% to stimulate economic growth and put a downward pressure on the national currency.

By MasterForex Company

143

Overview of the main economical events of the current day - 21/08/2013

The Dollar Fell Before FOMC Meeting Minutes Publication

The dollar dropped on Tuesday against almost all major currencies (except commodity ones) before the publication of FOMC Meeting Minutes on Wednesday. FOMC Meeting Minutes will clarify the placement of forces in the Federal Reserve about reducing the QE3 incentive program and whether it should be expected in September already. If the FOMC Meeting Minutes don’t say anything about QE tapering off and the state of economy is not considered good enough for this, it can have a negative impact on the dollar.

Extra pressure on the dollar was put by the decrease of the US National Activity Index. Chicago Fed National Activity Index (CFNAI) grew in July less than expected (-0.10) to -0.15 from -0.23 in June. Prior month reading was revised for the worse from -0.13 to -0.23. The index has been below zero for five months in a row since March – which indicates National Activity Index growth being below the trend.

The euro overcame the level of 1.34 Vs the dollar and closed higher than it for the first time since the middle of February. Construction Output in the euro-zone in June grew by 0.7% compared with the prior month, May data were revised from -0.3% to +0.5%. The reading has been growing for three month in a row making a significant contribution to overcoming the recession, which was shown by the euro-zone preliminary GDP released last week (GDP growth by +0.3% q/q after 6-quarter decrease). Belgium NBB Consumer Confidence Index had been growing for the fifth month in a row in August to its high for the last 15 months (to -12 from -16 in July).

The pound was traded upwards and updated the August maximum. According to the Council of Mortgage Lenders (CML), UK mortgage lending reached its high in July for almost 5 years amid incentive programs of the government: 16.6 bln pounds against 14.8 bln prior month. The yen has grown amid Japanese stock market decrease which according to Nikkei 225 lost 2.6% on Tuesday.

The Canadian dollar dropped Vs US dollar to its low for almost two weeks on the back of Wholesale Sales report in Canada which showed the highest decrease rates for more than 4 years. According to the Canadian Office for National Statistics, Wholesale Sales dropped by 2.8% in June against the expected decrease by 0.5%.

The Australian dollar fell after the publication of Australian Reserve Bank Meeting Minutes on August 6, which resulted in the decrease of the key interest rate to the record low 2.5%. The RBA declared in its meeting minutes that it didn’t exclude the possibility of further interest rate decrease in future although it hadn’t plans of mandatory rates decrease and it would continue to monitor the economic indicators. According to the minutes, AUD maintains overvalued in historical standards and it probably will continue falling.

New Zealand dollar weakened to a week low against the US dollar after the RBNZ Governor Graeme Wheeler speech. He called NZD rate overvalued, not just high, speaking of high credit risks. At the last meeting RBNZ used a mild formulation, which probably was a mistake. Also Wheeler announced on Tuesday that mortgage lending restrictions to borrowers with small deposits will be introduced since October 1, which put an extra pressure on the NZD.

By MasterForex Company

144

Overview of the main economical events of the current day - 22/08/2013

US Existing Home Sales Reached Its High for Almost 4 Years

The US dollar was traded upwards on Wednesday against most major currencies before the publication of the FOMC Meeting Minutes and it grew after the publication. In spite of the fact that the opinions of Fed leaders on the terms of bond purchase reduce divided, most Fed leaders’ wide support of the Fed governor Ben Bernanke’s plan on tapering off of incentives became evident although the minutes didn’t contain any apparent hints on the terms of QE reduce start.

It can be said that the text of the meeting minutes turned out without surprises. There are almost no changes in the Fed leader’s estimates of the state of the economy. Almost all FOMC members agreed that there was no need to make changes in the asset purchase program yet. The outlook of finishing QE program still depends on the data. Asset purchases will have been over by 2014 if the economic situation develops according to the expectations. In the whole the minutes raised the expectations that the Fed would start tapering off the economy incentive program within the next several months.

The dollar was supported on Wednesday by strong housing market data. Existing home sales grew by 6.5% in July compared with the prior month to 5.39 million houses at an annual rate, which turned out the highest reading for almost four years. A growth to 5.15 million houses was forecasted. Sales growth is likely to reflect consumers activity jump who want to close transactions before mortgage rates rise higher. Mortgage rate growth in the nearest weeks threatens to slow down the recovery rates of the housing market which is the US economic growth engine this year.

The pound was traded upwards on Wednesday and updated August maximum again but had lost all the growth by the end of the day. Some support was provided by the CBI’s report. CBI Industrial Order Expectations anticipating industrial indicator reached zero level in August against -12 in July and improvement expectations to -8 points, which turned out the highest reading in 2 years. Industrial production grew to 25 in August – the highest reading since March, 2011 against 15 in July. Such growth indicates that economic recovery which has started this year is gathering pace.

The Australian dollar hit 2-week low on Wednesday Vs the US dollar amid the fall of Asian developing countries’ currencies and the leak at NPP Fukushima that was declared the accident of the third level of danger according to the International Nuclear Event Scale. The Canadian dollar fell to 6-year low Vs the US dollar amid commodity assets price decrease.

By MasterForex Company