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145

Overview of the main economical events of the current day - 23/08/2013

Chinese and Euro-Zone PMI Is Growing

The US dollar had grown by the end of Thursday Vs most major currencies after the publication of July FOMC Meeting Minutes that showed that almost all Fed leaders were ready to start tapering off QE already in 2013 although the start terms were not clarified. Most of all the dollar rose against the yen, dropped against the Australian dollar and almost didn’t change against the euro amid the release of positive macrostatistics from China and euro-zone. Thursday US statistics data were also mainly positive despite some worsening of labour market data.

Unemployment Claims rose by 13 thousand last week up to 336 thousand while a smaller growth to 330 thousand was expected. Last week data were also revised for the worse by 3 thousand. However, an average number of claims for the past 4 weeks – the reading that smoothes volatility – dropped by 2.25 thousand to 330.5 thousand, the lowest reading since November, 2007.

The US Manufacturing PMI rose in August to its high for five months as employment and new orders growth accelerated. Flash Manufacturing PMI rose to 53.9 in August against the final July reading 53.7. Kansas City Fed Manufacturing PMI also grew as companies’ demand for labour is increasing for the first time in six months.

Kansas City Fed Manufacturing Activity Index rose in August to 8 from 6 in July – the highest reading since February, 2012. CB Leading Index rose by 0.6% in July having exceeded the forecast after zero changes prior month. FHFA House Price Index grew by 0.6% in June also having exceeded the forecast. FOMC Member Richard Fisher making speech on Thursday repeated that reducing bond purchasing should be started in September.

The euro was traded downwards but by the end of the day it almost hadn’t changed. Some support was provided by the euro-zone PMI which not just rose but also turned out much better than expected signaling that European economic recovery was gathering pace. Euro-zone Flash Composite PMI rose in August to 26-month high of 51.7 Vs 50.5 in July having exceeded the expectations of 50.9. Flash Manufacturing PMI of Germany reached 25-month high. Only French indicators turned out worse.

[B]Euro-Zone Flash Composite PMI[/B]

The Australian dollar rose after the release of positive Chinese macrostatistics. HSBC Flash Manufacturing PMI, a key indicator of manufacturing PMI, grew to 50.1in August from 47.7 in July having exceeded the level of 50 points and having turned out significantly better than expected. The activity turned out the highest for the past four months after July fall to the lowest reading in 11 months, which indicates that the second world’s economy could maintain after 2-quarter decrease.

[B]HSBC Flash Manufacturing PMI[/B]

The yen decreased significantly amid the stock indexes growth after the release of Chinese and euro-zone positive statistics. DJIA has grown for the first time after 6-day fall. The Canadian dollar weakened considerably on the back of a weak report on retail sales which dropped by 0.6% m/m in June having exceeded the expectations. Core Retail Sales fell by 0.8% compared with the prior month while no changes were expected.

By MasterForex Company

146

[B]Overview of the main economical events of the current day - 26/08/2013[/B]
[B]The Main Events of the Week[/B]

he US dollar lost on Friday all its weekly slight growth and fell after a weak New Home Sales report. In contrast to Existing Home Sales that showed the highest reading for almost 4 years – New Home Sales slumped unexpectedly in July by 13.7% in comparison with the prior month to 394 thousand houses at an annual rate. The sales have turned out the lowest since this January and showed the sharpest decline since May, 2010. The June reading was also considerably revised for the worse – from 497 to 455 thousand houses. FOMC member Bullard said on Friday that the Fed had no necessity to hurry with the reduction of the incentive program.

[B]US New Home Sales[/B]

Sales decline in July amid mortgage interest rate rise may signal a pause in housing market recovery. An average rate on 30-year mortgage loan grew up to 4.58% per annum last week compared with the lowest level of 3.31% recorded in November, 2012. Meanwhile, consumer confidence in the euro-zone grew to the highest level in August for more than two years - up to -15.6 from -17.4 in July.

By the end of the week the dollar had grown a little less than 0.1% according the dollar index that shows its attitude towards the basket of six major currencies. The dollar has grown Vs most major currencies except the euro (-0.40%) and Swiss franc (-0.55%). The largest dollar’s growth was Vs New Zealand dollar (+3.46%), Australian dollar (+1.62%), Canadian dollar (+1.57%) and Japanese yen (+1.18%). The pound showed the smallest decline (-0.28%).

This week there will be a release of retail sales data, labor market and inflation data, confidence and sentiment indexes. Most data will be published on two last days of the week. In the euro-zone unemployment, inflation data and European Commission confidence indexes will be released on Friday. In Germany IFO Business Climate report will be released on Tuesday and GfK Consumer Climate – on Wednesday, labor market and inflation reports – on Thursday and retail sales – on Friday. In Italy retail sales will be released on Wednesday and unemployment and inflation reports – on Friday. Confidence and sentiment indexes are expected to grow which will become another sign that economic recovery in the second quarter is going on.

In the UK it is a day off on Monday and there won’t be a lot of data this week. The main event may become the Bank of England governor Mark Carney’s speech where he is expected to discuss a new strategy of the Bank of England on providing monetary policy Forward Guidance. On Wednesday CBI Realized Sales will be released, on Thursday - GfK Consumer Confidence and on Friday - Mortgage Approvals.

In Japan retail sales report will be published on Thursday and on Friday a large statistics block of the end of the month will be released: inflation, unemployment, industrial production. In New Zealand ANZ Business Confidence will be released on Thursday and Building Permits – on Friday. In Australia Private Capital Expenditure report will be released on Thursday and Private Sector Credit – on Friday. In Canada quarterly Current Account report will be released on Thursday and the GDP for June and for the second quarter – on Friday.

In the USA on Monday there will be a release of Durable Goods Orders data. On Tuesday - CB Consumer Confidence and S&P/Case-Shiller HPI. On Wednesday Pending Home Sales will be released. On Thursday – revised GDP for the second quarter. On Friday Personal Income and Spending report, Chicago PMI and Revised U. of Michigan Consumer Sentiment.

[B]By MasterForex Company[/B]

147

Overview of the main economical events of the current day - 27/08/2013

US Durable Goods Orders Fell Unexpectedly

Trading at Forex on Monday was calm amid almost empty calendar and lack of any significant events on most major currencies. The dollar fell a little after the release of a weak Durable Goods Orders report but then recovered its losses. Durable Goods Orders in the USA slumped unexpectedly in July by 7.3% compared with the prior month to $226.6 bln while a drop only by 3.6% was expected.

[B]US Durable Goods Orders[/B]

The decrease was mainly due to the fall of aircraft orders. Durable Goods Orders Ex Transportation dropped by 0.6% against the expected growth by 0.5%. Capital Goods Orders Non-Defense Ex Aircrafts – a key indicator of business investment – decreased by 3.3% in July compared with the prior month after previous 5-month growth. At the same time a less significant Dallas Fed Manufacturing Activity Index grew up to 5.0 in August against 4.4 in July while its drop was expected.

Jackson Hole Economic Symposium ended past weekend. This time it didn’t attract much attention as no governors of major central banks joined it. According to many experts at the summit, the desire of Fed leaders who were present at the meeting to finish asset purchasing the sooner the better was felt. The Fed seems to be still intended to reduce QE in September. Although September decrease is likely to be less than expected before – not $20 bln from current $85 bln a month but $10 bln.

The euro and the pound were traded at a narrow range and closed almost unchanged. There were no any statistics in Europe and it was a day-off in the UK. ECB board member and German Bundesbank President Jens Weidmann said on Monday that the ECB, in his opinion, wouldn’t keep interest rates at low for several years.

Weidmann again opposed buying bonds of problem euro-zone countries by the ECB having called it redistribution of risks of unsound budgetary policy to all euro-zone states. ECB President Mario Draghi announced a year ago that the ECB was prepared to buy unlimited quantities of government bonds of such countries on the secondary market – and it turned out enough to calm down financial markets.

New Zealand dollar had almost no reaction towards bad trade balance data and closed the day with a slight growth after 5-day decrease in a row. For the first time in six months trade balance has dropped below zero and has amounted to 774 million NZD. The exports grew by 4.8% at an annual rate while the imports rose by 17% - mainly due to aircraft and oil products imports increase. Standard & Poor’s Ratings Services affirmed its AA long-term foreign currency rating on the country and said the rating outlook was stable.

By MasterForex Company

148

Overview of the main economical events of the current day - 28/08/2013

Escalating conflict around Syria led to the growth of defensive assets

Escalating conflict around Syria led to the growth of defensive assets such as the yen, franc and gold; and to escaping from risky currencies such as AUD, NZD and also currencies of developing countries. Daily decrease of the euro Vs the yen on Tuesday turned out the lowest for past eight weeks. The dollar also lost about 1.5% Vs yen having reached the lowest level against Japanese currency for seven days. Swiss franc took the second honorable place in Tuesday leaders rating.

U.S. Secretary of State, John Kerry said on Monday that there was an incontestable evidence of using chemical weapon by Syrian authorities against the rebels, which may serve a motive for military intervention into the country. According to some reports a military operation against Syria may start on Thursday already. The Pentagon has announced its readiness to the military operation in Syria.

The dollar fell on Tuesday against most major currencies except AUD and NZD having no reaction towards US Consumer Confidence growth while it was expected to drop. US Consumer Confidence rose up to 81.5 p. in August Vs 79 p. Consensus. Prior month reading was revised upwards from 80.3 p. to 81 p.

Richmond Fed Manufacturing Index also maintained to +14 in August Vs July reading -11, which has become the best result since April, 2012.

[B]CB Consumer Confidence in the USA[/B]

The euro also ignored at first good business confidence statistics in Germany and decreased but then recovered that loss. IFO Business Climate grew to its high for 16 months – 107.5 p. while a growth to 107 p. was expected. The index has been growing for four months in a row. Current Assessment has risen to 112 p. from 110.1 p. in July. IFO Expectations also exceeded the forecast having grown to 103.3 p. against 102.4 p. prior month.

[B]IFO Business Climate[/B]

By MasterForex Company

149

Overview of the main economical events of the current day - 29/08/2013

US Dollar Rose on Wednesday

The US dollar was traded upwards on Wednesday against most major currencies despite some decrease of housing market data. The dollar was in demand as a defensive asset amid rising geopolitical tensions in the Middle East and fears of military actions against Syria. According to some data the attacks on selected targets in Syria with cruise missiles can be made on the night of Thursday to Friday. U.S. Defense Secretary said earlier that the U.S. military is ready to act and waits for the president’s order. Meanwhile, the officials of Syria provided UN inspectors with the evidence of non-use of chemical weapons.

Pending Home Sales Index, a leading indicator at the real estate market, dropped in July for the second month in a row. According to the National Association of Realtors (NAR) - Pending Existing Home Sales Index fell by 1.3% compared with the prior month to 109.5 in July while a slight growth was expected. Continuing growth of rates on mortgage loans has a negative impact on housing market recovery. High prices and a low housing supply in some parts of the country also put pressure.

The euro was traded downwards amid some decrease of consumer sentiment in Germany. According to the GfK report a key Consumer Climate dropped to 6.9 p. in September Vs 7.0 p. in August. It was the first decrease in eight months after reaching more than 6-year high in August as households expect economic recovery to be slow in the nearest months. Retail sales in Italy also turned out a little worse than expected and dropped by 0.2% m/m in June against the expected growth by +0.1%.

The pound recovered almost all its losses of the day after the speech of the Bank of England governor Mark Carney which seemed to the market participants less inclined to soft monetary policy than it was expected. Carney said that there were signs of optimism on the back of a large-scale British economic recovery. He promised further measures on stimulating of the economy should be done if rising interest rates threaten its still weak recovery.

The Bank of England will soften requirements concerning the liquidity for banks. Besides, Carney marked that reaching 7% unemployment didn’t guarantee an automatic increase of interest rates – the Bank of England would also consider other factors. Retail sales growth data also supported the pound. CBI Realized Sales in August reached its high since November, 2012 at +27 Vs +17 in July having significantly exceeded the forecast of +20.

The Australian dollar updated more than 3-week low on Wednesday against the US dollar amid other Asian currencies decrease because of growing fears of soon attack on Syria. Besides, Construction Work Done in Australia fell by 0.3% in the second quarter against the expected growth by 1%.

By MasterForex Company

150

Overview of the main economical events of the current day - 30/08/2013

US GDP Growth Accelerated in the Second Quarter

The US dollar showed a significant growth on Thursday, the highest for almost 4 weeks according to the dollar index after the publication of strong US GDP data for the second quarter and weak German data. US Unemployment Claims decreased by 6 thousand last week to 331 thousand, which almost coincided with the expectations (332 thousand). It signals improvement at the US labor market.

According to the US Department of Commerce GDP Second Release for the second quarter was raised up to 2.5% at an annual rate against the initial release of 1.7%. The reading was expected to rise only to 2.2%. Growth rates acceleration was caused mainly by the upwards revision of exports and capital investments. Consumer spending was remained unchanged and public spending decreased more than estimated at first and remained the main source of pressure on economic growth.

[B]The USA and Euro-Zone quarterly GDP growth rates[/B]

FOMC Member Jeffrey Lacker said on Thursday that the Fed jeopardized its independence using its balance to support certain industries. Labour market has improved significantly since the beginning of the last bond purchase round and it is a good argument to start reducing the purchase, he said.

The euro reached 2-week low on Thursday Vs the dollar amid a weak report on German labour market, which leveled the reports that showed improvement of French Business Confidence and Italian Consumer Confidence. Unemployment Change in Germany grew by 7 thousand in August against the expected decrease by 5 thousand. German annual inflation dropped for the first time in four months and accounted for 1.5% in August Vs 1.9% in July, which turned out lower than forecasted 1.7%.

The pound also weakened moderately but it was traded a little better than the euro. The Bank of England chairman Mark Carney said on Thursday that devaluation of the currency was not a way to prosperity. He added a fledgling recovery in the U.K. economy appears to have “some life”.

The yen fell amid a weak retail sales report. Retail sales in Japan dropped by 1.8% in July compared with June, which exceeded the expected decrease by 1.3%. Also the yen decrease was influenced by some weakening of tensions around the situation in Syria after the US president Barack Obama had said that he hadn’t made a decision on Syria military attack yet and had no desire to involve the country into long-term conflict. The probability of the operation against Syria has slightly fallen recently as the UK and France expressed their desire to wait for the results of the UN expert examination. The experts’ opinion about using chemical weapon in Syria is expected to become known on Friday.

New Zealand dollar was traded downwards on Thursday despite Business Confidence data. ANZ Business Confidence fell slightly in August from July’s 14-year high but remained rather high as New Zealand economy continued showing strengthening signs. Australian dollar also dropped. HIA New Home Sales decreased for the first time in five months according to HIA data. Canadian dollar fell amid Canada’s current account deficit growth that widened in the second quarter to 14.6 billion Canadian dollars against 13.4 billion in the first quarter.

By MasterForex Company

151

Overview of the main economical events of the current day - 02/09/2013

The Main Events of the Week

The US dollar was traded slightly upwards on Friday against most major currencies amid mixed macrostatistics. Consumer Confidence data turned out better than expected, PMI coincided with the forecasts but Personal Income and Spending report turned out worse. Revised U. of Michigan Consumer Sentiment for August was reconsidered upwards up to 82.1 against preliminary estimates of 80 and the forecast of 80.5. However the index fell significantly in comparison with the revised July reading 85.1 which was the highest for 6 years.

Chicago PMI for August met the expectations and amounted to 53 compared with 52.3 in July. Personal Income growth rate in July slowed down more than expected from 0.3% to 0.1% (Consensus 0.2%); Personal Spending also increased only by 0.1% although a growth by 0.3% was expected. The situation with Syria is delayed and becomes more uncertain. President Obama said on Saturday that would ask the Congress to approve a military attack against Syria and that such operation could be held any time. The Congress is due to reconvene only in a week, 9 September.

By the end of the week the dollar had shown the highest growth for past 8 weeks, it had risen by 0.90% according to the dollar index. The dollar grew Vs all major currencies except the yen (-0.54%). The highest growth was shown against the Australian dollar (+1.37%), the euro (+1.22%), Swiss franc (+0.94%) and New Zealand dollar (+0.90%); less growth was shown Vs British pound (+0.47%) and Canadian dollar (+0.43%). By the end of the month the dollar’s growth had turned out less significant than even for the last week – it grew only by 0.47% according to the dollar index and showed growth against all major currencies except the pound.

This week as the first week of the month will be saturated with important events. There will be meetings of five major central banks of the world (Reserve Bank of Australia – on Tuesday, Bank of Canada – on Wednesday, Bank of Japan , Bank of England and ECB – on Thursday), there will be a release of PMI, GDP data, industrial output, retail sales, trade balance and labour market data. No changes of monetary policy from any central bank are expected but as always any surprises can be expected from the Central Bank of Australia. Besides, ECB Press Conference on Thursday will not be left without attention. The ECB is expected to reveal the details of its plans concerning easing of credit terms for small and medium-sized companies and also of a possible publication of ECB meeting minutes.

In the euro-zone there will be a release of manufacturing PMI on Monday and Service PMI – on Wednesday. Also the second estimate of the GDP growth (no changes are expected) and retail sales will be released on Wednesday. In Germany Factory Orders will be released on Thursday and industrial output and trade balance – on Friday. A decrease of both Factory Orders and industrial output is expected after a significant growth previous month which distorted the results a little.

In the UK during the first three days of the week Manufacturing, Construction and Service PMI will be published. A slight growth except service sector is expected. On Friday industrial output and trade balance data will be released. In Switzerland GDP for the second quarter will be released on Tuesday and inflation and industrial output data – on Friday. In Australia retail sales and current account will be released on Tuesday; GDP for the second quarter – on Wednesday and trade balance – on Thursday. In Canada trade balance will be released on Wednesday and labour market report – on Friday.

In the USA (and Canada) it is a Bank Holiday on Monday and some data (ADP, Crude Oil Inventories) will be released a day later. On Tuesday and Thursday respectively the most important ISM Manufacturing PMI and Non-Manufacturing PMI will be released. A decrease of indexes is expected after reaching many-month highs. On Tuesday Construction Spending will be published and on Wednesday – trade balance and Beige Book, on Thursday - ADP Employment Change and factory orders. And traditionally the first week of the month will be finished by the US Non-Farm Payrolls – it will be one of the last important reports which will be published before the Fed meeting 17-18 September and which will be used by the Fed for taking its decisions.

By MasterForex Company

152

Overview of the main economical events of the current day - 03/09/2013

UK Manufacturing PMI Has Grown

The pound grew on Monday after the release of manufacturing PMI. Manufacturing PMI in the UK rose in August up to 57.2 p. from 54.8 p. in July – to the highest reading for almost 2.5 years. A growth only to 55 p. was expected. Manufacturing PMI has been growing for seven months in a row in the UK. PMI growth can justify GDP growth rate acceleration in the third quarter.

It was a Bank Holiday on Monday in the USA and Canada. The dollar was traded differently – it weakened against the pound, AUD and NZD and partially rose against other major currencies having shown the highest growth against the yen. The yen weakened significantly amid the decrease of risks connected with Syria and stock indexes growth. US military action against Syria seems to be delayed. Past weekend Barack Obama said that he would ask the Congress to approve military actions against Damask. The uncertainty about the attack on Syria lowers the demand on defensive assets such as the yen and franc.

Swiss franc also followed the yen. The pressure was also put by the manufacturing PMI decrease. Manufacturing PMI in Switzerland dropped in August more than expected to 54.6 p. compared with 57.4 p. in July and against the forecast of 55.2 p. Besides, the head of the Swiss National Bank (SNB) Thomas Jordan said on Monday in the interview to Berner Zeitung that the Swiss franc was still overestimated and SNB would keep its limit for EURCHF as long as it would be necessary.

The euro had almost no reaction on manufacturing PMI growth in the euro-zone which exceeded the expectations and was traded slightly downwards. Euro-zone manufacturing PMI was revised up to 51.4 p. in August from the preliminary reading of 51.3 p. while no changes were expected. In July the index was 50.3 p. The index has been recording an increase for four months in a row and has reached the highest level since June, 2011. National indexes PMI grew in all euro-zone countries except France and Greece.

Australian dollar rose amid Chinese manufacturing PMI growth. Official manufacturing PMI in China released on Sunday grew to 51 p. against 50.3 p. in July having exceeded the forecasts. It may indicate that China’s economic growth rate in the third quarter can be a little higher than expected. HSBC Final Manufacturing PMI rocketed to 50.1 p. in August – the highest reading in 4 months. Besides, Building Approvals in Australia grew by 10.8% in July having exceeded the expectations 2.5 times.

By MasterForex Company

153

Overview of the main economical events of the current day - 04/09/2013

The Australian Dollar Grew After the Decision on Rate

The Australian dollar grew after the decision of the Reserve Bank of Australia to keep the rate unchanged at 2.50% despite weak retail sales and current account data. RBA rate statement was less mild than expected, which lowered the expectations that the central bank would continue further interest rate decrease. The central bank took a waiting attitude after eight decreases of the rate since 2011. RBA will continue estimating the outlook and correcting the policy necessary for a stable demand and inflation growth, - said RBA governor Glenn Stevens.

Retails sales in Australia grew only by 0.1% in July while its growth by 0.4% was expected. Current Account deficit rose by 7% in the second quarter up to 9.4 billion dollars, which exceeded the forecasted growth to -8.5 billion. Besides, prior quarter data were revised for the worse.

The US dollar was traded slightly upwards on Tuesday amid a positive report on US manufacturing PMI growth to its high since June, 2011. ISM Manufacturing PMI rose up to 55.7 p. in August from 55.4 p. prior month while its decrease to 54.0 p. was expected. New orders, inventories and prices grew while production and employment dropped. Another report of the US Department of Commerce showed that construction costs growth increased by 0.6% in July for a month having exceeded the expected growth by 0.4%.

[B]ISM Manufacturing PMI and Euro-Zone Business Climate[/B]

The euro was traded slightly downwards on Tuesday continuing the decrease of prior days. Euro-zone producer price index has shown its moderate acceleration for two months in a row. Producer price index in the euro-zone rose by 0.3% in July Vs June against the forecasted growth by 0.1%. At the same time Spanish labour market data turned out a little worse than expected – unemployment rate didn’t change last month while its drop by 5.2 thousand was expected.

The pound grew after UK construction PMI report that showed its growth to the highest readings for almost six years but then it lost all the growth. Construction PMI rose to 59.1 p. in August from 57 p. in July while no changes were expected. Construction PMI growth is another sign that UK economic recovery accelerated in the third quarter.

The yen dropped to a month low Vs the dollar amid strong US data and Japanese stock market growth which rose on Tuesday according to Nikkei 225 by 3%. However, the yen was rising shortly on Tuesday after the incident that reminded that the military operation against Syria was just delayed. Some mass media reported on Israel’s ballistic missile tests in the Mediterranean. Meanwhile, both parties leaders in the US Congress supported on Tuesday a military attack on Syria. Earlier the president was supported by John Boehner, Speaker of the US House of Representatives.

By MasterForex Company

154

Overview of the main economical events of the current day - 05/09/2013

UK Services PMI Reached Almost 7-Year High

The US dollar was traded downwards on Wednesday against most major currencies (except the yen) after 5-day growth in a row according to the dollar index amid weak statistic on trade balance and manufacturing PMI in the region of New York. Most of all commodity currencies grew against the dollar. According to the US Department of Commerce US trade balance deficit grew by 13.3% in July – to $39.1 billion having exceeded the expectations. Deficit growth in July was the most significant since January 2011.

[B]Trade Balance of the USA and Canada[/B]

The exports dropped in July by 0.6%, while the imports rose by 1.6% mainly due to the oil and automobile imports increase. ISM New York Index dropped to 60.5 in August against 67.8 prior month. IBD/TIPP Economic Optimism grew to 46 in September from 45.1 in August, which met the forecasts. FOMC Member John Williams making speech on Wednesday said that despite bond purchase tapering off, the policy would be still very mild.

The Australian dollar showed the highest growth Vs the dollar among all currencies after the GDP data for the second quarter that turned out a little better than expected. Australian GDP in the second quarter rose by 0.6% compared with the prior quarter, which exceeded the expected growth by 0.5%. At an annual rate the economy has risen by 2.6% Vs Consensus 2.5%. Consumer spending grew by 0.4% last quarter, saving rate increased to 10.8% from 10.5%. The AUD was also supported by Chinese Services PMI growth - HSBC Services PMI reached 5-month high in August and rose to 52.8 against 51.3 in July.

[B]Quarterly GDP growth of Australia and the USA[/B]

The Canadian dollar rose amid the Bank of Canada meeting finished on Wednesday where the key interest rate was left unchanged and it was repeated that the current monetary policy was still appropriate as there were no any expected changes of demand from the exports and investment yet. GDP growth met the forecast of the Bank of Canada, inflation was still moderate and the exports and investment should grow. The CAD ignored trade balance deficit growth data of Canada in July that rose to 0.93 billion Canadian dollars against 0.46 billion prior month.

The pound reached almost 2-week high Vs the dollar after the release of Services PMI which grew to the highest readings since December, 2006. Services PMI rose to 60.5 in August from 60.2 while it was expected to fall. Service sector accounts for 75% of all the UK economy. The index has been growing for eight months in a row. August growth was mainly due to new orders increase. The data justifies the strengthening of British economic recovery rates in the third quarter.

The euro rose after the publication of revised GDP for the second quarter despite Services PMI and retail sales data that fell short of expectations. Euro-Zone Revised GDP coincided with the preliminary estimate +0.3% - but an annual rate GDP fell slightly less that the initial estimates: by 0.5% not 0.7%. Retail sales rose only by 0.1% m/m in July against the forecast of +0.4%. The Final Services PMI in the euro-zone was lowered to 50.7 against the preliminary estimate of 51 – however, the index is still at 2-year high.

By MasterForex Company

155

Overview of the main economical events of the current day - 06/09/2013

The Dollar Strengthened in Anticipation of Non-Farm Payrolls

The dollar grew on Thursday after the release of strong labour market data and Non-Manufacturing PMI – and reached almost 7-week high according to the dollar index. ADP Employment Change almost met the forecasts but Unemployment Claims turned out considerably better than expected. They dropped by 9 thousand to 323 thousand while a fall only by 2 thousand was expected.

However an average number of claims for the past 4 weeks, an indicator that smoothes short-term fluctuations and shows the trend better, dropped to the lowest level since October, 2007 – 328.5 thousand, which was several months before the start of the last recession. A month ago before the release of the last labour market report that indicator was 341.5 thousand. For a month it fell by 13 thousand. It shows that Non-Farm Payrolls that are released on Friday can be strong. It is expected that Employment Change will amount to 180 thousand against 162 thousand prior month; and unemployment rate will stay unchanged 7.4%.

[B]Initial Jobless Claims - 4 Week Average[/B]

The US Services PMI reached historical high since the beginning of this statistics in January, 2008. ISM Non-Manufacturing PMI rose to 58.6 in August compared with 56 in July while it was expected to fall. Almost all sub-indices rose except the price. The highest growth was shown by new orders, employment and imports.

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

The euro fell to 7-week low Vs the dollar amid the press conference of the ECB president Draghi by the end of the central bank meeting where the policy and interest rates were kept unchanged. However, Draghi said that a possibility to lower the key interest rate was discussed and also referred to downward risks for economy. Besides, German Factory Orders decreased significantly in July more than expected – by 2.7% against the forecasted fall by 1%.

The pound was traded a little better than the euro. The Bank of England also left the key interest rate and bond purchase program unchanged and didn’t make an additional statement by the end of the meeting. The Australian dollar was traded downwards after reaching almost 3-week high against the dollar amid a weak trade balance report. Trade balance deficit reached 0.77 billion Australian dollars in July while trade balance surplus 0.10 billion was expected. Last month data were considerably lowered.

The yen weakened significantly amid 2-day meeting of the Bank of Japan finished on Thursday. The dollar closed higher 100 yens for the first time since July, 24. As it was expected, by the end of the meeting on September 4-5 the Bank of Japan didn’t introduce any changes into monetary policy having refrained from widening not so significant incentive programs. In addition, the central bank slightly improved the current assessment of Japanese economic state. In the statement by the end of the meeting the BoJ said that the economy was recovering at a moderate rate while in August only the beginning of the recovery was marked.

By MasterForex Company

156

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

The Main Events of the Week

The dollar dropped on Friday and leveled almost all weekly growth after the release of Non-Farm Payrolls that fell short of expectations. In August in the USA economy there were created only 169 thousand non-farm jobs against the forecast of 180 thousand. However, data revision downwards turned out much larger – for two past months by whole 74 thousand. The largest revision was for July – by 58 thousand: from 162 thousand to 104 thousand – it was the weakest NFP growth for more than a year.

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

Unemployment rate continued falling in August and dropped by 0.1% to 7.3% - against 7.4% in July. However, unemployment decrease was ignored like prior month. Unemployment decrease reflects labor force reduce. Labor force participation rate fell to 63.2% last month –the lowest level since August, 1978 compared with 63.4% a month before.

The number of new jobs created every month has never exceeded 200 thousand within recent 6 months. It significantly lowers the chances to start tapering off QE3 at the Fed September meeting – or it will be the lowest (by 10 bln). FOMC member Charles Evans making speech on Friday said that the Fed would probably reduce bond purchases later this year – but the central bank wouldn’t have enough information for it by September meeting.

By the end of the week the dollar showed the smallest growth according to the dollar index – only by 0.1%. The dollar grew against the yen (+0.91%), the Swiss franc (+0.80%) and the euro (+0.35%); and dropped against New Zealand dollar (-3.59%), Australian dollar (-3.19%), Canadian dollar (-1.24%) and British pound (-0.88%). At the second week of the month there are not a lot of important statistics data that can influence the markets significantly. There will be a publication of industrial output, labour market and inflation data.

In the euro-zone there will be a release of industrial output data and ECB Monthly Bulletin on Thursday and trade balance and Employment Change – on Friday. Industrial output data will be also published in other euro-zone countries: in France – on Tuesday, in Italy – on Thursday. On Tuesday the final Italian GDP for the second quarter will be released; and on Thursday - Consumer Price Index of France and Italy.

In the UK BOE Credit Conditions Survey will be released on Tuesday and labour market data – on Wednesday. On Thursday Inflation Report Hearings will be held where the Bank of England Chairman Mark Carney and other central bank members will make speeches. In Japan the final GDP for the second quarter and Current Account data will be released on Monday, on Tuesday – the last Bank of Japan meeting minutes, on Wednesday - - BSI Manufacturing Index and on Thursday - Core Machinery Orders.

The decision of the Bank of New Zealand on the key interest rate will be announced on Thursday, no changes are expected. In Australia labour market report on Thursday may become the most important event. In Canada Building Permits will be released on Monday and New Housing Price Index – on Thursday. In China inflation data will be released on Monday, Industrial Output, Retail Sales and Fixed Asset Investment – on Tuesday.

In the USA Wholesale Inventories and Trade Sales data will be released on Wednesday, on Thursday - Import Prices and Federal Budget Balance, on Friday – Retail Sales, Producer Price Index and Prelim U. of Michigan Consumer Sentiment. From Tuesday to Thursday the US Department of Treasury will sell long-term bonds. Voting on Syria in the Senate, the upper house of the US Parliament will be held on Wednesday. In the lower house of Parliament the voting can be delayed at least for a week. President Obama is going to make an announcement to the nation about the situation in Syria on Tuesday, September 10.

By MasterForex Company

157

Overview of the main economical events of the current day - 10/09/2013

Most Experts Are Sure QE3 Reduce to Be Started at the Nearest FOMC Meeting

The US dollar was traded downwards on Monday against most major currencies (except the yen) amid no any significant macrostatistics and continuing to recover Friday weak labour market data that lower the possibility of asset purchase reduce start at the nearest FOMC meeting.

Meanwhile, PIMCO’s Bill Gross is sure of the Fed to start tapering off QE despite disappointing labour market report. Most experts polled by Bloomberg last week also expect a reduction of monthly asset purchase of $10 billion at the FOMC meeting on September 17-18.

The pound reached 12-week high against the dollar and the euro –the highest reading of September on the back of also almost empty calendar. George Osborne, Chancellor of the Exchequer announced that British economy had passed a crucial point, which allowed the government to continue implementing economy measures. Sentix Investor Confidence reached more than 2-year high of +6.5 and exceeded zero point that separated optimism from pessimism – for the first time since July, 2011.

[B]Sentix Investor Confidence[/B]

The Bank of France raised on Monday its estimate of French economic growth in the third quarter to 0.2% q/q against 0.1% before. Bank of France Business Sentiment reached almost 2-week high in August at 97 against 95 in July.

Japanese yen weakened on Monday amid the news on Saturday of Tokyo hosting summer Olympic Games 2020, which may have a beneficial effect on Japanese economic growth. Hosting Olympic Games can favour construction and influx of tourists to the country and also facilitate implementing Shinzo Abe’s plans. Chinese and Japanese data also had a positive effect. Japanese stock index Nikkei 225 which is recently closely correlated with USDJPY grew by 2.5% and reached monthly high.

Japanese final GDP growth data for the second quarter were raised from 0.6% to 0.9% at a quarterly rate and from 2.6% to 3.8% at an annual rate. As a result the Japanese economy showed the highest half year growth for almost three years, which proves that Prime Minister Shinzo Abe’s policy, which is aimed to economic growth stimulation, is right.

The Australian dollar reached 6-week high Vs the dollar after Chinese trade balance data released on Sunday had showed trade balance surplus by 60% in August to $28.5 bln compared with $17.8 bln this July. The exports increased by 7.2% in August in comparison with the same period last year, which turned out better than Consensus 5.5%. The imports rose by 7% at an annual rate. The data indicate a stable high PMI in Chinese economy. Besides, Home Loans growth data in Australia in July turned out better than expected.

The Canadian dollar continued Friday’s growth and rose to 3-week high on Monday Vs the dollar amid positive housing market data which followed a strong employment report on Friday. Building Permits in July grew by 20.7% m/m up to record 7.99 bln Canadian dollars, which exceeded the expectations almost 5 times. Growth rates turned out the highest for more than two years.

[B]Building Permits in Canada[/B]

By MasterForex Company

158

Overview of the main economical events of the current day - 11/09/2013

Chinese Industrial Output Exceeded Expectations

The US dollar was traded differently on Tuesday; it fell against commodity currencies and the pound and grew against the yen and Swiss franc and almost didn’t change according to dollar index. Some pressure was put by job openings data from the Bureau of Labour Statistics that dropped by 180 thousand in July to 3.69 million against 3.87 million prior month. The reading has been falling for two months in a row. NFIB Small Business Index also dropped to 94 in August against 94.1 in July although its growth was expected.

Defensive currencies such as the yen and Swiss franc and also gold fell on Tuesday after the USA president Obama had agreed to consider Russian plan on Syria’s transfer its chemical weapon under international control, which may significantly reduce the possibility of attack on Syria at the nearest time. Obama said that he asked the Congress to delay voting on military attack in Syria.

The yen fell to more than 7-week low against the dollar, which was favored by the published BoJ meeting minutes of August that showed central bank’s firm intention to continue monetary policy easing.

Chinese positive data released on Tuesday that exceeded the expectations and indicated Chinese economic outlook improvement, supported commodity currencies growth. PRC industrial output growth rates accelerated in August up to 10.4% at an annual rate from 9.7% in July having exceeded forecasted growth by 9.9%. Retail sales grew by 13.4% y/y against expected growth by 13.3%. Fixed Asset Investment ytd/y grew by 20.3% y/y in August (Consensus 20.2%).

Australian dollar rose on Tuesday to its high for more than two months amid Business Confidence growth to the highest level since May, 2011. Australian NAB Business Confidence rose to +6 in August against -3 in July having exceeded zero point, which separated business conditions improvement from its worsening, for the first time in 4 months. Canadian dollar reached 3-week high on Tuesday despite Housing Starts decrease in August by 6.6%.

The pound updated its height of September amid positive housing market statistics. RICS House Price Balance rose to the highest reading in August since November, 2006 and reached 40% compared with 36% in July. The euro was traded a little worse. The pressure was put by French industrial output decrease which has been falling for three months in a row – it dropped by 0.6% in July while its growth by 0.5% was expected. Italian Final GDP for the second quarter also turned out worse than expected. GDP decreased by 0.3% against preliminary decrease estimate by 0.2%.

By MasterForex Company

159

Overview of the main economical events of the current day - 12/09/2013

GBPUSD Reached 7-Month High

The pound reached 7-month high on Wednesday against the dollar after the release of strong labour market data that exceeded expectations. The pound has grown to the highest level since this January against European currency. In August both Claimant Count Rate and the number of those who get unemployment payment decreased. The data signal that British economic recovery is going on gathering pace.

According to the National Bureau of Statistics Claimant Count Change dropped by 32.6 thousand in August having exceeded the expectations of decrease by 21 thousand. The prior month reading was also revised for the better. Claimant Count Change has been falling for 10 months in a row. Claimant Count Rate decreased by 0.1% to 4.2% in August –the lowest level since February, 2009. ILO Unemployment Rate fell to 7.7% in July in comparison with 7.8% prior month.

Unemployment Rate became a key indicator for further monetary policy line in the UK last month when the Bank of England announced that it would start considering the possibility of interest rate increase in case of unemployment decrease to 7%. Meanwhile, MPC Member David Miles said on Wednesday that he doubted that British unemployment rate would fall quickly despite the signs of economic strengthening.

The dollar has continued falling on Wednesday for four days in a row after the release of a weak labour market report past Friday and in anticipation of FOMC meeting which will take place next week, September 17-18. Mortgage Bankers Association /MBA/ said that MBA Mortgage Applications had fallen by 14% for the recent week compared with the prior week amid rates increase. Wholesale Inventories rose by 0.1% in July compared with the prior month, which turned out lower than expected growth by 0.3%. Wholesale Trade Sales grew by 0.1% m/m against the forecasted growth by 0.4%.

Swiss franc maintained on Wednesday amid UBS outlook increase on Switzerland GDP growth in 2013 to 1.8% from 0.9% and in 2014 to 2% from 1.3% after positive economic readings in the second quarter. The euro has risen higher 1.33 against the dollar for the first time since late August amid weakening concerns about Syria – after US president Barack Obama announced that he was open for diplomatic solution on Syria, which brought relief to the markets of risky assets and increased the pressure on the dollar.

Australian dollar was traded upwards amid Australian consumer sentiment growth to the highest level for almost three years. Westpac Consumer Sentiment rose by 4.7% in September in Australia to 110.6 p. against 105.7 p. in August. Canadian dollar also reached the highest level on Wednesday from the middle of August.

New Zealand dollar rocketed after Reserve Bank of New Zealand meeting where the key interest rate was kept unchanged. However, RBNZ Rate Statement was rather tough – it said that rates increase would probably be necessary next year because of house price inflation. The terms of rates increase will depend on housing and construction sectors dynamics. Interest rate outlook is about 0.50% higher than in June’s outlook.

By MasterForex Company

160

Overview of the main economical events of the current day - 13/09/2013

Euro-Zone Industrial Output Slumped

The US dollar grew on Thursday against the euro and the pound, fell against the yen and almost didn’t change according to the dollar index amid weak euro-zone and Australian data and unemployment claims decrease to the low of 2006. Unemployment claims fell to 292 thousand last week while a growth to 330 thousand was forecasted. However, too optimistic data could turn out distorted. According to the Department of Labor unemployment claims decrease could be caused by the fact that two states didn’t report about all the claims because of computer programs updating.

The euro was traded slightly downwards amid industrial output decrease in the euro-zone and Italy. Industrial output in the euro-zone slumped in July discrediting the steadiness of the region’s economic recovery. According to the Eurostat euro-zone industrial output dropped by 1.5% in July in comparison with June against the expected decrease only by 0.3% having shown the largest drop since last September. At an annual rate industrial output fell by 2.1% having considerably exceeded the forecasted drop by 0.2%.

Italian industrial output fell by 1.1% in July for a month against the forecasted growth by 0.3%. According to the National Institute of Statistics (Istat) the decrease was recorded in all major sectors except fuel. At an annual rate the reading fell by 4.3% - it is the 23 decrease in a row. ECB chairman Mario Draghi said at the press conference in Riga that he estimated euro-zone economic recovery dynamics with no enthusiasm. The recovery was still very, very green, he said. Meanwhile, the European Parliament approved a bill on Thursday according to which the ECB would become the main regulatory body over most European banks.

The pound also fell a little from 7-month high Vs the dollar amid the Bank of England governor Mark Carney’s speech before the Parliament’s Treasury Committee. Communication policy started by the Bank of England favors UK economic recovery, said Carney, but the Bank of England was not satisfied with its growth rates. The central bank is still loyal to its promise not to raise the key interest rate until unemployment rate falls below 7% if inflation remains moderate. According to Carney, BoE guarantees about keeping interest rate increased monetary policy efficiency.

The Australian dollar touched almost 3–month high on Wednesday but then dropped after 4 days of growth. According to Australian Bureau of Statistics Employment Change decreased by 10.8 thousand in August against expected growth by 10 thousand. Unemployment Rate rose by 0.1% to 5.8% from 5.7% in July. Participation Rate in August fell more than expected to 65%. Besides, according to Melbourne Institute Consumer Inflation Expectation in Australia fell to 1.5% in September against 2.3% in August.

New Zealand dollar was traded upwards on Thursday after a tough statement of the Reserve Bank of New Zealand by the end of the central bank meeting which put rate increase on the agenda. The bank said that rate increase was possible in near future when the economy improves. New Zealand may become one of the first developed countries which will start rates increase since 2014.

By MasterForex Company

161

Overview of the main economical events of the current day - 16/09/2013

The Main Events of the Week

The US dollar fell on Friday against the pound and the yen and almost didn’t change Vs the euro amid the release of weak Consumer Confidence and Retail Sales data in the USA. Preliminary U. of Michigan Consumer Sentiment dropped to 5-month low of 76.8 p. in September from 82.1 p. prior month. The decrease was probably caused by interest rates growth, which restrains housing market growth and economic growth in the whole; and by concerns about Syria.

[B]Preliminary U. of Michigan Consumer Sentiment[/B]

Retails sales in August grew by 0.2% against expected growth by 0.5% - it is the lowest growth rate for four months. Core Retail Sales rose only by 0.1% while a growth by 0.3% was expected. At the same time, July data were revised upwards. Sales growth restrains tax increase, limited growth of jobs and slow increase of personal income – all this lowers consumer confidence.

By the end of the week the dollar fell by 0.81% according to the dollar index having been put under pressure after a weak labour market report. It fell Vs all major currencies except the yen (+0.13%). The dollar showed the lowest decrease against New Zealand dollar (-1.73%) and British pound (-1.58%). It fell a little less against the euro (-0.96%), Swiss franc (-0.90%), Australian dollar (-0.72%) and Canadian dollar (-0.57%).

The main event of this week and probably of the whole month may become FOMC meeting on September, 17-18 where a decision about the start of tapering off asset purchase program is expected to be taken. On Wednesday the meeting results will be announced and a quarterly press conference of FED governor Ben Bernanke will take place; also FOMC Economic Projections for inflation and economic growth will be released.

Two thirds of Bloomberg respondents wait for Fed decision concerning asset purchase reduction at September meeting; according to forecasts the reduction will be moderate – by $10 billion (to $75 bln a month). According to the opinion poll of The Wall Street Journal, most economists expect the Fed to announce bond purchase reducing by $15 billion a month. As Credit Suisse experts believe the Fed would announce purchase reducing by $20 billion.

In the euro-zone the final inflation data will be released on Monday, on Tuesday – Trade Balance and Current Account, on Friday - Flash Consumer Confidence. German ZEW Economic Sentiment will be released on Tuesday and German Business Optimism Index is expected to rise. In the UK Consumer and Producer Price Index will be released on Tuesday, on Wednesday – Bank of England Meeting Minutes and on Thursday – Retail Sales and CBI Industrial Order Expectations.

The decision of the Swiss National Bank on the key interest rate will be announced on Thursday. Japanese trade balance will be published on Thursday. In Australia the Reserve Bank of Australia Meeting Minutes and New Motor Vehicle Sales will be released on Tuesday, on Wednesday - Conference Board and Westpac Leading Index. In New Zealand quarterly data will be released: on Wednesday – Current Account and on Thursday – GDP for the second quarter.

In Canada Manufacturing Sales will be published on Tuesday, on Thursday - Wholesale Sales and on Friday – Inflation. There will be quite a lot of data in the USA: on Monday - Empire State Manufacturing Index and industrial output, on Tuesday – Consumer Price Index, Capital Influx and NAHB Housing Market Index; on Wednesday - Building Permits and Housing Starts; on Thursday - Existing Home Sales, Philadelphia Fed Manufacturing Index and Current Account.

By MasterForex Company

162

Overview of the main economical events of the current day - 17/09/2013

Larry Summers Won’t Be a New Fed Chairman

The US dollar dropped on Monday after former US Finance Minister Larry Summers had withdrawn for Fed chair but then the dollar partially recovered its lost positions. Past Sunday Larry Summers, nominated by Obama a potential Ben Bernanke’s successor as the Fed chairman, withdrew his name justifying his decision with possible difficulties inside the Fed in case of his election, which may have a bad impact on the whole bank and the whole American economy.

Larry Summers was considered a “hawk”, a supporter of tougher monetary policy and in case of his election the probability of total tapering off of stimulus programs in the shortest period of time was growing. This decision increases the chances of Fed vice chairman Janet Yellen, who supports a milder monetary policy, to become a more possible candidate for the Fed chair – although Obama may put forward other candidates for the chair. Other top candidates are former Fed Vice Chairman Donald Kohn and former Treasury Secretary Tim Geithner.

Morgan Stanley experts believe that Summers’ withdrawal from the race for the Fed chair adds pressure on the dollar in anticipation of FOMC meeting. Commerzbank also believes that Yellen as Fed governor may favour dollar’s weakening in long-term perspective. Summers’ withdrawal may lower the concerns about the start of QE tapering off.

Other US data released on Monday had little influence on trading. Empire State Manufacturing Index dropped to 6.29 p. in September from 8.24 p. in August while a growth up to 9.1 p. was forecasted. The decrease was due to employment situation worsening. The US industrial output grew by 0.4% in August, which turned out a little less than expected growth by 0.5% and Capacity Utilization rate slightly increased to 77.8% as it was expected.

ECB president Mario Draghi making speech on Monday said about the progress in the efforts of euro-zone stabilization. Meanwhile, Eurostat data showed that euro-zone Labor Costs decreased to almost 3-year low in the second quarter and were behind inflation rates. It puts pressure on the finance of households and has a negative impact on the region’s stable economic recovery outlook. According to the Istat data, Italian trade balance rose by 64.6% in July to 5.95 billion euro against 3.62 billion in June.

New Zealand dollar reached 4-month high on Monday against the US dollar. Housing market data still support it. REINZ Housing Price Index rose by 2.1% in August compared with the prior month. REINZ House Sales rose by 8.5% in August Vs the same period last year. Risk appetite growth was supported by the agreement on chemical weapon in Syria between Russia and the USA past weekend.

By MasterForex Company

163

Overview of the main economical events of the current day - 18/09/2013

Euro-Zone Economic Sentiment Reached 4-Year High

The US dollar was traded slightly downwards on Tuesday against most major currencies in anticipation of the US Federal Open Market Committee (FOMC) decision by the end of 2-day meeting on Wednesday – amid weak US inflation statistics and strong economic sentiment growth statistics data in the euro-zone. The attention of market participants on Wednesday will be drawn by the results of the FOMC meeting where the Fed is expected to take a decision concerning QE reduction.

According to the Bloomberg poll most experts expect the Fed to reduce asset purchase by $10 billion – to $75 billion a month. In July the expectations were overestimated - $20 billion. The Fed is supposed to finish these programs totally in June, 2014. The officials of the Federal Reserve at the September meeting will have to consider three negative factors at once which may weaken the US economy in the nearest months: real interest rates growth in the country, complicated political situation abroad and a new episode of never-ending budget war in Washington.

Meanwhile, Congressional Budget Office (CBO) warned on Tuesday about a continuing growth of the US public debt and the risks connected with it. According to the CBO estimates, the US public debt today is 73% of GDP – it is the highest level in the country’s history except the Second World War period. Present level of the public debt is twice higher than at the end of 2007, according to the CBO report.

The USA consumer price growth in August slowed down to 3-month low. Consumer Price Index (CPI) rose by 0.1% m/m in August while a growth by 0.2% was forecasted. Annual rate inflation slowed down (growth by 1.5% Vs forecasted growth by 1.6%). Consumer Price Index Ex Food & Energy also grew by 0.1% m/m against the forecasted growth by 0.2%.

The pound was traded significantly worse that the euro also due to weak inflation report. Consumer Price Index rose by 0.4% in August against the expected growth by 0.5%. Inflation dropped to 2.7% in August at an annual rate in comparison with 2.8% in July. Core CPI remained unchanged in August – at +2% y/y having fallen short of expectations for a moderate growth to 2.1% y/y. Producer Price Index also turned out worse than forecasted.

[B]Annual inflation growth rate in the USA and the UK[/B]

The euro was traded upwards. German ZEW Economic Sentiment for the nearest six months rose in September to its high of 49.6 p. since April, 2010 – from 42 p. in August having exceeded the reading of 45 p. considerably.

Euro-Zone ZEW Economic Sentiment rocketed to 58.6 p. from 44 p., the highest reading in 4 years. German ZEW Current Situation rose to 30.6 p. from 18.3 p. in September – the highest reading for 15 months.

The Australian dollar rose on Tuesday after the publication of Australian Reserve Bank Meeting Minutes. The Bank didn’t exclude the possibility of further key interest rate decrease but it doesn’t plan doing it at the nearest time and waits for further clearing of economic situation. Lower lending rates and the AUD rate stimulate economic growth. But other indicators are less positive and the bank prefers waiting for additional evidence of economic growth before taking decisions concerning its further actions. The Canadian dollar was traded upwards amid Manufacturing Sales growth by 1.7% in July that exceeded expected growth by 0.5%.

By MasterForex Company

164

Overview of the main economical events of the current day - 19/09/2013

No Decision on QE Reduction Is Taken, the Dollar Slumped

The US dollar slumped just after the announcement of the FOMC 2-day meeting results, where it was decided not to reduce bond purchase program. A slight reduction of asset purchase by $5-$10 billion a month was widely expected and the Fed decision was sudden. The dollar fell to more than 7-month low according to the dollar index and showed the lowest drop since July, 10.

The Fed kept interest rate at 0.0%-0.25%. Nine of ten members of the meeting voted for keeping monetary policy unchanged. The head of the Federal Reserve Bank of Kansas Esther George opposed again – for the sixth time this year. She fears that keeping high level of stimulation increases the risks of economic and financial imbalance in future and also may have a negative effect on inflation in long-term perspective.

The economy is not strong enough to stop supporting it by quantitative easing, says the Fed. The decision on QE tapering off is put off for the next FOMC meetings this year. It is necessary to wait for new evidences of economic progress stability before correcting asset purchase rate. The Fed kept unemployment and inflation thresholds unchanged and again confirmed that it would increase or decrease bond purchases according to the economic outlook.

In economic outlooks published by the end of the meeting FOMC members revised downwards their forecasts on economic growth for this and 2014 years. Unemployment and inflation forecasts almost didn’t change. Most Fed officials expect the first interest rate increase in 2015 or later. Three of them believe that it is possible already in 2014.

Making speech at a press conference the Fed governor Ben Bernanke tried to explain taken decisions by poor labour market conditions, tightening financial conditions and fiscal problems. Bernanke said that unemployment rate was not an accurate indicator of labour market state as because of labour force reduction unemployment decrease was not totally due to new jobs creation. There is no any fixed calendar for asset purchase reduction and it can start later this year.

US housing market statistics data released on Wednesday again proved not quite stable economic state which was the reason of the FOMC meeting decisions. Building permits dropped by 3.8% in August at an annual rate to 918 thousand against 954 thousand in July. Housing starts in August also turned out worse than expected – they rose only by 0.9% (to 891 thousand) Vs the forecasted growth by 2.3% to 917 thousand. Mortgage rate increase has a negative impact on housing market recovery within recent six months.

[B]Building Permits and Housing Starts in the USA[/B]

The euro and the pound reached its high on Wednesday against the dollar for 7 and 8 months respectively; and Australian dollar – 3-month high. MPC Meeting Minutes supported the pound and gave an optimistic estimate to British economy. The third quarter GDP growth outlook was raised. Further stimulating may be required only in case of economic recovery slow down. According to the meeting minutes Monetary Policy Committee members didn’t think that market interest rate increase failed to meet fundamental economic indicators.

By MasterForex Company