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

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

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

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

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

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

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

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

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

By MasterForex CompanyOverview of the main economical events of the current day - 12/07/2013

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

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

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

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

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

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

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

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

 

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

The main events of the week

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

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

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

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

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

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

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

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

 

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

US retail sales fell short of expectations

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

Change of the US retail sales m/m

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

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

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

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

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

 

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

Markets wait for Bernanke’s testimony to Congress

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

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

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

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

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

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

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

 

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

The US housing market shows weakness

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

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

Building Permits (left) and Housing Starts (right) in the USA

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

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

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

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

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

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

 

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

Philadelphia Fed Manufacturing Index exceeded 2-year high

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

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

Philadelphia Fed Manufacturing Index

Source: phil.frb.org​

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

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

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

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

NAB Quarterly Business Confidence of Australia

Source: business.nab.com.au​

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

 

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

The main events of the week

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

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

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

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

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

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

 

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

The US existing home sales rate dropped unexpectedly

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

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

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

Source: realtor.org​

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

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

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

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

 

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

Retail sales in Canada exceeded expectations

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

Retail sales in Canada

Source: statcan.gc.ca​

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

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

Richmond Fed Manufacturing Index

Source: richmondfed.org​

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

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

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

 

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

US New Home Sales Jumped to 5-year High

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

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

HSBC Flash Manufacturing PMI of China

Source: markiteconomics.com​

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

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

The US New Home Sales

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

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

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

 

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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.

 

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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.

 

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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.

The US Pending Home Sales Index

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.

 

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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.

 

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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.

ADP Employment Change

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.

 

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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.

 

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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.

Non-Farm Employment Change and Unemployment Rate in the USA

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.

 

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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.

ISM Non-Manufacturing PMI

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.

UK Services PMI

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.

 

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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.

The USA Trade Balance

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.

 

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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.