MasterForex Broker – Trend analysis of currency pairs and Comments (Updated daily)

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Overview of the main economical events of the current day - 02/12/2013

The Main Events of the Week

The US dollar was traded differently on Friday, it grew Vs the euro, Swiss franc, yen and Canadian dollar but it fell Vs the pound, Australian and New Zealand dollars. The trades were calm and the currencies were traded at a narrow range amid lowered activity index because of the holidays in the USA. The euro stopped 3-day growth and fell amid an unexpected decrease of German retail sales by 0.8% in October while a growth by 0.5% was expected. Meanwhile, inflation and unemployment data in the euro-zone are better than expected.

Canadian dollar dropped to its low of early October, 2011 Vs the dollar after the release of Canadian GDP that turned out slightly better than expected. Canadian GDP rose by 0.3% m/m in September having exceeded the expected growth by 0.2%. Quarterly growth of economy annualized accounted for 2.7% in Canada Vs the forecast of +2.5% - the economy rose at the fastest rate for two years in the third quarter amid the increase of consumer spending, investment and inventory holdings while the exports decreased. Despite some improvement of economy it is unlikely to make the Bank of Canada to start finishing monetary stimulation earlier than the US Fed.

By the end of the week the US dollar slightly fell according to the dollar index having lost 0.07% and continued the trend of the prior week: the growth Vs the yen and commodity currencies and decrease Vs European currencies. The dollar dropped against the British pound (-0.81%) and the euro (-0.20%), it almost didn’t change Vs the Swiss franc and grew Vs Japanese yen (+1.12%), Canadian dollar (+0.93%) and New Zealand dollar (+0.68%) and Australian dollar (+0.59%). By the end of November the dollar rose by 0.45% according to the dollar index having shown the growth against the yen and commodity currencies; it decreased to the pound and almost didn’t change Vs the euro and Swiss franc.

This week, the first one of the month, a lot of important data will be released: GDP, Trade Balance, Non-Farm Payrolls, and PMI. There will be meetings of four main central banks: the Reserve Bank of Australia – on Tuesday, Bank of Canada – on Wednesday, Bank of England and ECB – on Thursday. However, the main event of the week will be Non-Farm Payrolls released on Friday which will make clear possible terms of QE3 tapering start. Unemployment rate is expected to fall by 0.1% to 7.2% and 183-185 thousand of new jobs. Strong Non-Farm Payrolls (about 200 thousand) can increase the chances that the Fed will make a step towards QE tapering at the meeting on December already.

In the USA ISM Manufacturing PMI will be released on Monday; on Wednesday - ADP Employment Change, Trade Balance, New Home Sales (for two months) and ISM Services PMI; on Thursday – revised GDP for the third quarter (a revision from 2.8% to 3.1% is expected) and Factory Orders; on Friday – Personal Income and Spending and Preliminary U. of Michigan Consumer Sentiment.

In the euro-zone the Final Manufacturing PMI will be released on Monday and Services PMI – on Wednesday; on Tuesday – Producer Price Index and on Wednesday – Retail Sales and revised GDP for the third quarter. In Germany Factory Orders will be released on Friday. In the UK during the first three days of the week there will be a release of Manufacturing PMI, Construction PMI and Services PMI. Chancellor of the Exchequer George Osborne will make an Autumn Forecast Statement on Thursday and introduce the main provisions of government’s policy for the next year.

In Switzerland industrial output for the third quarter will be released on Wednesday and on Friday – inflation. In Australia Retail Sales and Current Account will be released on Tuesday, on Wednesday – GDP for the third quarter and on Thursday – Trade Balance. In Canada Trade Balance will be released on Wednesday, on Thursday – Building Permits and Ivey PMI; on Friday - Labor Market Data.

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Overview of the main economical events of the current day - 03/12/2013

The U.S. Manufacturing PMI Rose Despite Forecasts

The US dollar grew on Monday Vs most major currencies amid the growth of manufacturing PMI in the USA which rose despite the forecasts. The data strengthened the expectations of an earlier QE tapering that puts a lowering pressure on the dollar.

ISM Manufacturing PMI rose unexpectedly in November to 57.3 p. against 56.4 p. in October - despite the expected decrease and it continues to stay at its high of April, 2011. In comparison with October - industrial output, new orders and employment have risen while inventories and prices dropped. Final Manufacturing PMI also turned out better in November than initially estimated 54.3 p. and grew to its high 54.7 p. since January. Construction Spending in the USA rose in October by 0.8% m/m against the expected growth by 0.4%.

The euro dropped on Monday considerably before the ECB meeting which results will be announced on Thursday – although euro-zone PMI in general turned out better than forecasted. Euro-zone final manufacturing PMI grew up to 51.6 p. in November from 51.3 p. in October having slightly exceeded the initial estimates of 51.5 p. However, the PMI of Spain, the fourth euro-zone economy, dropped below 50 p. for the first time for 4 months. French PMI also continues staying below this level.

Euro-zone PMI growth was mainly due to German manufacturing sector: the euro-zone largest economy PMI rose to 52.7 p. in November from 51.7 p. in October. However, according to German Engineering Federation (VDMA) that represents a significant part of medium business companies - German Factory Orders slumped by 10% y/y in October mainly due to demand decrease beyond the euro-zone. Official German Factory Orders will be released on Friday.

The pound updated its annual height Vs the dollar but then dropped. The UK Manufacturing PMI rose to its high since February, 2011 continuing the growth for the eighth consequent month. Manufacturing PMI rose to 58.4 p. in November from the revised reading of 56.5 p, in October. Industrial output and new orders rose to the highest levels for almost 19 years, employment growth also accelerated.

The yen continued falling and USDJPY rose above 103 for the first time since May 23 – after Bank of Japan governor Kuroda had said that the central bank would follow mild policy until inflation reached 2% and extra measures would be taken if needed. According to former Ministry of Finance official Eisuke Sakakibara, also known as “Mr. Yen”, the yen will drop to 108 per dollar in 2014. The Government Pension Investment Fund, whose assets rose last quarter to a record 124 trillion yen ($1.2 trillion), should follow an expert panel’s proposal to boost foreign holdings to as much as 35%, from 23%, according to Sakakibara.

Australian dollar was growing in the first half of the day after the release of stronger than expected Chinese manufacturing PMI on Sunday, but then it fell. NBS Manufacturing PMI amounted to 51.4 p. in November without any changes compared with October and exceeding the forecast. The index has been at its high of 1.5 year for two months. HSBC Final Manufacturing PMI fell in November from 50.9 p. to 50.8 p. having exceeded the estimates of 50.5 p.

New Zealand dollar rose on Monday amid Chinese positive data and Terms of Trade Index of New Zealand that reached 40-year high. According to the Bureau of Statistics of New Zealand Terms of Trade Index rose by 7.5% in the third quarter compared with the second quarter having considerably exceeded the expected growth by 2.9%. The growth of Terms of Trade Index to its high since 1973 was favored by the growth of exports prices for dairy products.

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Overview of the main economical events of the current day - 04/12/2013

The UK Construction PMI Grew to its High for More than 6 Years

The US dollar was traded downwards on Tuesday Vs most major currencies amid no significant macrostatistics in the USA. The pound strengthened on the back of the UK Construction PMI growth to its high since August, 2007. The yen rose amid fixed long positions on USD/JPY and stock markets decrease.

IBD/TIPP Economic Optimism rose by 1.7 p. in December or by 4.1% to 43.1 p. compared with 41.4 p. in November. The index has been growing for two months already after the decrease to 2-year low. The index is a good leading indicator for U. of Michigan Consumer Sentiment that will be released later.

ISM New York index in November rose by more than 10 points to 69.5 p. In October the index was 53.9. November index has become the highest since October, 2010. ISM New York index which mainly refers to non-manufacturing companies is released a day before the national ISM nonmanufacturing report.

The British pound strengthened on Tuesday amid the UK Construction PMI growth to its high of August, 2007. The UK construction PMI rose to 62.6 p. in November from 59.4 p. in October signaling a strong increase in the construction sector. The index above 50 p. indicates activity growth in the sector. The index has been above 50 p. for seven months in a row.

The euro also followed the pound and rose amid unemployment decrease in Spain in November for the first time for 4 months. Spanish Unemployment rate in November fell by 2.5 thousand in comparison with the prior month when it grew by 87 thousand – while unemployment rate was expected to grow by 50 thousand. The decrease has become the first one for November in the country’s history and probably it is a signal that the bottom of unemployment crisis in Spain has passed.

At the same time producer price index in the euro-zone was worse than expected and has fallen in October for the third month in a row, which may strengthen the concerns that a low inflation can threaten a fragile recovery in Europe. Producer price index fell in October by 0.5% in comparison with the prior month while a decrease only by 0.2% was expected. At an annual rate the prices dropped by 1.4% Vs the expected decrease by 1%.

Australian dollar fell after the Reserve Bank of Australia on Tuesday left the interest rates unchanged for the 4th consequent month but then it grew. RBA governor Glenn Stevens said that Australian dollar rate was still unreasonably high and there was a need of currency devaluation for a balanced growth of economy. The AUD was supported by retail sales data which grew by 0.5% m/m in October having exceeded the expected growth by 0.4%. At the same time current account deficit in Australia turned out higher in the third quarter than forecasted.

The yen rose amid the decrease of stock markets and fixation of long positions on USD/JPY within the upcoming annual heights. Another factor was the decrease of the world stock markets, which has increased the demand for safe assets. Dow Jones Industrial Average dropped by 0.6% on Tuesday, which has become the lowest decrease for almost a month.

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Overview of the main economical events of the current day - 05/12/2013

ADP Report Points to Strong Non-Farm Payrolls on Friday

The US dollar rose on Wednesday Vs commodity currencies, fell Vs the yen and almost didn’t change Vs the euro and the pound – amid contradictory statistics. The dollar grew after the release of strong ADP Non-Farm Employment Change but then lost all its growth amid the decrease of Services PMI that accounts for the largest part of the economy.

According to the Automatic Data Processing (ADP) Employment Change rose by 215 thousand in the USA in November while a growth by 170 thousand was forecasted and October growth by 130 thousand was revised to 184 thousand. The increase in November was the largest since the beginning of the year. ADP estimate is released before the official Non-Farm Payrolls of the Bureau of Labour Statistics this Friday and it can be considered preliminary.

According to the Institute for Supply Management the U.S. Services PMI dropped more than forecasted in November and fell to 5-month low 53.9 p. compared with 55.4 p. in October – while a decrease only to 55 p. was expected. The lowest decrease was shown by Business Activity Index/production, prices and employment.

The U.S. New Home sales rose at the fastest rate for 30 years on October – by 25.4% compared the prior month having reached 444 thousand houses at an annual rate. Such result became possible because New Home sales fell by 6.6% in September to 354 thousand, which was the lowest level since April, 2012. The U.S. Trade Balance deficit dropped by 5.4% in October to $40.6 billion - due to exports growth that reached the highest level for all history.

The pound was traded downwards amid the UK Services PMI decrease to 16-year maximum that was much more than expected but then recovered its fall. Services PMI fell to 60 p. in November from 62.5 p. in October while a decrease only to 62 p. was forecasted.

The euro had almost no reaction to a weak retail sales report that fell by 0.2% m/m in October against the expected growth by 0.1%. The euro-zone final Services PMI fell less than expected in November to 51.2 p. Vs preliminary estimate 50.9 p. and 51.6 p. prior month. Slightly better final results were only due to Germany – in France and Italy the index was worse than expected.

Australian dollar dropped to 3-month low Vs the US dollar after the release of a weak GDP for the third quarter. Last quarter Australian economic growth turned out slower than forecasted – the country’s dependence on the mining sector is high and other economic sectors are weak. Australian GDP rose by 0.6% q/q in the third quarter and by 2.3% y/y while a growth by 0.7% q/q and 2.6% y/y was expected. Despite eight decreases of interest rates for last two years record low interest rates didn’t stimulate the economy enough and left an opportunity for further rates decrease in 2014.

Canadian dollar fell on Wednesday to 3.5-year low Vs the dollar after the meeting of the Bank of Canada where, as expected, monetary policy was kept unchanged. However, Bank of Canada’s statement was considered milder as the central bank marked than lowering risks for inflation had strengthened – but significant stimulation measures taken by the Bank of Canada were still appropriate. The yen continued correction after it had weakened to half year low Vs the dollar amid the statements of BoJ member Sato who said that there was no need to further policy easing – which could hurt current efforts towards the exit from many years deflation.

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

The Dollar Fell before the U.S. Non-Farm Payrolls

The US dollar dropped on Thursday Vs most major currencies before Non-Farm Payrolls on Friday despite positive statistics on GDP and Unemployment Claims – but GDP growth was mainly caused by inventories growth. The driving force of dollar’s weakening became growing yen amid stock markets decrease for a few days in a row.

GDP Second Release in the third quarter was raised from 2.8% up to 3.6% at an annual rate. It is the most significant growth since the first quarter of 2012 but the revision upwards was mainly due to the most considerable increase of warehouse inventories since early 1998 which added 0.85% into the GDP growth in comparison with the first estimate. Consumer Spending which brings about 2/3 of the whole share to the GDP – was lowered from 1.5% to 1.4% - it is the weakest growth since the end of recession.

Meanwhile, the U.S. labour market data continue improving. Unemployment Claims dropped by 23 thousand at once to 298 thousand last week – the lowest level for 12 weeks – while the indicator was expected to be 320 thousand. Initial Jobless Claims - 4 Week Average fell to 322.25 thousand from 331.75 thousand. Non-Farm Payrolls are released on Friday – 180-185 thousand of new jobs and unemployment decrease by 0.1% to 7.2% are expected.

The euro grew after the ECB meeting where interest rates were kept unchanged as expected – but no new measures on economic support were announced. ECB president Mario Draghi said that the ECB didn’t plan further monetary policy easing though negative deposit rate was briefly discussed. The central bank raised the euro-zone economic growth outlook for 2014 up to 1.1% from 1% and repeated GDP decrease estimate by 0.4% for 2013. In 2015 according to the expectations of the ECB economic growth rate will increase to 1.5%. Euro-zone inflation estimate was lowered: for 2013 to 1.4% from 1.5% and for 2014 – to 1.1% from 1.3%.

The pound was traded downwards on Thursday amid the BoE meeting, by the end of which the rate and asset purchase program had been left unchanged. Meanwhile, for the first time for three years the UK economic growth outlook was improved – which was announced by Chancellor of the Exchequer George Osborne on Thursday making a traditional Autumn Forecast Statement in the Parliament. The UK government raised GDP growth outlook for 2013 from 0.6% to 1.4%; and for 2014 – from 1.8% to 2.4%. Unemployment rate will drop to 7% in 2015 and to 5.6% in 2018. Osborne marked that the UK economy is growing faster than other developed economies.

Canadian dollar finished the day with a slight growth Vs the US dollar – before Canadian labour market data which will be published on Friday. According to Statistics Canada, Building Permits exceeded the forecasts considerably in October and grew by 7.4% Vs prior month against the expected growth by 1%. At the same time, Ivey PMI fell in November lower than forecasted – to 53.7 p. in comparison with 62.8 p. in October while a decrease to 59 p. was expected.

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

The Main Events of the Week

The US dollar rose considerably on Friday Vs the yen; it fell Vs the euro, Australian dollar and New Zealand dollar; it almost didn’t change Vs the pound and Canadian dollar – after the release of the U.S. Non-Farm Payrolls and Consumer Confidence which generally exceeded the expectations.

According to the Labor Department the U.S. Non-Farm Employment Change grew in November by 203 thousand having exceeded the forecasted growth by 180 thousand – which has become the highest growth for three months. Unemployment rate dropped by 0.3% at once to 7% having significantly exceeded the expected decrease to 7.2% - and has reached the lowest level for five years since November, 2008. The report released on Friday can strengthen the expectations that the Fed will start QE3 tapering faster than it was expected earlier.

Consumer Confidence also turned out better than expected. Preliminary U. of Michigan Consumer Sentiment rose unexpectedly in December to 5-month high 82.5 p. in comparison with the final reading for November of 75.1 and the forecast of 76 p. Both Current Assessment and Expectations have risen. At the same time Personal Income and Personal Spending report showed a decrease of personal income by 0.1% m/m in October against the forecasted growth by 0.3%.

By the end of the week the US dollar lost 0.50% according to the dollar index weakening for four weeks in a row. Currency dynamics was mixed. The dollar fell against the New Zealand (-1.94%), Swiss franc (-1.47%) and the euro (-0.87%) – but it grew Vs the Canadian dollar (+0.45%), Japanese yen (+0.41%), British pound (+0.15%) and Australian dollar (+0.09%).

There will not be a lot of important data during the second week of the month. In the USA on Tuesday Wholesale Inventories and Wholesale Trade Sales will be released; on Wednesday - Federal Budget Balance; on Thursday – Retail Sales, and import prices; and on Friday – Producer Price Index. From Tuesday to Thursday the U.S. Department of the Treasury will be holding long-term Bond Auction. James Bullard will deliver a speech about monetary policy on Monday.

In the euro-zone industrial output and ECB Monthly Bulletin will be released on Thursday. Industrial output will be also released in other euro-zone countries: in Germany – on Monday, in France and Italy – on Tuesday. In Germany Trade Balance will be released on Monday; and inflation – on Wednesday. On Tuesday Italian Final GDP for the second quarter will be released; and on Thursday – inflation data in France and Italy. ECB president Draghi will make a speech on Tuesday in Rome; and on Thursday – in European Parliament.

In the UK Industrial Output and Trade Balance will be released on Tuesday. Bank of England governor Carney will make a speech on Monday in New York. In Japan the Final GDP for the third quarter and Current Account will be released on Monday; on Tuesday - BSI Manufacturing Index; and on Wednesday - Core Machinery Orders.

In Australia NAB Business Confidence will be released on Tuesday and on Wednesday - Westpac Consumer Sentiment – but a labour report on Thursday may become the most important. On Thursday RBNZ Interest Rate Decision will be announced and a quarterly Press Conference of RBNZ governor Wheeler will be held. Bank of Canada governor Poloz will make a speech on Thursday about risks for Canadian financial system. In China inflation data will be released on Monday; and on Tuesday – industrial output, retail sales and investment.

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Overview of the main economical events of the current day - 13/12/2013

The U.S. Retail Sales Growth Supported the Dollar

The US dollar grew on Thursday Vs all major currencies after retail sales data that exceeded the expectations. The US retail sales showed the highest growth rates in November for 9 month and rose by 0.7% m/m Vs the expected growth by 0.6%.

The growth was mainly caused by auto sales increase by 1.8% - the highest for five months - Retail Sales ex Auto rose by 0.4% m/m having exceeded the expected growth by 0.2%. The sales of 8 from 13 major categories of retail goods increased in November, which can confirm a successful start of Christmas sales season in the USA. Consumer spending growth which is 2/3 of GDP, is a sign of economic improvement in the 4th quarter and it can bring the start of QE3 tapering closer.

At the same time employment market data showed an unexpected growth of Unemployment Claims which rocketed by 68 thousand last week to 368 thousand, the highest reading for two months. Initial Jobless Claims - 4 Week Average grew to 328.75 thousand from 322.75 thousand prior week. However, the US Department of Labor warned that the last week data could be a little distorted due to seasonal factors and holidays during the last two months of the years.

The Swiss franc had almost no reaction to the meeting of the Swiss National Bank (SNB) according to which the policy was kept unchanged as expected – but then it fell. SNB governor Jordan said that the franc rate was still high - downwards risks prevail in the economy, and its growth may slow down in the fourth quarter.

The euro fell after another futile test of $1.38 amid the decrease of euro-zone industrial output which fell by 1.1% m/m in October Vs the expected growth by 0.3%. The data released earlier this week showed industrial output decrease in October in France and Germany – the key countries of the European Union. Since November EURUSD has risen almost by 4% coming close to the height of 2013. ECB president Draghi said on Thursday that another LTRO line must be created to raise the chances that the program could reach real economy.

Australian dollar dropped Vs the dollar to the low of late August after Australian labour market data that showed unemployment growth to 4-year high in November. Employment Change grew by 21 thousand in November having exceeded the expected growth to 10 thousand. Extra pressure was put by the news that a number of companies are going to leave Australia or threaten with a significant reduction in the number of jobs. RBA Governor Glenn Stevens said that he expected Australian currency to fall to $0.85.

New Zealand dollar rose in the first half of the day after the RBNZ meeting where the key interest rate was kept unchanged but then it dropped. RBNZ said that inflation pressure started to rise and the necessity of further stimulation in the current volume is falling. The rate increase wasn’t considered yet but it can be raised if needed to support inflation about 2%. The rate must be increased by about 2.25% during the next two or so years – said RBNZ Governor Wheeler.

The yen again came close to annual heights Vs the dollar on Thursday. According to the QUICK poll, most Japanese analysts expect the Bank of Japan to start further monetary policy easing in spring of 2014. Canadian dollar stopped correctional growth of recent days and fell. Bank of Canada governor Poloz said again in his speech about the neutral position in regard to interest rate changes. He said that it might take two years for inflation to return to the target level of 2%.

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Overview of the main economical events of the current day - 16/12/2013

The Main Events of the Week

The US dollar grew on Friday Vs major European currencies but fell against the yen and commodity currencies. The euro and the pound continued correctional decrease of the prior day. The yen updated its annual low but then rose. Bank of Japan Governor Haruhiko Kuroda said that the central bank would take extra stimulation measures if consumer prices growth rates start weakening. Commodity currencies showed growth after a strong decrease of prior days.

The U.S. Producer Price Index turned out worse than expected and had dropped for the third consecutive month, which was mainly caused by energy prices decrease. Producer prices fell in November by 0.1% while no changes were expected. At an annual rate producer price growth accounted for 0.7% against the expected growth by 0.8%. The inflation fall can make it difficult for the Fed to take a decision of the start of QE tapering.

By the end of the week the US dollar had fallen slightly according to the dollar index by 0.10% having recovered almost all its decrease by the end of week after strong retail sales data, which strengthened the expectations of a possible start of QE3 tapering. The dollar grew Vs the Australian dollar (+1.52%), Japanese yen (+0.32%), British pound (+0.28%) and New Zealand dollar (+0.20%) – but it fell Vs the Canadian dollar (-0.51%), Swiss franc (-0.31%) and the euro (-0.27%).

The main event of the week and the whole month will be FOMC meeting on 17-18 December; its results will be announced on Wednesday – and also a quarterly press conference of the Fed governor Ben Bernanke will be held; and FOMC economic outlook for the GDP growth, inflation and rates will be published. It will be the last meeting of Bernanke as a Fed governor. And though most experts don’t expect QE3 tapering start – considering rather successful recent macrostatistics the process is possible to start. Last week President of the Federal Reserve Bank of St. Louis James Bullard insinuated it. Besides, the first reduction may be small, for example, by $5 billion.

There will be rather a lot of US data: on Monday - Empire State Manufacturing Index, Flash Markit Manufacturing PMI; on Tuesday – Consumer Price Index, Current Account and NAHB Housing Market Index; on Wednesday – Building Permits and Housing Starts; on Thursday – Existing Home Sales and Philadelphia Fed Manufacturing Index; on Friday - Final GDP for the third quarter. The US Senate will vote to pass or reject the nomination of Janet Yellen as Federal Reserve Chairperson.

In the euro-zone there will be Flash Manufacturing PMI & Flash Services PMI of France, Germany and the whole euro-zone; on Tuesday – the final inflation data; and on Thursday – Current Account. In Germany ZEW Economic Sentiment will be released on Tuesday; on Wednesday - IFO Business Climate; and on Friday - GfK Consumer Climate. ECB president Mario Draghi will make a speech on monetary policy in the European Parliament on Monday.

In the UK consumer price index and producer price index will be published on Tuesday, on Wednesday – BoE meeting minutes and labour market data; on Thursday – retail sales, on Friday – the final GDP for the third quarter and current account. The results of BoJ 2-day meeting will be announced on Friday. On Monday Tankan indices will be released; and on Wednesday – Japanese Trade Balance. In China HSBC Flash Manufacturing PMI will be released on Monday.

In Australia on Tuesday the Reserve Bank of Australia meeting minutes, New Motor Vehicle Sales and Conference Board Leading Index will be published; and on Wednesday - Westpac Leading Index. In New Zealand Westpac Consumer Sentiment for the fourth quarter will be released on Monday, on Wednesday - ANZ Business Confidence and Current Account; and on Thursday – GDP for the third quarter. In Canada Manufacturing Sales will be released on Tuesday, on Wednesday - Wholesale Sales and on Friday – inflation and retail sales.


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Overview of the main economical events of the current day - 17/12/2013

The Main Events of the Week

The US dollar fell slightly on Monday Vs the euro and the yen – and almost didn’t change Vs the pound and commodity currencies amid contradictory statistics. The US industrial output rose more than forecasted while manufacturing PMI strengthened less than expected. The euro was traded upwards amid the euro-zone manufacturing PMI growth to 31-month high.

The dollar recovered some loss after the U.S. industrial output release. Industrial output rose to 101.3 in November from 100.2 in October, having exceeded the top of recession for the first time and having shown the historical height – which has become another sign of the U.S. economic growth rate acceleration.

The U.S. industrial output rose by 1.1% in November compared with October while a growth by 0.6% was expected. This is the highest growth rate for a year. Prior month data were revised upwards. Capacity Utilization Rate grew by 0.8% to 79% above expectations.

At the same time manufacturing PMI turned out weaker than forecasted. Empire State Manufacturing Index rose to 0.98 p. in December compared with -2.21 p. in November while a growth to 5 p. was expected. Flash Markit Manufacturing PMI fell to 54.4 p. in December Vs the final reading 54.7 p. in November and forecasted growth to 55 p.

The euro grew on Monday after two days of decrease amid the euro-zone Manufacturing PMI growth. Euro-zone Flash Manufacturing PMI grew to 31-month high in December. At the same time euro-zone Services PMI dropped to 4-month low. Euro-zone Composite PMI maintained only to 3-month high. In France both manufacturing and services PMI decreased. In Germany only manufacturing PMI has risen which continues pulling the whole euro-zone.

The euro-zone trade balance surplus rose 1.6 times in October to 17.2 billion euro compared with 10.9 billion in September. ECB president Mario Draghi making speech in the European Parliament on Monday said again that economic recovery in the euro-zone was still fragile – price pressure would be still moderate and interest rates in the region would stay at the current low level for an extended period of time. Meanwhile, the ECB got 3-Year LTRO Repayment - for the loans given at the end of 2011 within LTRO first round – for the highest since February 22.7 billion euro.

The yen rose amid the decrease of Japanese stock market – Nikkei fell on Monday by 1.6%. Pressure was put by Chinese manufacturing PMI decrease. HSBC Flash Manufacturing PMI dropped to its low 50.5 p. for the past three months n December from 50.8 p. in November while the index was expected to grow. At the same time Tankan Large Manufacturing Index rose to its high in the fourth quarter since December, 2007. However, concerns managers worsened the forecasts of Business Spending for the current fiscal year and the next quarter estimate.

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Overview of the main economical events of the current day - 18/12/2013

Markets Wait for FOMC Meeting Results

The US dollar rose on Tuesday Vs the pound and Australian dollar, it fell Vs the yen and almost didn’t change Vs the euro amid the start of FOMC meeting which results will be announced on Wednesday. The pound dropped after a weak inflation report that showed a decrease of annual inflation rates to 4-year low. The euro had almost no reaction to German Economic Sentiment growth to its high for more than 7.5 years.

FOMC meeting on 17-18 December, the last one this year, may become conclusive. Many analysts estimate 50% probability of QE3 tapering at this meeting as American economy outlook is improving significantly. The markets wait for the Fed to take a decision on a small QE3 reduction – however, the probability of this step is not high.

More than 25% of analysts polled by The Wall Street Journal expect the Federal Reserve to announce QE3 tapering at December meeting already. More than 46% of analysts expect it till late January, 2014. According to December’s Bloomberg poll, 34% of respondents wait for the Fed to taper QE3 at this meeting. And another quarter believes that the reduction will start in January, the rest 40% wait for the reduction only in March.

The US inflation data were weaker than forecasted while current account and housing market data turned out better than expected. In November the US consumer prices didn’t change Vs October due to energy prices decrease – while a growth by 0.1% was expected. Annual inflation growth rates accelerated in November to 1.2% after a slowdown to 4-year low in October at 1% but turned out less than forecasted +1.3%. Weak inflation can make it difficult for the Fed to take a decision on QE3 tapering.

The US current account deficit fell to $94.8 billion in the third quarter, which turned out less than expected $100 billion. The deficit dropped to 2.2% GDP compared with 2.3% GDP in the second quarter. NAHB Housing Market Index rose in December by 4 p. to 4-month high of 58 p. – while a growth only to 55 p. was expected.

The pound dropped after a weak inflation report which showed a decrease of annual inflation growth rate in November to 4-year low of 2.1% from 2.2% in October while no changes were expected. Producer prices and retail prices also turned out worse than expected. The pound was slightly supported by BoE governor Mark Carney’s speech in the Parliament who said that the UK showed one of the fastest growth rates among G7 countries and there was no need in extra quantitative easing.

The euro had almost no reaction to German Economic Sentiment growth to the high since April, 2006 having recovered its fall by the end of the day. German ZEW Economic Sentiment grew to 62 p. in December against 54.6 p. in November having considerably exceeded the forecast 55 p. German ZEW Current Situation rose to 32.4 p. in December from 28.7 p. prior month.

Australian dollar dropped on Tuesday Vs the dollar to early August low after the release of RBA meeting minutes. The central bank said that it didn’t exclude the possibility of further interest rate fall – and further AUD rate decrease is necessary for economic growth. Besides, Australian Minister for Finance introduced a Mid-Year Economic and Fiscal Outlook providing a sharp decline of the budget and a weak economic growth in 2014. The budget is supposed to stay deficit-ridden for a decade.

In contrast to the AUD, the New Zealand dollar remained stable on Tuesday. New Zealand Finance Minister said that RBNZ was expected to raise interest rates in the first half of 2014. The yen continued strengthening for the third day in a row. BoJ governor Kuroda in the interview to the Financial Times made it clear that the central bank wouldn’t take new monetary policy measures besides those which are already used.

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