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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.

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