The currency market setup still supports the American currency. The lack of the convincing information from the side of the Government of Greece concerning the plans of the budgeting deficit curtail and economic recovery alongside to the just appeared problem – the apprehensions concerning the Austrian bank system have enforced the investors’ concerns and increased the willing to escape of risks. Under such terms the US dollar has got the support against all its major “opponents”. Moreover, the announcements from The Wells Fargo as for get back of the money supplies having been committed by the state authorities within the TARP Program have warmed up the interest for the dollar informing the market about the improvement of the affairs in the US bank system. Furthermore, the support of the “bugs” was also provided by the really weak statistics from the continental Europe published on Tuesday. After all the predictions as for FRS can acknowledge the perspectives even more optimistic at its next meeting also supported the American currency. Concerning the data of the US economy published on Tuesday they appeared to be controversial though contented no serious negative in concerns of the dollar. Moreover, the inflation indicators’ growth was able enough to support the opinion as the US regulator could incline to the side of the start of stiffening its own policy. The producers’ prices index (PPI) grew up in November for 1.8 per cent alongside to +0.3 per cent in October; in the annual comparison the uplift was for 2.4 per cent y/y. The analysts’ expectances were connected to the raise of the producers’ prices index in November for 1.0 per cent m/m only. The basic producers’ prices index being under the special attention of FRS increased for 0.5 per cent y/y, while the raise had been presumed for 01.2 per cent y/y. However, the New York FRB Manufacturing Report brought some disappointment, the business dealing condition index fell down in December to 2.55 from 23.5 in November; at that the indicators for perspectives were remarkable for their decrease – the new orders index fell down in December to 2.20 from 16.7 in a month earlier; and the employment index came back into the negative range and demonstrated -5.26 from 1.32 in November. The Investment Assets Trend Report over the state border of the USA, TIC showed the net purchases of the US long-termed securities amounted in October 20.7 Billion of dollar against 40.7 Billion of dollar in September. Meanwhile, the manufacturing in the USA uplifted in November to greater degree than it had been presumed; the growth for 0.8 per cent m/m is fixed at the expectances of +0.5 per cent m/m; at that the industrial capacities utilization increased to 71.3 per cent in November whereas predicted to see 71.1 per cent. The news going to be published today will be as many as significant and quite encouraging due to the forecast. The consumer inflation growth is expected; the consumer prices index (CPI) can mark +0.4 per cent m/m, +1.8 per cent y/y in November after 0.3 per cent m/m, -0.2 per cent y/y in October, and the core index was 0.1 per cent m/m, 1.8 per cent y/y. Besides, the market will attentively follow the development affairs as the forecasts expect the increase of the new housing developments and permissions in November. However, the payment balance results for the 3rd quarter can be negative as the deficit enlargement till 108 Billion of dollar against 98.0 Billion is expected. At that the market’s attention will be entirely concentrated at the FOMC decision concerning the rates going to be publicized today. FOMC is presupposed to announce neither the rates uplift nor the beginning of the special measures’ cutting though some hints on the nearest perspectives can most likely be. If it happens so the dollar will get a very serious support.
EUR
The market’s tunes concerning the euro still stay negative under the impression of the situation as for the state debts of some countries-members of the Euro zone. The Greece Prime-Minister’s speech has unlikely provided the appearance of the opinion that the state authorities make effective steps as for the tax-budgeting crisis overcoming. Moreover, “the fat in the fire” became the problems raised in the Austrian bank sector as one of the biggest banks – Hypo Group Alpe Adria was nationalized by the state authorities on short notice. In the forefront of such development of events the common European currency decreased against the dollar and GB pound on Tuesday. The economic news published at the previous session hasn’t also favored the European currency. The economic expectances in Germany worsened in December; the report of the German Institute of ZEW showed the economic expectances index had already been decreasing for the third month running and in December it had amounted 50.4 against 51.1 in November. The results of December appeared to be better than the forecast expected the index’s decrease till 49.5; though at the same time they appointed at the probable retardation of the tempos of the economic recovery after the durable growth having been observed before. Though the current terms index grew up in December to -60.6 from -65.6, but it also was worse than expected as presumed -60.1. The economic tunes’ index from ZEW for the whole Euro zone has also fallen down but more significant than in Germany; the indicator has fixed 4.0 after 51.8 by forecasted 50.9. The news of this day will unlikely alter the situation at the market though in accordance with the forecast it’s presumed to observe the positive dynamics in the business activity of the Euro zone in general and Germany in particular. The advancing provision managers’ indexes (PMI) both for the manufacturing and the services for December can be marked with another growth, however, the growth tempos of the indexes are expected with the retardation and exactly that can become the extra factor proving the sluggish economic recovery. The forecast for the manufacturing in Germany is 52.6, while it had been 52.4 before; for the Euro zone – 51.5, and before – 51.2; for the services in Germany – 52.0, and before – 51.4; for the Euro zone – 53.3, and before – 53.0. The final consumer prices index (CPI) will also be announced for the Euro zone for November; here it’s expected the consent with the preliminary evaluation, 0.2 per cent m/m, 0.6 per cent y/y, but alongside to -0.1 per cent y/y in the previous period; the dynamics of this kind can be labeled as active for the euro, though after the confirmation only, of course.
GBP
The British pound also decreased against the dollar on Tuesday trades. Though the downfall of the "cable" was fixed by the results of the day i.e., the pair GBP/USD continues to stay within the narrow range having been keeping the trades within its own edges for five days already; meanwhile, the euro denotes the new minimums every day. The sterling’s endurance of such kind may probably be explained with the considerable decrease of the anxieties as for the Emirates’ foundation and the declaration of the Moody's Rating Agency that AAA credit rating of Great Britain is stable. The "Isles" economic data published on Tuesday demonstrated the growth of inflation in Great Britain in November, the consumer prices index increased with very quick tempos from March-April 1990 and amounted +0.2 per cent m/m, +0.2 per cent y/y, the core consumer prices index was also maximal from November 2008, +0.2 per cent m/m, +1.9 per cent y/y, and the consumer prices index fixed +0.3per cent m/m, +1,9 per cent y/y, after 0.2 per cent m/m, 1.5 per cent y/y, in October. In another situation such price dynamics would be able to blow up the market in favor of the sterling, though this case it hasn’t happened so and it gives the unique signal that the market not only fails to expect but also is sure in the absence of some stiffening reaction from the side of the Bank of England at any rate in the foreseeable future. The data going to be published today will demonstrate the state of affairs concerning the employment in Great Britain. The retardation of the growth of the number of the redundant payment appeals is expected in comparison with the tempos of the previous months against the background of activity’s features in the sphere of employment. The November unemployment may stay at the previous positions of 5.1 per cent, but after the MOT methodic it is expected to see the uplift of the level for 0.1 per cent till 7.9 per cent. Though as it seems the macro indexes of GB economy, as things stand now, won’t become the drivers for the sterling; the "cable" positions will be under the pressure of the news form the USA as for the FRS decision and commentaries.
JPY
The special interest to the dollar amidst the general political information, not bad data about the US economy and the expectances of signals from FRS concerning the probable “stiffening” have determined the purchases of the “bugs” against the yen on Tuesday trading. The economic data from the “Land of Rising Land” having already been published today demonstrated the improvement as for the services; the business activity index for this sphere in October marked the raise for 0.5 per cent against -0.6 per cent in September. At the current trading the yen has ceased its decrease and as it seems will be located within the lateral trend due to the expectances of the information from FRS concerning the rates. As for more long-run prospects as it has already been denoted most likely there’s a reason to expect the decrease of the Japanese currency by cause of the profitability’s alternation to the worse side in comparison with the dollar and against this background – the warming up of the interest to the yen as a foundering currency for the carry-trade deals.
Analysis prepared by:
Arkady Nagiev
Forex4you analyst
