The former week turned out to be mild enough. The trades’ result incited the opinion that the summer holidays begin to influence upon the market. The US Dollar slightly yielded to all majors, though the controversies of the currencies swayed to and fro in the course of the session. There were trading exciters both pro and contra the “greenback”. The main subject, which caused the negative totals for the “buck”, was the matter that the investors noticed the signs of the economic recovery, and that encouraged the sales of the American currency against the risky assets. Quite a nice impulse for the raise of the risk inclination was made by the Chinese economic data as the trading balance surplus suddenly multiplied 11.5 times in that country. Besides, there were some other causes for the sales of the “buck”: for example, the statements of B. Bernankey about the American economic recovery. It’s interesting to notice that the market whistled over the hint of the Head of FRS concerning the interest rates, which might be risen up before the unemployment falls down till the adequate rates as the inflation may get beyond the control. Meanwhile, there was also the news favoring the US Dollar – the reminder about the troubles in the Eastern Europe, for example. The inaccurate data on the budgeting deficits in Hungary and Bulgaria raised popularity of the US Dollar just the same as the rating agencies’ assaults of Great Britain. Probably, the G20 summit of the Ministers of Finances and the Governors of the National Banks also offered its mite in the market’s optimistic climate due to the statements of the encouraging increase of the global economy, whereas nothing essential was pronounced in fact, as usual. The data on the US economy demonstrated nothing of note as the trading deficit increased in April till its maximum since the end of 2008; the retail sales suddenly curtailed in May for 1.2% compared to the April value, but for 1.1% only while excluding the car sales. The IBD/TIPP economic sentiment index decreased in June, but the consumer confidence upturned in the same month – both according to the version of the ABC News/Washington Post and the report of the University of Michigan. The consumer crediting grew up for 1 Billion of dollar in April, however, the March values were revised with the meltdown to -5.4 Billion from +2.0 Billion of dollar. There’s going to be much data on the economy of the USA. The inflationary figures hold a high position within this package, at that the General PPI and CPI are expected decreasing to some degree in May, though the Core indicators i.e., except for the food products and energy resources, - with the raise. By the way, FRS pays its attention to the latter of those data exactly while counting the price dynamics. Furthermore, the forecasts promises nothing optimistic in the development branch as the recent developments are expected decreasing, but the developmental permits with the growth. Generally speaking, the forecast are giving controversial prophecies, but the truth is that more pessimistic. Basing upon the former week, when the optimism was the main driver of the market, it reasonable to presume the US Dollar’s comeback to the leadership at the market during the started session, because the inclination to risk may occur low-rated again most likely.

   Despite the Euro marked out the annual minimum in the beginning of the former weekly session, its positions to both of the currency shelters i.e., The US Dollar and Yen, were steady. At first, the dumps and the increasing apprehensions as for the common currency were caused by the rumors about the sorry state of the Hungarian and Bulgarian national budgets, and also more and more persistent and emphatic claims about the Euro’s insolvency, and more over, its probable extinction in next five years. The disappearance of the negative excitement happened thanks to the positive attitude of the Chinese investors who declared their assurance in the positive prospects for the Euro and considering the decline of the common European currency as a natural consequence of the debts’ crisis. By the way, later on the macro data of “The Heavenly Empire” also supported the Euro, which demonstrated a fair good profit to the US Dollar summarizing the trades. As for the Euro zone’s economy, it showed the indicators, which neither suppressed the common European currency, nor provided any special support. The raise of the manufacturing orders was observed in Germany as it occurred to be +2.8% m/m in April just after +5.1% m/m in March. The manufacturing within the Euro zone in general grew up for 0.9% m/m in April, while it was +13.3% per annum. The German current account balance remained unchangeable in April; the surplus was state at the former degree. However, the inflation advances its attacks, because the German producers’ transfer prices up-rocketed again for 0.3% monthly and for 6.2% per annum. However, the consumer prices cause no concerns up to the moment due to the dull demand. The ECB decision concerning the interest rate was predictable; and the comments of J.-C. Triche afforded no grounds for any presumptions of changing the European regulator’s policy in the nearest time. The news package for the current week isn’t fruitful for the publications that touch upon EU. Moreover, as it seems, there’re no special reasons for looking forward for any positive influence upon the common European currency, because the German indicator of ZEW will most likely demonstrate another decrease of the business behavior in June amidst the debts’ crisis and formerly scheduled austerity as for the budgeting expenses. Furthermore, the consumer inflation within the Euro zone is predicted to show the raise of dynamics as for the food products’ prices in May. The slowdown is also expected in the monthly upturn of the manufacturing in April and also concerning the Payroll expenses in the 1st quarter of the current year. As already mentioned before, the economic indicators of the Euro zone may become extra reasons for pressure on the Euro.

   The GB Pound experienced the evident raise in popularity during last week and so, fixed the gain in the controversy both to the US Dollar and Yen. Nevertheless, there were also days when the British currency suffered from great pressure: for example, the memorandum of the Fitch Rating Agency as for the persuasive suggestion of rapid budgeting deficit’s curtailing for Great Britain suppressed the “cable” last Tuesday. Moreover, the dull data from the USA on Friday gave a handle for sudden downfall of optimism and also pressed upon the Sterling. The statements of the new Prime-Minister J. Cameron about the necessity of taking measures for cutting down the budgeting expenses at the very moment already targeting to avoid the fact of doubling the interest payments in 5 years haven’t also favored the good attitude to the Sterling. Nevertheless, the positive weekly totals were fixed for the GB Pound. The economic statistics from the “Isles” noted the slowdown of the economic processes’ dynamics, because the manufacturing production curtailed for 0.3% m/m in April and also for 0.4% per month as for the processing branch. The PPI entrance prices decreased for 0.6% per month this time; the increase of the retail prices slowed down in May, finally, the slight decrease of the home prices has been observed for the recent months. The Bank of England’s survey of the inflationary expectances stated the decline. It means the derogation of the former hopes for the stiffening of the policy from the side of the British regulator. By the way, the clarification of the matter of the inflation and prospects as for the expectances of the interest rates’ increase might occur at the present week already, due to the presumed publication of the plenty of data, also including the inflationary report among all others. The retardation of the annual increase in the consumer price index (CPI) is currently presupposed in Great Britain – it showed up in May as the index is going to state -0.2% m/m and 2.0% y/y. In relation to the budgeting troubles the data on the state finances will be interesting, of course. As expected, the state borrowings may show sudden raise in May in comparison with April, and that in its turn may upgrade the negative attitude to the British currency and also give a handle for predicting even more complexity of the British government’s current task. The data on unemployment may gladden, because the number of the preliminary jobless claims are expected decreasing more. At the same time, the prospects of the labor market urge cautions due to predictable significant cutting down of the governmental expenses, and so, the decrease of the State Payrolls, of course. Concerning the positive tendencies, the forecast of the May raise of the retail sales may be also mentioned. In other words, the variety of the news picture is ambiguous as for the Sterling. As it seems, however, it never encourages any special optimism and also affords no grounds for expecting the sudden changes in the long-term trend for the British currency to the US Dollar. Obviously, the currently predominating “bearish” direction will maintain its positions.

   The currency of Japan was traded within the relatively narrow range to the US Dollar and marked with strengthening the moments of the investors’ departure out of risk, and the increase of the inclination to risk – with the decline certainly. The expectances of clarification the prospects of the process failed, because the new Prime-Minister hasn’t made any hints about his intents concerning the national currency still yet. The economic data stated the almost coincidence of the précised estimation of the Japanese GDP for the 1st quarter to the preliminary one i.e., the increase stayed at the degree of +1.2% per quarter, though grew up for 0.1% annually. The machine building orders grew up for 4.0% m/m and 9.4% y/y in April. The Japanese current account balance stated in April the surplus almost double-sized more than a year ago: the export grew up for 43% and the import – for 26% per annum. The growth of the producer’s transfer prices was also observed – it was +0.1% m/m and +0.4% y/y. However, the banking crediting goes ahead sagging even accelerating, as it was -2.1% y/y in May compared to 1.9% y/y in April. There’s going to be not much news about the Japanese economy this week. The most of the attention will be focused on the decision of the Bank of Japan, the minutes of its meetings and also the monthly report of the Japanese regulator. Besides, the data on the business activity in the services will also cause interest. The increase of the services’ index is expected to +2.5% in April just after -3.0% in March. However, as is sometimes the case, the statistics won’t become the factor, which determines the moves of the currency of “The Land of the Rising Sun”. In this context, the market will focus its attention on the newly emerged government of the country and also its statements, of course. If the advocate of the dull Yen N. Khan makes a slightest hint on the inadequacy of the currency’s positions to the economic tasks the Yen will occur under massive pressure.

Analysis prepared by:

Arkady Nagiev
Forex4you analyst