The results of the former session showed the raise of the inclination to risk, and so, the American currency fixed the loss to all majors against this background. The US Dollar had the advantage of the Euro and attempted to balance to the GB Pound in the first half of the Wednesday trades. This was stated thereupon the data on the US economy showed the sales decrease at the primary real estates market in May. This information made a positive impact on the Yen’s positions to the “buck” and also added impulse to the purchasing of the Japanese currency. The environment was changed by the comments accompanying the pronouncement of the decision of Federal Open Market Committee (FOMC) concerning the key interest rate. The US Dollar suddenly tumbled to all major “opponents” and so, enhanced the loss the GB Pound and Yen, while the common European currency completed the day above zero. The statements of the FRS top-management pointed to the prolonged maintenance of the low interest rates as the unemployment was predicted high, whereas the inflation – low. Moreover, the FRS administration downgraded their estimation of the American economy. As concerning the macro data, which were represented at the previous session, they demonstrated the slumping sales at the United States primary real estates market till the lowest recorded level over the entire history of the economic statistics. In accordance with the represented data, the home sales per family fell down for 32.7% m/m and made up to 300 thousand per annum. The lack of the state tax benefits for the home purchasing became evident to the full extent and meant that all gains of the US home market were grounded on the state easing. The analysts’ expectances resolved to less disappointing picture and forecasted the sales decreasing for 20.6% till 400 thousand in May. The today news isn’t long on the economic information about the USA. The only weekly employment rate, where the shortage of the jobless claims for 11 thousand till 461 thousand, is going to be represented together with the data on the durable goods orders with probable shortage per month: -1.2% m/m just after +2.8% m/m in a month before. The cut down of the orders will probably upset the investors as an advancing indicator, but for a while only. Most likely, the technical factors will be able to change the situation in the US Dollar’s favor, because the prospect of the profit fixation is very attractive, especially concerning the cross of GBP/USD.

   The common European currency was traded within the range in the first half of the former session. The Euro was supported by the business data as the purchasing managers’ index (PMI) turned out to be a little better than forecasted. At the same time, the common concerns about all the same debts’ troubles in the European block suppressed the currency. The sales-offs of the common currency increased thereupon the publication of the data on the US primary real estates market, and so, the Euro lost to the US Dollar till the new daily minimum due to the investors’ sudden departure out of risk. Despite all that, the session was completed in favor of the common currency, which gained thanks to the FRS reports. The Euro zone’s economic statistics showed the slowest possible expansion rate of the business activity 3 months. The purchasing managers’ indexes (PMI) demonstrated contradictory values – alongside to the foreseen sinking of the manufacturing indicator to 55.5 and the services one to 56.0, the actual state of affairs occurred less upsetting, because it was 55.6 and 56.1 respectively, in fact. On the contrary, in the EU largest economy, Germany, the activity growth rate rose up in June, as the compound purchasing managers’ index (Compound PMI) reached its bimestrial maximum, 56.6 after 56.4 in May; though its structural components – the indexes both for the manufacturing and services sank down in this country, and that speaks well for tempos slowdown. There’s going to be little news about EU today. The April data on the manufacturing orders are expected with the predicted growth: +1.6% m/m, +21.8% y/y after 5.1% m/m, 20.3% y/y. The statistics will probably make no influence upon the Euro; but the troubles about the national debts of the EU countries goes ahead being a factor of influence upon the Euro, and moreover, the technical factors may currently join them, because the common currency has approached to the powerful resistances in its controversy to the American Dollar.

   The GB Pound obviously availed of the most favorable environment at the Wednesday trades. The lack of willing to risk of the first half of the session never influenced on the British Pound, which demonstrated the heightened endurance. The sales-offs of the “cable” occurred after the publication of the dull results in the USA, though they were impermanent, and the Sterling managed to keep the greater part of previously gained positions to the US Dollar. The British currency was supported by the minutes from the meeting of the Committee for Monetary-Crediting Policy of the Bank of England, which were publicized on Wednesday and stated the voting of one of the Committee member, E. Sentance, for raising the key interest rate, despite the foreseen results concerning both the rates and the capacities of the T-Bonds’ retirement fund. That fact, this claim for monetary tightening became the first experience from the beginning of the crisis, obviously made a great influence upon the market and so aroused interest in the Sterling. The report of the Moody’s Rating Agency also added to the GB Pound’s popularity, because this international institution professed the recently adopted British state budget would provide the maintenance of the national crediting rate of the country at the top degree of “AAA” with a “stable” forecast. The FRS comments about the maintenance of the low interest rates was one more factor of support for the Sterling, because the GB Pound up-rocketed to the new local maximums both to the US Dollar and Euro thanks to this information. Finally, the yesterday represented macro statistics also stack with the “Briton”, as the number of the approved mortgage loans grew up to 36 709 in May compared to 35 964 in April, whereas the forecasts resolved to 36 100; the retail sale index also showed the advance to -5 in June from -10 in a month earlier. However, there was also “a fly in the ointment”: as BBA reported, the net crediting of the non-financial corporations curtailed for 1.3 Billion in May thereupon the decrease for 1.2 Billion of pound in a month before. It’s reasonable negative, because the prolonged slowdown of the non-financial companies crediting was stated due to limited demand for the crediting by reason of the reluctance to expend business, which may be the result of lack, or better to say, dull composite consumer demand. Nevertheless, the market didn’t mind it in the course of the yesterday trading by reason of the rejoicing. There isn’t going to be any essential news from Great Britain. The GB Pound will be traded as affected by both the exterior information and technical factors, which concede the profit fixation as well.

   The dull values of the US economy usually instigate the strengthening of the Japanese currency. The Wednesday trades were no exception. The Yen gained to the US Dollar thereupon the represented sale fracture at the primary real estates market; moreover, the ready home market showed the like dynamics, as known. The FRS comments on the monetary-crediting policy also failed to get in the road of the strengthening Yen, as the purchasing of the Japanese currency upturned just after the publication of this information, even more, a new local minimum to the US Dollar was fixed at 89.70/75. Yesterday nothing was published as for the Japanese economy. Though, the data, which have already been represented today, pointed to the derogation of the foreign trading as the trading balance surplus curtailed till 416.1 Billion in May from 729.1 Billion in a month before, while the forecast predicted 626.8 Billion of Yen. The causes of the trading balance totals’ slackening were the export decrease from 40.4% y/y to 32.1% y/y alongside to the import increase from 24.2% y/y to 33.4% y/y. The today publication has also contributed to positive, as the slowdown of the price decrease was stated: the corporative services price index was fixed at -0.8% y/y in May after -1.1% m/m. Assuming the US economic news is predicted not in the best plight and order, the Yen’s near-term prospects will concern the advance of this currency, most likely. Though, there’re also risks of influence by the technical factors considering the cross of USD/JPY, as the supports are powerful because of the pair’s approaching to the annual minimums.

Analysis prepared by:

Arkady Nagiev
Forex4you analyst