The Thursday session passed away without ruffle or excitement. The US Dollar was less suppressed by the European currencies, but still steadily sold for the Yen. Obviously, “the heat of the moment”, which spurred the inclination to risk and was provided by the Federal Reserve’s Fabian statement toughing upon the economic growth and inflation, is sloping to zero. Moreover, the recently published US economic data never positively influenced upon the upturn of the risky assets purchasing. Summarizing all that, the US Dollar slightly gained to the GB Pound, lost a little as for the Euro and sank down concerning the Yen reasonably enough; the latter fact vividly speaks well about the downgrading of the willing to risk. Both the stock indexes’ narrowing and T-Bonds; price increase were quite natural against this background. The durable goods’ orders cut down in the USA in May by reason of the transport orders’ decrease, especially concerning the commercial air-crafts. In accordance with the represented data, the orders curtailed for 1.1% in May, whereas it had been forecasted -1.5%, though they grew up discounting the transportation – the result was +0.9% thereupon the April sinking down for 0.8% in this case. The weekly employment rate turned out to be reasonably good: following the data, the number of the preliminary jobless claims lowered down for 19 thousand, till 457 thousand, whereas the decrease was predicted for 7 thousand only. The capacity of the secondary also descended, moreover, the previous value was revised upgrading. However, the regional news didn’t bring magnificent hopes, because the manufacturing growth retarded in June judging from the FRS Kansas-City report, and the manufacturing index made 3 after 5 in May and 24 in April, while the annual value slid to 9 thereupon 16 in May. The today news will attract attention to the presentation of the final estimation of the US GDP for the 1st quarter. The forecast resolves to +3.0% q/q, and no changes are predicted. Though, if to remember the FRS statements about the economic raise, the suspicions of downfall of this indicator emerge. Besides, the University of Michigan consumer sentiment index will be also interesting – most likely, the previously mentioned value of 75.5 will remain unchangeable.

   The common European currency fixed a slight gain to the US Dollar on Thursday, though it was under pressure in the course of the trading as well. The Euro’s credibility was obviously supported by the impressions of the Wednesday statements of FRS and also favorable enough statistics on the US economy. Also possible, the reasonably good data on the EU economy were considered as well, though they made no impact on the market just in the moment of their publication. The new manufacturing orders grew up for 0.9% m/m and 22.1% y/y in April; and that has been the greatest annual upturn for recent 10 years. The essential increase was stated in the production orders: +1.1% m/m and +23.1% y/y, and that evidently causes the predictions of steady positive in the most important branch of the Euro zone economy. Most likely, the information about the upturn of the consumer expenses in France and downfall of the Italian unemployment also favored the good moods. There’s going to be not much EU news. The special attention will be put to the data on GDP of France for the 1st quarter, which is expected without any revisions, 0.1% q/q, 1.2% y/y, and also the German import price index, which is forecasted upturning for 0.1% m/m and 8.0% y/y. Due to both the absence of negative and anticipation of the week-end the Euro will probably keep the range trading, if certainly no ill news spreads from the Euro zone. By the way, the analysts’ speak louder about the necessity for the European countries to coordinate their efforts to cut down the budgets; otherwise, the deflation will cause even deeper recession. This opinion is obviously taken into account by the investors as it may be a market’s driver in the closest time. It means, the Euro isn’t foreseen to be stable long term.

   The British Pound made an attempt of further upturn at the Thursday session as well. The recently publicized Emergency Budget of the “Isles”, which was estimated as “reasonably good” by two of the most authorized rating agencies – the Fitch and the Moody’s - impressed the market; and this attitude was the main driver of the market, in fact. In substance, these efforts have succeeded, because the cross of GBP/USD checked up the new local maximum. Though, the Sterling began sagging in the second half of the day and completed the session slightly loosing to the US Dollar. Quite probably, it was a natural consequence from more guarded and prudent comment on the British budget from side of the third rating agency – the Standard & Poor’s. That statement aroused the sales-offs of the “cable”. Yesterday no economic news was published, neither today anything new is going to be represented. That’s why the GB Pound may be further traded within the shaped short-term range. As concerning the prospects, whatever impressions were made by the statements of great chances for Great Britain to maintain its crediting rate of AAA it would never be the supporting factor for a long time. The interest rates aren’t also forecasted to be increased in the close time as well, despite the results of the BoE Committee’s voting; though the expenditure cut and financial tightening are quite possible to happen and so cause the slowdown of the economic recovery. That’s why there’s a considerate ground for negative attitude to the Sterling.

   The currency of Japan rang the bell with the market at the session on Thursday. That’s why it strengthened to all major currencies. The gain to the US Dollar was of an absolute nature. The up-rocketing of the US T-Bonds’ prices, and the weakness of their profitability respectively obviously caused the massive departure out of the US Dollar assets and Yen’s purchasing. The data, which have already been represented today, stated the sagging of the consumer prices. That may be considered as a favorable point of “The Land of Rising Sun”, because the May consumer price index (CPI) showed -0.9% y/y thereupon -1.2% y/y all over the country. The dynamics of the Core CPI, excluding the food products and power resources, is analogous: -1.2% y/y just after -1.5% y/y, while Tokyo CPI demonstrated -1.3% y/y in June after -1.6% y/y before. As concerning the Yen’s near term prospects, the currency has enough ground for the continuation of the upturn due to the anticipating G20 summit. The summits intents to consider the matters of more tight market regulation and enhancement of the financial discipline don’t certainly uplift spirits, and moreover, spark off the probable price decrease at the stock markets, which will result in cutting down the carry trade deals with the participation of the Yen. Besides, the further decrease of the United States T-Bonds’ probability is also probable by reason of the persistent market impressions of the FRS conservative value of the economy.

Analysis prepared by:

Arkady Nagiev
Forex4you analyst