The trades were oppositely directed at the previous session. Summarizing that, the US Dollar strengthened to the Euro, lost to the GB Pound and kept the same rate to the Yen, though it was mainly loosing at this cross as well. It’s worthy of note that the trades were mainly sluggish and demonstrated a little higher volatility in the beginning of the American session only. The pronouncement of the G20 resolutions aroused contradictory emotions and never gave a handle for the evident preferences and so, opening great positions by the investors. The declarations of the summit resolved to the promises of the budgeting deficits’ cutting down twice till 2013 and steadying of the ratio of the debt to GDP till 2016. The final protocol stated the countries keeping different preferences would achieve the target levels of 2013 and 2016 in different tempos. Quite likely, the prospect of the kind encouraged the opinion among the investors that the US Dollar’s positions were more attractive all the same, because the USA were apt to pursue a policy of further economic easing, whereas the European countries were prone to greater cutting down of the budgeting deficits. The Euro was certainly sold against this background, while the GB Pound took advantage of the next coming statements of the BoE representative concerning the necessary tightening of the monetary policy. Most likely, the market will focus its attention on the economic data under such conditions. The yesterday published statistics showed the American consumers increased their expenditures in May alongside to the upturned personal incomes. In accordance with the represented data, the consumer expenditures grew up for 0.2% m/m, while the personal incomes – for 0.4%. Also possible, the moderate tempos of the price increase also favored the raise of the consumer sentiment. The core consumer price index, discounting the food products and energy resources prices, grew up for 0.2% m/m and 1.3% y/y in May. The general price index remained unchangeable compared to the previous month, +1.9% y/y. The data from the FRS Chicago, which represented the national ISM index, were considered as reasonably good. The indicator noted the decline till 0.21 in May against previous 0.25; though this result states the business activity exceeding the average level. The compounds – indicators of sales, order and commodities – slightly rose up also. However, the news from the Texas disenchanted, because the general purchasing managers’ index (General PMI) fell down till -4.0 in June against 2.9 in May according to the report of the FRS Dallas. The manufacturing index slid down to -1.9 in June just after 20.8 before, the new orders also crushed down, -8.2 compared to 15.8 in May, and finally, the Payrolls fell down to 4.3 from 11.5. The today news brings the data on the consumer confidence index in accordance with the line of the Conference Board, which is presumed sagging and to make 62.5 n June against 63.3 in May; and also the data on the home prices in the US largest megacities. The S&P/Case-Shiller report will most likely demonstrate the weakness of the home price index in 20 largest megacities, because the forecast predicts -0.35% m/m, 3.5% y/y. It’s worth being said, these results leave much to be desired as for the US Dollar; though they will make no harm for the “greenback” due to the current environment at the market.

   The exacerbation concerning the perspectives of the global economic raise amidst the strict intents of the largest economies all over the world to stick to the austerity supported the US Dollar, but suppressed the Euro. The common European currency lost to all majors and fixed almost -100 points to the “buck”. The results of the G20 summit instigate an opinion that the FRS will most likely tighten its money-crediting policy short term, whereas the European Central Bank will uphold its current positions as for this matter. That will make difference between the interest rates in favor of the “greenback”. The Monday statistics showed a discerning dynamics at the EU crediting market. The annual weakness of the broad money supply indicator within the Euro zone made up 0.2% y/y within the Euro zone, despite the analysts foresaw the upturn of the M3 aggregate for 0.4%. Besides, the Conference Board compound advancing index of the Euro zone lowered down for 0.5% in May. The comments of the Conference Board’s representatives intended to expound such result as the probable reaching of the highest possible peak by the economic rally in the 2nd quarter, and so, there’s a probability of the weakness in the near future. The German data noted the raise of the consumer prices, as the index grew up for 0.1% in June, which was just within the forecasted values. Today the EU news is going to represent the June “sentiment” indexes. Both the confident indexes for the manufacturing and services branches and also the consumer confidence are predicted to remain unchangeable; though the business behavior index is foreseen sliding down to 0.32 from 0.34 due to the worsening of the environment. To say it shortly, no support is expected from the economic data. Considering the above mentioned attitude to the Euro at the market, it’s reasonable to presume the continuation of the common European currency’s decline.

   The Sterling kept its leading positions at the last session and so strengthened to all its major “opponents”. Nevertheless, the British currency slightly incurred pressure in the begging of the day. The interpretation of the G20 summits’ results obviously made a negative impact on the GB Pound as well. However, the Hometrack report somewhat supported the currency as it stated the British home prices grew up for 0.1% in June against May and for 2.1% compared to June 2009. Furthermore, the GB Pound began its strengthening, which was continued till the end of the day due to the expectances of the speech of the member of the Committee for the Monetary-Crediting Policy of the Bank of England E. Sentance, who sprang a surprise on the market last week by his voting for the increase of the interest rate for 0.25% following the minutes of the BoE last meeting. The announcements made by this very functionary in his interview to the Reuters Agency confirmed his attitude, because it was noted the financial tightening, which had been declared in the Emergency Budget, never cancelled the necessity to start the gradual stiffening of the monetary policy. That easily contributed to the support of the “cable”. The today news is going to demonstrate the dynamics of crediting in the “Isles” together with the changes in the money supply i.e., the M4 money aggregate. The forecasts predict the upturn of the private crediting till 0.9 Billion and mortgage loaning for 0.1 Billion of Pound alongside to the increase in number of the mortgage loan appeals from 49.9 to 51 thousand. No negative data are predicted for the GB Pound; if no ill news appears in fact the British currency will have all chances for the continuation of the advance. Though, the general attitude of the market may probably make some adjustments and get back the GB Pound under pressure as Great Britain pursues the policy of cutting down to a far greater degree, just like the Euro zone in general.

   The currency of Japan remained neutral to the US Dollar summarizing the yesterday confrontation, though the Yen mainly had the advantage of the “buck”. The investors’ attitude to the trading at this cross resolves to the expectance of the negative economic data from the USA. That’s why the market prefers the Yen. The positions of the kind will obviously be maintained till the end of the week, until the publication of the Main Labor Report in the USA. The today represented data on the Japanese economy have shown the frustrating picture, as the industrial production dropped down for -0.1% m/m, 20.2% y/y in May just after previous 1.3% m/m, 25.9% y/y alongside to the expectances of 0.0% m/m, 20.3% y/y. Furthermore, the unemployment rate rose up to 5.2% from 5.1%, despite the forecasts of sagging till 5.0%; the households’ expenditures went ahead decreasing and showed -0.7% y/y in May thereupon -0.7% y/y earlier, and alongside to the analysts’ expectances of the raise for 0.3%. Nevertheless, the Yen is strengthening at the current session as well, because the investors obviously prefers to complete the carry trade deals and get back into the Yen in this “time of turmoil” when the inclination to risk falls down.

Analysis prepared by:

Arkady Nagiev
Forex4you analyst