The inclination to risk, or better to say the lack of it, goes ahead driving the market, as it was surely proved at the trading session on Wednesday. The US Dollar gained to the GB Pound and lost to the Yen. The “greenback” slight decline was also observed to the Euro, but it was caused by the sudden lack of interest in the borrowed assets in the Europe while the ECB was holding the tender of three-month crediting. The data on the economy of the USA afforded ground for greater doubts in the stability of the recovery. The ADP data on the private sector employment’s dynamics stated the raise in June, but much less than predicted as the Payrolls grew up for 13 thousand, whereas the upturn for 60 thousand was presumed. However, the May value was revised upgrading, though with the increase for 2 thousand only, from 55 to 57 thousand. The report of the business activity didn’t also encourage elation, because the New York indicator demonstrated slowdown in June. In accordance with the represented by ISM New York data, the current conditions index slid down to 69.3 since after 89.9 in May, when there was a rapid upraise and gain for 27.7 points. In Chicago the situation was just the same – the ISM of this region reported the downgrade of the purchasing managers’ index (PMI), which is known as the “Chicago business barometer”, to 59.1 compared to 59.7 in May and also against 63.8 in April. The June forecast predicted 58.5. The news of this day is going to represent the information about the weekly employment: these data are of great importance just before the publication of the Main Labor Report. The forecast predicts some shortage in number of the preliminary jobless claims, for 3 thousand, though the essential increase of the secondary ones, almost +20 thousand. Besides, the ISM index for the manufacturing will be in the focus of attention with the probable decrease to 58.9 from 59.7. The data on the number of the outstanding home sales deals in May will also arouse great interest due to probable -7.4% by reason of slumping sales. However, the real estates market environment will be improved soon most likely, because the US state authorities concluded to give further effect to the home purchasing tax benefits till this September. As is seen, nothing favoring optimism is expected from the data on the US economy. That’s why the upturn of the US Dollar is most probable, but most likely, it’ll be limited, because the investors are just setting mind on the event of this week i.e., the publication of the Main Labor Report in the USA, which is planned for tomorrow.

   The common European currency slightly advanced at the last session due to the support from the ECB tender of three-month crediting. The demand for the liquidities turned out to be worse than forecasted as the Banks were interested in 133.933 Billion only, while the analysts expected the loans in amount of about 250 Billion of euro. The assets’ capacity wasn’t limited. Actually, the Bank could get the necessary amount at interest of 1.0%. That’s why the result of the kind was considered as a justification of the absence of problems of assets’ deficiency at the Euro zone financial institutions. That also meant the latter were able to fulfill their obligations without any supplemental assistance. Of course, it became a good reason for optimism, so the Euro occurred in the forefront of purchasing increase amidst the upturn of the European stick indexes. However, the common fears about the economic increase together with the data from the USA, in particular the ADP report, and finally, still acute debts troubles of the Euro zone countries suppressed the common currency, which lost some part of recently got positions and kept a little gain to the US Dollar only. The publication of the Euro zone’s economic statistics made no influence, because the result was quite predictable: the number of the German jobless decreased for 21 thousand, despite the forecasts of -23 thousand, so the unemployment rate kept the previous mark of 7.7%. The consumer inflation fell down a little all over the Euro zone as the consumer price index occurred at 1.4% after 1.6% in May. The today news is going to represent the ISM data on the manufacturing of the Euro zone in general, Germany and some other leading countries of the block. The June PMI is foreseen remained at the value of the advanced estimation in Germany, France and in the Euro zone in general, while the Italian one is predicted sagging. Besides, the data on the retail sales in Germany will also arouse interest due to the probability of the essential increase: 0.5% m/m and -0.6% y/y thereupon -0.5% m/m and -3.1% y/y before. Also possible, the Euro would get a support by reason of this publication, but for a short while only, as it seems, because the anticipation of the data from the USA has already begun to make their impact on the market and will have kept tension till tomorrow.

   Generally speaking, the British Pound incurred pressure all over last session and so completed the day with significant loss to the US Dollar. Obviously, the first impression of the GfK data on the consumer confidence in Great Britain, which were worse than before, was influencing the whole day. Furthermore, the general market layout never encouraged the raise of the inclination to risk. Moreover, the later published economic data from the “Isles”, which demonstrated positive, failed to change the environment greatly, but caused the transient “cable” purchases influxes only. The consumer confidence index fell down to -19 points from -18 in May i.e., exceeded the forecasts. That might be caused by the expectances of the state expenditures retrenchment and also fiscal tightening. However, the British home prices up-rocketed in June as compared to the previous month, though with slowdown. The home price index grew up for 0.1% m/m and 8.7% y/y, whereas it was +0.5% m/m and 9.8% y/y in May. The business investment also rose up: it was stated 7.8% q/q and -7.7% y/y of the upturn in the 1st quarter, despite the presumed +6.0% q/q and -11.0% y/y. Today the publicizing of the British business activity “triptych” is going to start. The market is looking forward for the announcement of the manufacturing activity – the PMI for this branch is like to slide down to 57.6 from 58.0. Besides, the Bank of England Quarterly Credit Conditions Report for the 2nd quarter will also attract attention. Neither special negative nor essential positive is expected. So, the news is going to make no influence, in fact. That’s why the Sterling will stay within the ranges with the inclination to slight loss to the “buck” amidst the expectances of the tomorrow US Main Labor Report.

   The Japanese currency remained within the market’s range of interest as a currency shelter, though the Yen’s strengthening to the US Dollar was much less essential than at the previous sessions. The disenchanting ADP data on the US Payrolls occurred to be the main trouble spot for the investors. Less intensive purchases of the Yen may obviously be explained with the investors’ current expectances of the publication of the most important weekly data the Main Labor Report in the USA, which may render more precise trading checkpoints. The Yen mainly goes ahead upturning at the current session. Probably, it’s a result of the today published optimistic economic data. As represented, the Tankan Report for the 2nd quarter stated the advance to 1 from -14 in the 1st quarter. The indexes, which are included in this report and depict the affairs of various economic branches, have also demonstrated the significant advance. The nearest prospects for the currency of “The Land of Rising Sun” will obviously be grounded on the narrow volatile trading amidst the expectances of the information from the USA, though with the intents to advance due to the investors’ dull inclination to risk at the same time.

Analysis prepared by:

Arkady Nagiev
Forex4you analyst