The US Dollar lost again, though this time to the European currencies only; whereas there was a slight gain to the Yen. This event might be considered as a sign of high level of the inclination to risk. In the beginning of the trades the US Dollar closed out a market to all its European “opponents” due to some support from the partial profit fixation and also the expectation of the reports about the stress-testing of the European banks, obviously. Later on, however, the massive optimistic surge at the stock markets aroused the sales-offs of the “buck”. The American currency lost away all recently gained positions and so, completed the day loosing to both the Euro and GB Pound, but getting profit to the Yen, which got back its popularity as a foundering currency for carry-trade deals. Nothing important was represented as concerning the US statistics. The yesterday published MBA mortgage loaning index showed the decrease to 6.7% in July from previous 8.8%. This change is quite common due to the currently observed slumping sales at the home market. The today news is going to represent the weekly employment statistics. As for the jobless claims, the shortage in number of the preliminary claims is expected for 11 thousand, from 471 to 460 thousand, while the secondary ones are to demonstrate the cut down for 16 thousand. Besides, the May capacity of the consumer crediting should attract attention due to the forecasted comeback below zero, to -1.9 Billion since after 1.0 Billion of dollar before. That certainly states the disappointing dynamics of the households’ demand. Another matter, which is worth of special attention, is the data on the oil stockpile by reason of yesterday “black oil” prices up-rocketing. The great dependence of the US Dollar’s perspectives to the information from the Europe in the course of today session should be mentioned as well, because the “news climate epicenter” is being shaped in this region exactly thanks to extremely essential information from the European Central Banks.

   In the beginning of the last daily session the Euro slightly lost to the US Dollar. Besides the investor were looking forward for the clearing up of the matter about the European banks’ stress-tests, the disappointing data on the German manufacturing also suppressed the common currency. The processing industry’s orders of the European largest economy suddenly fell down for 0/5% m/m in May, despite the prediction of the upturn for 0.5% m/m. The last estimation of the Euro zone GDP for the 1st quarter remained unchangeable. Later on, the stock markets’ gaining provided the support to the Euro together with the significant upraise of the petrol prices. Another contribution to the positive attitude to the common European currency was provided by the details of the next coming stress-tests, which were announced by the European Committee on Banking Regulation and Supervisory Practices and obviously were liked by the market. The tests’ results are to be published on July 23. Due to the lack of negative information about the Euro zone countries’ debts the common currency got time-out. Up to the point, this instrument keeps up an appearance of the unfluctuating asset. Nevertheless, the investors exercise caution, which reasons the opinion about great apprehensions at the market. Today the large information inflow is expected from the Europe. The May values of the German foreign trading are predicted to show the increase of the trading balance surplus to 13.4 from 13.1 Billion of euro together with the cut down of the payment balance surplus to 11.4 from11.8 Billion of euro. The data on the EU largest economy’s manufacturing branch will also arouse a lot of interest because of the foreseen slowdown – 0.8% m/m, 9.2% y/y after 0.9% m/m, 13.3% y/y. However, not all above mentioned, but the information from the ECB concerning the interest rate and also about the prospects of the monetary-crediting policy will be the hot point of the day. As usual, the main constituent of this very event will be the press-conference of the ECB President J.-C. Triche, as he is predicted to make all his efforts to persuade the market players that there’s no reason for the apprehensions concerning the banking sector’s affairs and liquidities. Of course, it can support the Euro, though great concerns about the national debts seem not to let the common currency upgrade significantly.

   Just the same as the Euro, the GB Pound was loosing to the US Dollar in the beginning of the Wednesday trades. Probably, that scenario was caused by the disenchanting data from the British Retiling Consortium (BRC), which declared that the British retail price index had gone along marking the downfall for the second month running in the previous month. This event on itself could be taken by the investors as an extra acknowledgement that the Bank of England wouldn’t tighten its monetary policy due to the lack of any serious threat. The recently published data stated the June value lowered down to 1.5% y/y as compared to 1.8% y/y in May, while there was a slowdown for 0.1% against previous raise for 0.3% per month. The BRC comments explained the price decrease with both the stiff competition and sudden food products price sagging. Also, both low and steady inflation was predicted for the rest of this year. The inflation fell down to 1.4% y/y in June against the May rise for 1.6% y/y discounting the food products prices. The “Isles” news is going to report the data on the manufacturing branch in general and its processing sector today. The processing sector’s production output is forecasted upturning for 0.5% m/m and 4.5% y/y, just after the sudden tumble in the former month (-0.4% m/m, 3.5% y/y). Furthermore, the like dynamics will be seen all over the manufacturing in general: 0.4% m/m, 3.2% y/y since after -0.4% m/m, 2.1% y/y. The publication of the June HBOS home price index will be very important by reason of the probable comeback to forecasted advance for 0.6% m/m after -0.4% m/m. However, the main checkpoint for both the Sterling and, of course, the market will be the pronouncement of the Bank of England’s decision concerning both the interest rates and capacities of the quantitative easing. As known, the points of view of the members of the BoE Committee varied concerning the outlines of the policy. The E. Sentance’s statement of the necessity to rise up the interest rates was responded with the opposite opinion. This matter disquiets the market and certainly encourages the looking forward for any hints, which can clear up the situation.

   The spur of optimism at the stock market of the USA caused the weakness of the Japanese currency in the second half of the Wednesday session. The Yen lost to the US Dollar the daily totals, though it showed the steadiness in the beginning of the trades. This tendency has gone on during the present session, because the Yen’s sales were inspired with the upturn of the greater part of the Asian stocks picking up the slack of the American Stock Exchanges, which had closed the previous session with good gain. The statistics from “The Land of the Raising Sun”, which has already been published today in bulk, stated the weak results of the process, which recently intervene the Japanese economy. Probably, it added to the negative attitude to the currency of Japan. The machine building and equipment orders fell down to -9.1% m/m and 4.3% y/y in May after former 4.0% m/m and 9.4% y/y. The surpluses of both the payment and trading balances went down in May greatly: the trading one till 391.0 from 859.1 Billion of yen, and the payment one – to 904.8 from 1 379.6 Billion of yen. The squeeze of both M2 and M3 money aggregates was observed in June per annum. The central banks of the Europe are expected to make no surprise, which could neglect the current optimism climate of the market, and so the Yen will go ahead sagging down mainly.

Analysis prepared by:

Arkady Nagiev
Forex4you analyst