Optimism rules over the market again, that’s why the US Dollar was in the forefront of the sales-offs at the Tuesday session and so, fixed great losses to the European currencies though gained to the Yen properly. There were several reasons for mood improvement. However, the successful bid auction for the Greek securities’ placement seems to be the most important one. The Greek state authorities effectively sold 26-week T-Bills in amount of 1.625 Billion of euro with the profitability below 5.0% of interest per year, which is eligible from the analysts’ point of view. Of course, the main European stock indexes upturned under such conditions, which favored the raise of the inclination to risk. The like dynamics was observed at the US stock market as well, which contributed to the attractiveness of the risky assets and weakened the “buck” even more. It’s interesting to remark, that the US Dollar gain to the Yen was less impressive while considering the environment when the intents to purchase the risky assets were so high. The investors obviously are mainly skeptic as for the current state of the market still yet and so, urge some caution. After all, the pessimistic attitude to the American currency was provided by the data on the economy of the USA. As previously reported, the foreign trading deficit suddenly upraised in May till the highest possible degree for last 18 months in the USA. The negative totals of the goods and services foreign trade grew up to 42.3 Billion, despite forecasted -38.9 Billion of dollar. The April value was revised upgrading a little, till 40.3 Billion of dollar. The mood of the American consumers was also not so optimistic, as the IBD/TIPP consumer sentiment index stated sliding down to 44.7 points in July from 46.2 points in June. The information about the budgeting deficit in the USA slightly cheered up, as it was -68.4 Billion according to the June report, though this value occurred to be slightly better than predicted -69.5 Billion of dollar. This day news is going to clear up the state of affairs in the US retail sales in June. The decrease for 0.1%-0.2% m/m is foreseen, though it’s better than formerly when it had been observed -1.2% m/m. The main event of the present session will be the publication of the FOMC meeting’s minute, which is expected to represent the information about the money policy’s future.

   The common European currency gained to the US Dollar and fixed almost 150 points of profit. The keen demand for the Greek securities during the bid auction, where exactly the T-Bills in amount of 1.625 Billion were placed, despite forecasted 1.5 Billion of euro, allayed all anxieties as for the reluctance of interest from the side of the investors and so reasoned heightened interest in the Euro. The profitability summed up to 4.65%, what is far from being low, in fact. Nevertheless, the analysts like to consider this result positive as for Greece, because the value is much lower than 5.0%. Positive affection, which flooded over the market by that reason, pulled back to the second place all negative matters connected to the report from the Moody’s Rating Agency concerning the two point’s downgrade of the Portuguese crediting rate till A1, and also the disenchanting ZEW sentiment reports. The main sentiment index of Germany slid down to 21.2, despite the previously forecasted decrease to 26.0 from 28.7 only. This indicator also showed the like changes within the Euro zone in general as it fell down to 10.7 from 18.8. The today EU statistics may help to the Euro to keep heightened interest, because the manufacturing output is predicted with significant increase in May, to 1.2% m/m, 11.4% y/y thereupon 0.8% m/m, 9.6% y/y. The June value of the consumer inflation is also going to be publicized this day and foreseen remained unchangeable compared to the advanced estimation – the consumer price index (CPI) is most likely remain as formerly, 0.1% m/m, 1.4% y/y.

   The British currency wasn’t an exception and also gained to the US Dollar at the Tuesday session. The general level of optimism certainly made an impact on the Sterling and reasoned the increase in volume of the British currency’s purchasing. However, the main cause of the heightened interest in the “cable” was lower than foreseen inflation in the “Isles”. The Tuesday published data stated the British consumer prices’ inflation lowered down in June less significant than predicted and that afforded grounds for predicting the probable tightening of the Bank of England’s policy. The CPI fell down to 3.2% y/y only in June against 3.4% y/y in May, and also grew up compared to the previous month for 0.1% after the previous increase for 0.2%, despite the predictable remaining unchangeable. Furthermore, the GB Pound was provided with the support thanks to the announcements of such a famous “hawkish” functionary as the member of the Committee for the Monetary-Crediting Policy of the Bank of England E. Sentence – just as the proverb says: “A stitch in time saves nine”. This politician pointed to the necessity of adjustment of the interest rates with a glance to the recent significant improvement of the economic environment and also proved his commitment in the necessity of the interest rates’ increasing. Today the data on the unemployment in the “Isles” are going to be represented. The improvement in this sphere is foreseen, because the number of the jobless claims will fall down most likely for 20.2 thousand together with the capacity of the employment application forms to 4.5% from 4.6%; though the MOT calculated unemployment rate is presumed to stay at the former degree of 7.9%. The today published information has already stated that the British consumer became more pessimistic in their evaluation of the economic and employment prospects in accordance with the data from the British National Association of House Builders (NAHB) and the Nationwide. The general indicator of the consumer confidence crashed down to 63 points in June as compared to the May value of 66 points. Of course, it can suppress the Sterling under the current conditions as it proves the negative influence of the Governmental steps on the consumer demand’s perspectives.

   The opening of the Tuesday trades was remarkable for the Yen’s gaining both to the US Dollar and Euro. The rates’ volatility at the Asian stock markets gave a handle for the investors’ special caution. Most likely, the downgrade of the Portugal’s rate and also the dull European statistics never inspired the market for departure out of the Yen as a currency shelter and so kept high the diffidence to the European session’s affairs. Moreover, the Yen could also be supported by the good values of the yesterday publicized economic indicators. Despite all that, the volumes of the carry trade deals with the participation of the Yen were probably increased in the second half of the trading day due to the massive gaining of the stock market in the USA. As a consequence, the currency of Japan lost to other majors. Today no economic data are planned for publication. So, the Yen will be under the influence of such a driver as the rate of the inclination to risk as common. However, the political component should be also taken into account because of the current discussion of changes in the strategy of the ruling party caused by the realignment occurred in the Japanese Parliament thereupon the recent elections. That’s why the official information from “The Land of the Rising Sun” is worth of all possible attention.

Analysis prepared by:

Arkady Nagiev
Forex4you analyst