Last week was marked by the strong market moods. The beginning of this week was positive as well. The U.S Dollar was selling lower against its major counterparts on Monday and ended up losing its positions against the Euro and the Yen. The last week's results from the European banks’ stress tests that didn't elicit any big negative surprises also encouraged investors and made the dollar less attractive as a shelter-currency.
Today it’s going to be a “busy day” - there is so much news coming out. Of interest to the market are the Standard & Poor's Case-Shiller Home Price Index for May which has increased by 4.1% (YoY) for 20 mega polices. But if the sales drop, indicator will show a decline.
Data on Consumer Confidence Index in July by Conference board is expected to be pessimistic as well – a fall from 52.9 to 50.8 is a high-possibility. The Federal Reserve's Beige Book on Wednesday will also draw attention, but in case the upcoming Fed report on the situation in Richmond zone shows a decrease as well, we can imagine what “kind” of information Fed’s “Book” will provide. At present, while the market is full of hopes, the dollar is expected to remain under pressure. But the market will soon get into the reality that the situation in other regions is not that bright either and it’s high time to temper risk appetite.
EUR
Despite poor economic data on Euro zone, the EUR was doing quite well on the first day of trading. It strengthened, but a slight growth against the Yen indicates, that the mood in the market in unstable and hesitant. Today we expect much more news from Euro zone. Germany’s June Import prices should grow up to 0.7% m/m and 8.6% y/y from 0.6% m/m and 8.5% y/y respectively. The GfK Institute is scheduled to release forward looking consumer sentiment data for August, where growth from 3.5 to 3.6 is anticipated. A positive change of loans to private sector in Euro zone is also a high-probability. June’s growth totals 0.3% y/y. In general, euro has all chances to continue its growth, but only temporally, because Euro zone still has to deal with the same problems, which will show very soon.
GBP
Pound gained against the dollar yesterday’s evening and tested new local maximums. But it’s not a happy ending for the pound yet. The situation in Great Britain is not as bright as it seems. Research institutes beat the alarm, warning that British householders worry of the future of their finances. Research company Nielsen and the British Retail Consortium discovered that the quarterly consumer confidence has fallen. British economic data released today is likely to confirm it. Confederation of British Industry (CBI) finds that retail prices for July dropped to -6, after -5. Such perspective are not optimistic for the sterling, despite strong statistics released previously.
JPY
The Japanese currency gained against the dollar on Monday session, proving that optimistic moods in the market should be thoroughly analyzed. Japanese exports rose more than expected, attracting some interest to the Yen. Export volume increased by 27.7% y/y and the trade balance surplus raised up to 687 billion Yen. Today’s economic data shows that the attempts to curb the inflation in Japan are still of no effect: Corporate Service Price Index went down from -0.8% y/y to – 1.0% y/y. The outlook for the Yen is now vague. On the one hand, risk appetite in the market can cause the Yen selling out as a funding currency for carry trade operations. On the other hand, the Yen can continue strengthening preserving its status as a shelter-currency, because economic data from the US proved to be weak and insufficient. And last, but not the least: Bank of Japan seeks to intervene and weaken the Yen.
Forex4You analyst: Arcady Nagiev
nagiev@ forex4you.org
