Though the market moods on Wednesday were the same, trading closed with a bit different results. Only the British pound, supported by good statistics from the Eurozone and the Great Britain, managed to keep its leading positions against the dollar. The euro was neutral, and the yen was selling out.
The American currency remained under pressure at the beginning. Later on, the news on the US economy came out and the dollar pared its losses against the euro and strengthened against the Yen, still left behind the British sterling.
Consumer Confidence Index in July by Conference Board showed a decrease to 50.4 against 54.3 in June. Disappointing also were data from Federal Reserve Bank of Richmond – Business Index in the region dropped from 23 to 16.
But the US Home Price Index for May in 20 megapolices was quite optimistic on the other hand. Though the growth above expected, which we see here, is probably the last, because previously supporting federal government program is now finished. Standard & Poor's Case-Shiller Home Price Index increased by 4.6% (y/y) and 1.3% (m/m). Similar dynamics +5.4% y/y, +1.2% m/m was observed in 10 megapolices of the country.
Today there’s not so much significant data on the US economy coming out. But there are still a couple interesting issues to pay attention to: Durable Goods Orders are expected to grow by 0.9% m/m after a 0.6% m/m decrease in May and the Federal Reserve's Beige Book with a report on situation in the regions. The report might appear disappointing at the same time – taking into account pessimistic data from Chicago, Dallas and Richmond, provided earlier.
EUR
Economic data from Euro zone helped the euro to test new local maximums against the dollar. Stress tests’ results took all worries concerning crisis in the Euro zone and sovereign debts away and the euro keeps on getting support. Besides, good news about fast-growing profits in European companies strengthens European currency even more.
Consumer sentiment index in Germany, released by the GfK Institute yesterday went up to 3.9. June Import prices also grew to 0.9% m/m and 9.1% y/y, which indicates the increase in home demand.
Today we don’t expect much news from the European zone. European Central Bank is about to release a bank crediting market review and reports on Consumer Price Index in Germany: Reports anticipate 0.2% m/m ? 1.2% y/y growth in the European largest economy. Due to the lack of economic news we can expect an increase in volatility by the end of the day, when Fed’s Beige Book comes out.
GBP
The British pound shot up against the dollar on Tuesday's session after retail sales showed a significant growth and hit a 3 year high, exceeding all expectations - July index grew up to +33 against -5 in June. Summer discounts, nice weather and the World Football Championship are named among the reasons. Besides, the Index is anticipated to grow even more in August – up to +45. Nevertheless, analysts doubt these bright prospects, saying that government restrictions are coming and anticipating a slow down in consumption process. Not so much statistics from the “Islands” released today, though Bank of England chief Mervyn King is making a speech today. His statements often put sterling under pressure, so it makes sense to take time and be very careful about this event.
JPY
The Yen fell against the dollar on Tuesday's session. Optimistic moods in the market resulted in stock market increase all around the globe, which dampened the interest toward the Yen as a reserve currency and made it a funding currency for carry trade operations. Good moods, connected with the European Banks’ stress tests seem to start influencing the Japanese currency. Today’s economic data show Small Business Confidence growth in July- 48.1 after 47.4. BoJ statements anticipate moderate recovery of Japan’s economy, expecting a slowdown in the 4th quarter of the year. So, the Yen will continue weakening and will only preserve its status as a reserve currency.
Analysis prepared by:
Arkady Nagiev
Forex4you analyst
