Thursday’s trading had negative implications for the American dollar. The greenback had been under pressure for the most part of the session and closed it with a negative result against the euro and yen. And though the statistics, released on Thursday was positive enough, it still made no changes to the market moods. The number of initial jobless claims had reduced for the last week more then expected – by 31 thousand against the expected 10 thousand decrease. So, the number of claims now totals 473 thousand. Continuing jobless claims also decreased by 62 thousand. The total number is currently 4 456 thousand after previous 4 518 thousand. Chicago Fed Midwest Mfg Index showed growth by 2.2% m/m in July and reached its high from December 2008 – 81.4. The index also increased by 13.1% y/y. Today we welcome GDP data for the second quarter, which are likely to be revised from +2.4% q/q to + 1.3% q/q. This information is rather significant and has all chances to influence the market in case it differs from the previous outlook. Of the most interest today is Jackson Hole Fed meeting and Bernanke’s speech in particular. Numerous negative messages on the US economy, released this week initiated a growing number of expectations for further quantitative easing measures. If this becomes clear from Bernanke’s speech today, the dollar will be selling off.
EUR
The European currency went up against the dollar on the last session, which was mostly triggered by the US negative data, rather then by the change of the market moods towards the euro. The EU statistics was, so to say, quite optimistic. Above the expected Gfk consumer sentiment in Germany registered a raise up to 4.1 against 4.0 in August, bringing about a positive attitude. Loans to private sector increased by 0.9% in comparison with the same period last year and 0.5% growth, registered in June. M3 money supply grew by 0.1% m/m and 0.2% y/y. ?3 growth rates are still lower then expected +4.5% y/y level, set by the ECB. It’s a good thing though, that loans to private sector index is showing positive dynamics - the growth rates increased to their annual maximums. There’s not so much data, released in the Eurozone today. We expect preliminary CPI from Germany with anticipated slowdown in price growth – by 0.0% m/m,+1.0% y/y after 0.3% m/m,+1.2% y/y earlier. This information is not going to be decisive for the euro, the greatest attention will given to the news from the United States.
GBP
The pound was on the positive track at the beginning of Thursday’s session as a result of increased market’s demand for risky assets. Strong CPI report on retail sales fueled the market and raised the dollar to its intraday maximum against the dollar. At the end of the day though, the sterling found itself under pressure, probably influenced by S&P rating agency’s comments concerning government spending and budget deficit, leaving AAA for the Great Britain, but with a negative outlook. Britain’s news block for today contains GDP data for the second quarter, with expected changes in report’s details, particularly in expenditures, though the 1st assessment will remain unchanged. If the data shows a decline, it will have negative consequences for the economic recovery.
JPY
The Japanese currency strengthened against the dollar on the last week, despite the fact, that the government is mulling over restrictive measures to curb the yen’s growth. May be the market was just making corrections pending some additional information after the yen sell off. M. Ikeda, vice minister of finance, said that BoJ should take proper measures in order to support the country’s economy. This might have been understood as a possibility of a dovish outlook to the monetary policy and its further easing, rather then interventions. The end of the month is generally rich in economic statistics from Japan and today we’ve already a good deal of significant news. Unemployment rate decreased from 5.3% to 5.2%, but deflation process is still there and it seems to be strengthening – core consumer price index decreased by -1.1% y/y after -1.0% y/y. Total CPI showed -0.9% against -0.7%. Nevertheless, it’s not the economic statistics that will be influencing the market, but the political news concerning possible BoJ interventions and the news from the United States. If the information that Fed is likely to continue further easing measures confirms, the yen will have all chances to further strengthen to its historical maximum.
Analysis prepared by:
Arkady Nagiev
Forex4you analyst
