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[LF.Anastasia]

Euro/USD: Rating agencies are pulling Euro down

The pair EUR/USD is traded downward at the Forex currency market on Monday morning amid aggravation of the Greek debt crisis.

By 9.00 Moscow time the Euro is at 1.4075 against closing level of 1.4159 on Friday.

Last Friday, rating agency Fitch downgraded Greece to the level of B+ which triggered closure of the Euro position and has led investors to safe currencies, once again, due to the fears of aggravation of the debt problems both in Greece and in the entire Eurozone

In addition, at the weekend, S&P revised the rating of Italy to A+, forecast is “negative” against the previous “stable”, as the agency is concerned that outlooks of the economic growth in the country are poor and capability of authorities to reduce public budget deficit is very low.

Therefore, the Euro is again in the forefront for the investors and sentiments of the players are negative.

Most likely the pair EUR/USD will not go beyond the range of1.4010-1.4180 at the trading session on Monday.

 

[LF.Anastasia]

GBP: British Pound is sold out amid low external background

At the Forex currency market the British Pound Sterling rate goes down on Monday morning, since investors are moving away from risk, due to the downgrade of the ratings of Greece and Italy.

Forex forecast: MACD indicator for the pair GBP/USD has crossed the signal line from top to bottom and is moving down, giving a pair sell signal. Stochastic Oscillator sluggishly increasing in the neutral zone, giving a pair buy signal.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of1.6200, the levels of 1.6225 and 1.6240 will become the target for the purchase. If the level of 1.6170 is exceeded, the level of 1.6150 will become the target for the sale.

No important British statistics is scheduled for the release at the beginning of the week, however on Tuesday investors expect publication of the net borrowing of the public sector and cash requirements of the government in April; the second part of the data on GDP in the UK for QI will be made public on Wednesday.

On Friday, 27 May the Nationwide statistics on house prices will be released

It was made public last week that retail sales in the UK increased by 1.1% m/m (+2.8% y/y) in April. A lot of UK macro-statistics was released yesterday (index of CPI rose by 1.0% m/m (+4.5% y/y) in April against the forecast of growth by 0.7% m/m (+4.1% y/y); index of retail prices RPI increased by 0.8% m/m (+5.2% y/y) in April, which agreed with the forecast.) Therefore, inflationary pressure in the country continues to grow.

We would remind that at the regular meeting, the Bank of England has left interest rate unchanged at the level of 0.50% per annum and volume of assets purchase was kept unchanged - at the level of GBP200 billion. The situation in the British economy is still far from being stable.

Deloitte & Touche LLP believe that the Bank of England will not raise rates until 2013 – according to observers economic growth in the country is still poor, basic economic trend in the UK is also not too good, which encourages them to leave rates at the current level at least until the end of this year and throughout next year as well. Inflation in the country is twice as high as 2% projected by MPC. Deloitte & Touche LLP indicates that British GDP will amount to 1.5% in 2011, the same as next year; while inflation will reach 4.5% in 2011 and 1.8% in 2012.

However, the Bank of England think that interest rate will reach the level of 0.75% by the end of this year; while by Q4 2012 it will be 1.75%, i.e. the Bank have made provisions for one rise in interest in 2011 and four in 2012. Inflationary prospects were described as “uncertain” and Central Bank admits that CPI will reach the level of 5% this year. Although the Bank of England expects that CPI will be slightly above 1.9% in two years time.

Representative of the Bank of England Mr. Bean noted yesterday that unemployment will partly contain inflation; however inflationary pressure can intensify in the second half of 2011. In this case, while consumer spending remains restrained, and net exports are disappointing, we cannot expect that tax payers will support the banks.

 

[LF.Anastasia]

CHF: Swiss Franc does not leave the range

At the Forex currency market Swiss Franc rate remains in the previous range of 0.8747-0.8880 on Monday.

Forex forecast: MACD indicator is in the negative area for the pair USD/CHF and is increasing, giving a pair buy signal; while volumes are below average. Stochastic Oscillator has come out of the oversold zone, giving a pair buy signal.

Forex recommendations: in case of breakdown at the level of 0.8810, the pair USD/CHF will go to к 0.8840 and 0.8860. If upward breakdown does not take place, the pair will consolidate close to the current levels.

Important Swiss statistics of this week –index of leading indicators KOF- will be released only on Friday, 27 May. It is assumed that the index will decline to 2.20 points against the previous level of 2.29 points in April.

Inflation slowed down in Switzerland in April, which became another negative factor for the Franc, pushing the currency downward. It became known last week that the index rose by 0.1% m/m (+0.3% y/y) which is below the forecast of 0.6% y/y.

It became known earlier that index of investors’ economic expectations ZEW in May fell by 20.3 points in May, to the level of -11.5 points against the previous level of 8.8 points. Due to such background, a number of those who expected the increase of the interest rate in the next quarter have dropped sharply.

Meanwhile, economists do not assess Swiss economic situation as negative, on the contrary, it is described as “good” (majority -68.6% of respondents think so). The share of those, who expect the rise in inflation in the near future, has fallen to 51.4% (-25.1%).

The head of the National Bank of Switzerland, Mr. Hildebrand noted that strong and expensive Franc undermines exports and disrupts tourism industry; therefore negative impact of the CHF could be worse than predicted. “We intend to take any measures to achieve price stability” stressed the monetary politician. According to him, downside risks to recovery are still preserved, although economy demonstrates steadier growth rate than previously expected. It was worth noting Hildebrand’s statement that expansionary monetary policy constitutes a menace to a number of industrial sectors in the long term.

Swiss National Bank is going to discuss monetary policy issues on 16 June.

It was made public earlier that unemployment rate in Switzerland fell to 3.1% in April against the previous level of 3.3%, which is a positive indication for the economy. The data released earlier showed that, real retail sales in Switzerland decreased by 0.2% in March against the growth of 1.8% in February. In addition index SVME – PMI in Switzerland fell to 58.4 points in April against the previous level of 59.3 points. In addition statistics released earlier showed that consumption indicator UBS in Switzerland rose to 1.660 points in March against the revised level of 1.453 points in February; while volume of exports in Switzerland fell by 4.8% m/m in March against the level of +3.6% m/m in February.

 

[LF.Anastasia]

JPY: Japanese Yen falls in price

The Japanese Yen rate goes down at the Forex currency market on Monday under the pressure from the USD.

Forex forecast: MACD indicator for the pair USD/JPY is in the negative area, and started to increase, giving a pair buy signal. Stochastic Oscillator is growing sluggishly in the neutral zone, indicating moderate purchases.

Forex recommendations: in case of breakdown at the level of 82.00 the pair will go to 82.10 and 82.35. If upward breakdown does not take place, the pair will consolidate in the current range.

The following Japanese data was released today:

– Index of coincident indicators in Japan fell by 3.3% m/m in May against the preliminary estimate of 3.2%;

– Index of leading indicators in Japan decreased by 3.9% m/m in March versus preliminary estimate of -4.5%;

– Sales in supermarkets fell by 1.3%yгy in April against +0.3% in March.

Toward the end of last week, the Bank of Japan decided to leave the level of the key rate unchanged in the range of 0-0.1%. It is obvious that recession in the Japanese economy is preserved in full, however regulator still withholds from nullification of the rate.

Japanese Economy Minister is confident that the economy of the Country of the Rising Sun is very easy to adapt to various changes and prior to the earthquake the state of economy had improved. “We are making progress in the fight against limited supply and by the end of this fiscal year GDP will increase by 1%” –he said. The Minister is also assured that economy can avoid recession. Ex-deputy head of the Bank of Japan Mr. Muto said this morning that national economy is weak and will reach the bottom in QIII this year. Future economic prospects are vague.

It was made public earlier that consumer confidence fell to 33.1 points in April against the level of 38.6 points in March, at the same time index of CGPI rose by 0.9% м/м in April against the growth by 0.6% m/m in March. According to the data released earlier, current account balance in Japan fell by 34.3%, to Y1.679 trillion in March against expected -32.0%. The data released earlier showed that leading indicators index decreased by 4.5% and index of coincident indicator subsided by 3.2%. In addition it is also became known that gold and foreign currency reserves of Japan have reached a new peak level.

The data released on Friday showed that activity index in the industrial sectors of Japan fell by 6.3% m/m in March; while the forecast of reduction was 6.1%. It became known this week that preliminary GDP in Japan fell by 0.9% q/q (-3.7% y/y) in QI against the expectations of decline by 0.5% q/q (-1.8% y/y). In addition, the revised volume of industrial production dropped by 15.5% in March against the previous level of -15.3%. It is clear that the earthquake in March had a negative impact on the industrial production.

 

[LF.Anastasia]

AUD: Australian Dollar is sold out at the beginning of the week

The Australian Dollar rate is sold out at the Forex currency market on Monday, since investors are moving away from high-risk positions because external background is not the most optimistic at the beginning of the week.

Forex forecast: MACD indicator is in the positive area for the pair AUD/USD and continues to go down, giving a pair sell signal, while volumes are low. Stochastic Oscillator is going down in the neutral zone, giving a pair sell signal.

Forex recommendations: in case of breakdown at the level of 1.0530 the pair will go to 1.0515 и 1.0500. If downward breakdown does not take place, the pair will consolidate at the current levels.

Australian statistics will not present important macro-statistics this week; therefore external background will continue to act as a driver for the players.

The minutes of the Reserve Bank of Australia meeting of 3 May which were made public earlier stated that growing Australian Dollar has assisted to curb inflation; while interest rate remains at the previous level of 4.75% per annum.

The RBA admits that if economic situation will develop according to expectations, interest rate increase will become a necessity.

The minutes of the meeting were vague when describing the state of the labor market in the country; it is not clear yet in which way the increasing wages will impact on the tightening of the labor market conditions. At the same time sentiments of households and labour market will be important factors for determining dynamics of inflation in the coming years.

Statistics released earlier was mixed: trade balance in Australia rose to A$1.74 billion in March against the level of -A$0.08 billion in February. Moody's Investors Service agency gave positive assessment to the data; according to observers of the agency, resolution of the authorities to revert the balance of the state budget to the zone of surplus is well-founded and such attitude supports credit rating of the country, which is at Aaa. Index of wage costs in Australia rose by 0.8% on quarterly basis (+3.8% y/y) in QI, while the forecast of growth was 1.1% q/q. The market had been waiting for the index as earlier it had almost reached the significant level of 4% y/y. Now the concern of investors about the discrepancy between labor cost and index of inflation will lessen.

However, the data may well affect the decision of the RBA in June, forcing the regulator to extend the pause in the interest rate increase.

Note: that the level of CPI in Australia rose by 1.6% on quarterly basis (+3.3% y/y) in QI.

 

[LF.Anastasia]

CAD: Canadian Dollar weakens amid reduction in investors’ interest in risk

At the Forex currency market the Canadian Dollar rate is traded downward on Monday because investors continue to leave high-risk positions.

Forex forecast: MACD indicator for the pair USD/CAD has broken through the signal line from top to bottom, giving a pair buy signal. Stochastic Oscillator increases in the neutral zone, giving a pair buy signal.

Forex recommendations: in case of breakdown at the level of 0.9785, traders’ target will be the levels of 0.9800 and 0.9590. If upward breakdown does not take place, the pair will consolidate close to the current levels.

Inflation in Canada increased by 3.3% y/y, 0.3% m/m in April against the forecast of 3.4% y/y and 0.5% m/m; while energy costs rose by 17.1% y/y, as per the estimates of the Canadian Statistics Service.

According to the head of the Bank of Canada Mr. Carney inflation shall exceed the level of 3% in the current Quarter due to which the issue of raising rates will be “get a lot of scrutiny”. He noted earlier that most countries of the Eurozone comply with the requirements prescribed by the G20; only the USA ignores them in large extent. At the same time, the size of the American deficit continues to be a matter of concern.

With respect to the Europe Carney noted that he is convinced that IMF should continue to implement the tasks aimed at resolving European crisis.

The Bank of Canada stated earlier that CPI in the country will begin to rise, as soon as it exceeds expected level. At the same time value of key index of net CPI is also growing.

It became known earlier that retail sales in Canada rose by 0.4% in February against the fall by 0.4% in January. In addition, the index of leading indicators in Canada increased by 0.8% in March versus 0.8% m/m earlier and wholesale sales declined by 0.6% in February against 1.5% m/m in January.

Imperial Bank of Commerce reported earlier on the revision of its GDP forecast for QIV 2010 to 2.6% versus the previous level of 2.3%; the Bank expects that this year economic growth will be by 2.6% (2.4 % previously).

It became known in the middle of the week that leading indicators index in Canada rose by 0.8% in April, which was above market’s expectations (+0.6%). The favorable data has become the 7th fact that gives an incentive for the rise in the indicator

High exports levels along with the labor market continue to be the main supportive factor.

 

[LF.Anastasia]

Euro/USD: Euro makes attempts to recover

The pair EUR/USD grows on Tuesday morning after the slump of the last days.

By 9.00 Moscow time the Euro is at 1.4067 against yesterday’s closing level of 1.4047.

Meanwhile, both debt situation of the peripheral countries of Eurozone, and not very positive statistics represent risks to the Unified European currency.

This afternoon investors will await the data on the orders of the European industrial plants in March.

Most likely the pair EUR/USD will not go beyond the range of1.4010-1.4130 at the trading session on Tuesday.

 

[LF.Anastasia]

British Pound is still in the focus of sellers

At the Forex currency market the British Pound Sterling rate remains under pressure on Tuesday morning, as cleavage in the Monetary Committee of the Bank of England gains momentum. In addition investors are not ready to return to the risks due to the turbulent external background.

Forex forecast: MACD indicator for the pair GBP/USD has crossed the signal line from top to bottom and is moving down, giving a pair sell signal. Stochastic Oscillator has reversed and is going down in the neutral zone, giving a pair sell signal.

Forex recommendations: in case of breakdown at the level of 1.6100, the target of the sales will be the levels of 1.6090 and 1.6050.

Representative of the MPC of the Bank of England Mr. Will noted that it would be prudent to start rates increase now. He believes that the sooner the series of the tightening in the economy and monetary policy start, the easier it will be to avoid surges in the rates in the future.

He also stressed that the weakness of the Pound which has been observed lately, had a beneficial effect on the economy of the country.

We would remind that at the regular meeting, the Bank of England has left interest rate unchanged at the level of 0.50% per annum and volume of assets purchase was kept unchanged - at the level of GBP200 billion. The situation in the British economy is still far from being stable.

Deloitte & Touche LLP believe that the Bank of England will not raise rates until 2013 – according to observers economic growth in the country is still poor, basic economic trend in the UK is also not too good, which encourages them to leave rates at the current level at least until the end of this year and throughout next year as well. Inflation in the country is twice as high as 2% projected by MPC. Deloitte & Touche LLP indicates that British GDP will amount to 1.5% in 2011, the same as next year; while inflation will reach 4.5% in 2011 and 1.8% in 2012.

However, the Bank of England think that interest rate will reach the level of 0.75% by the end of this year; while by Q4 2012 it will be 1.75%, i.e. the Bank have made provisions for one rise in interest in 2011 and four in 2012. Inflationary prospects were described as “uncertain” and Central Bank admits that CPI will reach the level of 5% this year. Although the Bank of England expects that CPI will be slightly above 1.9% in two years time.

No important British statistics is scheduled for the release at the beginning of the week, however on Tuesday investors expect publication of the net borrowing of the public sector and cash requirements of the government in April; the second part of the data on GDP in the UK for QI will be made public on Wednesday.

On Friday, 27 May the Nationwide statistics on house prices will be released.

 

[LF.Anastasia]

CHF: Swiss Franc is getting weaker

At the Forex currency market Swiss Franc rate remains weak on Tuesday, largely due to the statement made by Mr. Jordan from Swiss National Bank.

Forex forecast: MACD indicator is in the negative area for the pair USD/CHF and is increasing, giving a pair buy signal; while volumes are below average. Stochastic Oscillator is going up in the neutral zone, giving a pair buy signal.

Forex recommendations: in case of breakdown at the level of 0.8855, the pair USD/CHF will go to 0.8870 and 0.8890. If upward breakdown does not take place, the pair will consolidate close to the current levels.

Mr. Jordan from the SNB said this morning that the Bank is very concerned about Swiss Franc rates, although exports have coped well with the impact of the expensive currency. However, the CNB is going to take measures if the threat of deflation will continue to grow.

This verbal intervention forced the Franck to roll back, and still remains under selling pressure.

We would remind that inflation slowed down in Switzerland in April, which became another negative factor for the Franc, pushing the currency downward. It became known last week that the index rose by 0.1% m/m (+0.3% y/y) which is below the forecast of 0.6% y/y.

It became known earlier that index of investors’ economic expectations ZEW in May fell by 20.3 points in May, to the level of -11.5 points against the previous level of 8.8 points. Due to such background, a number of those who expected the increase of the interest rate in the next quarter have dropped sharply.

Meanwhile, economists do not assess Swiss economic situation as negative, on the contrary, it is described as “good” (majority -68.6% of respondents think so). The share of those, who expect the rise in inflation in the near future, has fallen to 51.4% (-25.1%).

The head of the National Bank of Switzerland, Mr. Hildebrand noted that strong and expensive Franc undermines exports and disrupts tourism industry; therefore negative impact of the CHF could be worse than predicted. “We intend to take any measures to achieve price stability” stressed the monetary politician. According to him, downside risks to recovery are still preserved, although economy demonstrates steadier growth rate than previously expected. It was worth noting Hildebrand’s statement that expansionary monetary policy constitutes a menace to a number of industrial sectors in the long term.

Swiss National Bank is going to discuss monetary policy issues on 16 June.

Important Swiss statistics of this week –index of leading indicators KOF- will be released only on Friday, 27 May. It is assumed that the index will decline to 2.20 points against the previous level of 2.29 points in April.

 

[LF.Anastasia]

JPY: Investors take interest in Japanese Yen again

The Japanese Yen rate rises in price again at the Forex currency market on Tuesday, since investors use the JPY as a safe harbor, expecting that the data on Eurozone and the US, scheduled for the release today, is not going to be very positive.

Forex forecast: MACD indicator for the pair USD/JPY is in the negative area, and started to increase, giving a pair buy signal. Stochastic Oscillator is moving sluggishly along the signal line in the neutral zone, not giving a clear signal.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 81.60 the pair will go to 81.45 and 81.25. If downward breakdown does not take place the pair will consolidate in the current range.

Macro-economic statistics for March which is being released this week shows weakness of the economy; index of coincident indicators in Japan fell by 3.3% m/m in May against the preliminary estimate of 3.2%; index of leading indicators in Japan decreased by 3.9% m/m in March versus preliminary estimate of -4.5%;

In other respects situation in the Japanese economy remains unchanged

Japanese Economy Minister is confident that the economy of the Country of the Rising Sun is very easy to adapt to various changes and prior to the earthquake the state of economy had improved. “We are making progress in the fight against limited supply and by the end of this fiscal year GDP will increase by 1%” –he said. The Minister is also assured that economy can avoid recession. Ex-deputy head of the Bank of Japan Mr. Muto said this morning that national economy is weak and will reach the bottom in QIII this year. Future economic prospects are vague.

It was made public earlier that consumer confidence fell to 33.1 points in April against the level of 38.6 points in March, at the same time index of CGPI rose by 0.9% м/м in April against the growth by 0.6% m/m in March. According to the data released earlier, current account balance in Japan fell by 34.3%, to Y1.679 trillion in March against expected -32.0%. The data released earlier showed that leading indicators index decreased by 4.5% and index of coincident indicator subsided by 3.2%. In addition it is also became known that gold and foreign currency reserves of Japan have reached a new peak level.

Toward the end of last week, the Bank of Japan decided to leave the level of the key rate unchanged in the range of 0-0.1%. It is obvious that recession in the Japanese economy is preserved in full, however regulator still withholds from nullification of the rate.