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[LF.Anastasia]

AUD: Australian Dollar started to increase after sales

At the Forex currency market the Australian Dollar rate started to regain on Tuesday after significant sales of the last two trading days.

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 1.0550 and 1.0590. If downward breakdown does not take place, the pair will consolidate at the current levels. There is a strong possibility that aggressive sellers will return in the pair.

Statistics released earlier was mixed: thus, 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.


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

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.

Australia will not present any important macro-statistics to investors this week; therefore external background will continue to act as a driver.

 

[LF.Anastasia]

NZD: New Zealand Dollar tries to regain from the previous sales

The New Zealand Dollar rate is growing steadily at the Forex currency market on Tuesday; external background enables to regain partly from the previous sales, due to the players’ risk aversion.

Forex forecast: MACD indicator is in the positive area for the pair NZD/USD, giving a pair sell signal, while volumes are low. Stochastic Oscillator goes up in the neutral zone, giving a pair buy signal.

Forex recommendations: in case of breakdown at the level of 0.7970, the pair will go to 0.7990 and 0.8020.

It became known today that two-year inflationary expectation in New Zealand increased by 0.3% in QII against the rise of 2.6% on quarterly basis earlier.

Unemployment rate New Zealand fell to 6.6% in QI against the level of 6.8% in QIV, 2010. The forecast had been 6.7%. In addition the proportion of labor force increased to 68.7% against the previous level of 67.9%. Although indicators are favourable, ASB still believes that report is ambiguous: it is possible that the earthquake of February will have more serious impact on the economy than expected and it will have additional pressure on the labor market of New Zealand and will have an adverse affect on the prospects for the sector as a whole. Agency Fitch stated that New Zealand economy has demonstrated stabilization of the budget however it is not sufficient yet to revise the rating outlook of the country from the current “negative”. Moody’s noted that authorities of New Zealand are doing a good job and are taking every step to revert the economy to its normal state.

It is also worth noting that budget deficit in New Zealand amounted to NZ$10.17 billion for the 9 months by 31 March which was in average 15% higher than expected by economists. This was the fact that provoked previous sales of the NZD.

The data released earlier was mixed: house prices fell by 1.9% m/m in April against the decline by 2.0% in March and credit cards expenses rose by 1.7% м/м in April against the increase by 0.5% in March and credit cards costs rose by 1.7% m/m in April against the growth by 0.5% in March. Therefore, real estate sector of New Zealand started to recover and it is a strong supportive factor for the economy. According to REINZ estimates house prices index in New Zealand increased by 1.1% m/m in April against the forecast of growth by 0.5% m/m. In addition, the agency reported that the level of house sales last month was -4.2% y/y against the level of -5.1% y/y in March.

It is also worth noting that producer price at entrance into QI rose by 2.2% q/q, while the forecast of growth had been 0.6% q/q, producer prices at exit increased by 1.7% q/q with the forecast of 0.5% q/q.

 

[LF.Anastasia]

Euro/USD: Euro is again under pressure from external background

The pair EUR/USD is traded downward at the Forex currency market on Wednesday morning, remaining inside the channel for the last three days.
By 9.00 Moscow time the Euro is at 1.4049 against yesterday’s closing level of 1.4099.

In Japan a 5.1 –magnitude earthquake struck in the area of Fukushima this morning, which caused concern among investors and increased the outflow of funds from risky positions.

In addition, Middle East once again gave rise to fears about spreading of “fire of freedom”: riots broke out in Yemen last night: last weekend President of the country refused to sign an agreement on transfer of power, which provoked a rising tide of discontent.

Therefore, external background is moderately negative this morning.

Most likely the pair EUR/USD will not go beyond the range of 1.3990-1.4120 at the trading session on Wednesday.

 

[LF.Anastasia]

GBP: British Pound remains weak

At the Forex currency market the British Pound Sterling rate is still under pressure despite the rebound on Tuesday.

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 is moving along the signal line in the neutral zone, not giving a clear signal for the pair.

Forex recommendations: in case of breakdown at the level of 1.6150, the target of the sales will be the levels of 1.6120 and 1.6090. If downward breakdown does not take place the pair will consolidate close to the current levels.

As long as external background is not improving, investors’ interest in the Pound Sterling will be low. However, today is a special day for the GBP – the second part of the data on the UK GDP for QI will be released on Wednesday. Data on the house prices from Nationwide will be made known on Friday, 27 May.

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

 

[LF.Anastasia]

CHF: Swiss Franc thrown into confusion

At the Forex currency market Swiss Franc rate is under some pressure from the USD on Wednesday, although trading session of Tuesday showed that in case of substantial deterioration in the external background the CHF will regain the status of the protective currency and hence, growth.

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 0.8815, the pair USD/CHF will go to 0.8830 and 0.8850. If upward breakdown does not take place, the pair will consolidate close to the current levels.

Julius Baer Group believes that it is not clear yet whether Swiss economy requires the increase in the interest rate or not: “any rise will have an impact on the economy as a whole for a year”. However it is quite possible that local economy and its recovery process are strong enough to cope with the interest rate rise to 1%-1.5%.

Note that real effective exchange rate of the Franc grew by 10% last year.
Swiss National Bank is going to discuss monetary policy issues on 16 June.

Mr. Jordan from the SNB said yesterday 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.

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: Japanese Yen maintains intention to strengthen

The Japanese Yen rate continues to move slowly towards strengthening at the Forex currency market on Wednesday morning.

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.

Minutes of the Bank of Japan meeting of 28 April was released today, it states that the Bank members were requested to expand program of the quantitative easing due to the deterioration in the economic sentiments. In addition the Bank agreed that it is required to focus on the downside economic risks and take further steps to support the process reconstruction after the earthquake.
The following Japanese data was released on Wednesday:
– Volume of imports increased by 8.9% y/y in April against the forecast of growth by 12.8% and the previous rise by 11.9%;
– Volume of exports fell by 12.5% in April against the forecast of reduction by 12.7% and previous decline of 2.2%.

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.

Macro-economic statistics for March which have been 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%.

 

[LF.Anastasia]

AUD: Australian Dollar is on sold amid risk aversion

The Australian Dollar rate falls at the Forex currency market on Wednesday: investors are moving away from risks, while external background remains unstable.

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 and is approaching oversold zone.

It became known today that leading indicators index in Australia increased by 1.5% m/m in March, to the level of 284.5 points, while annual gain is assessed at 5.3%. Index of coincident indicators rose by 0.7% (+2.0% y/y) in March.

Westpac believes that growth rate of the leading indicators, which helps to assess economic prospects for the next 3-6 months, has stabilized, and shows moderate rate of recovery in the Australian economy. “The results of the first half of the year might be not the best, due to slowdown in the pace of development in QI, caused by the weak external sector and wholesale inventories- pointed Westpac.

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: thus, 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.


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

 

[LF.Anastasia]

NZD: New Zealand Dollar came in sight of bears

At the Forex currency market the New Zealand Dollar rate is on sale on Wednesday, as players are moving away from positions associated with risk.

Forex forecast: MACD indicator is in the positive area for the pair NZD/USD, giving a pair sell signal, while volumes are low. Stochastic Oscillator goes down in the neutral zone, giving a pair sell signal.

Forex recommendations: in case of breakdown at the level of 0.7910, the pair will go to 0.7890 and 0.7850.

Unemployment rate New Zealand fell to 6.6% in QI against the level of 6.8% in QIV, 2010. The forecast had been 6.7%. In addition the proportion of labor force increased to 68.7% against the previous level of 67.9%. Although indicators are favourable, ASB still believes that report is ambiguous: it is possible that the earthquake of February will have more serious impact on the economy than expected and it will have additional pressure on the labor market of New Zealand and will have an adverse affect on the prospects for the sector as a whole. Agency Fitch stated that New Zealand economy has demonstrated stabilization of the budget however it is not sufficient yet to revise the rating outlook of the country from the current “negative”. Moody’s noted that authorities of New Zealand are doing a good job and are taking every step to revert the economy to its normal state.

It is also worth noting that budget deficit in New Zealand amounted to NZ$10.17 billion for the 9 months by 31 March which was in average 15% higher than expected by economists. This was the fact that provoked previous sales of the NZD.
It became known this week that two-year inflationary expectation in New Zealand increased by 0.3% in QII against the rise of 2.6% on quarterly basis earlier.

It is also worth noting that producer price at entrance into QI rose by 2.2% q/q, while the forecast of growth had been 0.6% q/q, producer prices at exit increased by 1.7% q/q with the forecast of 0.5% q/q.

The data released earlier was mixed: house prices fell by 1.9% m/m in April against the decline by 2.0% in March and credit cards expenses rose by 1.7% м/м in April against the increase by 0.5% in March and credit cards costs rose by 1.7% m/m in April against the growth by 0.5% in March. Therefore, real estate sector of New Zealand started to recover and it is a strong supportive factor for the economy. According to REINZ estimates house prices index in New Zealand increased by 1.1% m/m in April against the forecast of growth by 0.5% m/m. In addition, the agency reported that the level of house sales last month was -4.2% y/y against the level of -5.1% y/y in March.

 

[LF.Anastasia]

Euro/USD: Euro received energy boost

The pair EUR/USD grows at the Forex currency market on Thursday: external background enables to regain from the previous sales today.
By 8.45 Moscow time the Euro is at 1.4155 against yesterday’s closing level of 1.4087.

China gave rise to optimism – according to the Financial Times China declared intention to buy bonds of the peripheral countries of Eurozone. If this proves to be true, weak European countries will be able to obtain necessary funds from the market in full.

In addition, Portugal once again announced intention to save more than spend which also added optimism to investors. The evening might be stressful, as the U.S. macro-statistics is scheduled for the release tonight: number of applications for unemployment benefits and preliminary levels of GDP for QI will become known. It is assumed that economy will grow by 2.1% q/q against the level of QIV last year, when GDP grew by 1.8%.

Most likely the pair EUR/USD will not go beyond the range of 1.4010-1.4150 at the trading session on Thursday.

 

[LF.Anastasia]

GBP: British Pound tends upward

At the Forex currency market the British Pound Sterling rate grows steadily on Thursday, keeping on the trend of the last three days, when calm external background enables to make purchases of interesting levels.

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 is increasing in the neutral zone, giving a pair buy signal.

Forex recommendations: in case of breakdown at the level of 1.6320, the target of the purchases will be the levels of 1.6350 and 1.6370. If upward breakdown does not take place the pair will consolidate close to the current levels.

It became known yesterday that index of the service sector rose by 0.6% m/m against expectations of the growth by 0.5% m/m. In addition, as a result of the second reading, GDP in the UK rose by 0.5% on quarterly basis (+1.8% y/y) in QI, was left unrevised.

Representative of the MPC of the Bank of England Mr. Will noted that it would be reasonable to start rates increase now. He believes that the sooner they start tightening in the economy and monetary policy, the easier it will be to avoid surges in the rates in the future. He also stressed that 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 statistics is scheduled for the release today; however, the data on the house prices from Nationwide will be made known on Friday, 27 May.