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[LF.Anastasia]

GBP: British Pound Sterling launched this week with sales

At the Forex currency market the British Pound Sterling rate goes down on Monday after rapid growth last week.

Forex forecast: MACD indicator for the pair GBP/USD is growing in the negative area, shaping a buy signal. Stochastic Oscillator tends to go out overbought zone, shaping a sell signal.

Forex recommendations: in case of break down at the level of 1.5970, target for the purchase will be the levels of 1.5960 and 1.5950.

Macro-economic situation in the UK remains stable this morning.

The fall of the Pound Sterling today can be related to the closure of long positions on currency, caused by strong overbought and lack of drivers for the further growth.

Debates regarding monetary policy are still going on in the UK. Thus, Mr. Bean noted earlier, that as the result of QE program, the level of inflation can rise by 0.5%; however positive effect of the incentive program is that GDP will get additional +0.5%.

Meanwhile, member of MPC Mr. Dale noted earlier that he also expects sharp decline in CPI at the beginning of 2012. According to Mr. Will, a member of the Bank of England and MPC, British economy demonstrates slow growth rate and probable recession in Q4 would not have been a great surprise.

The head of the Bank of England Mervyn King noted that Britain has effective medium-term financial plan and if QE1 had not been introduced, situation with bank lending would have been much worse. However, there is a double-edged sword here and no one can guarantee that QE2 can increase the volume of borrowing.

Meanwhile, King expects sharp decline of inflation in 2012. CPI in the UK rose by 0.6% m/m (+5.2% y/y) in September against the growth of 4.5% y/y in August. Obviously, inflationary pressure has soared upward, which creates new obstacles to economy. We would remind that in the outcome of the meeting in October, the Bank of England decided to leave interest rate unchanged at the level of 0.50% per annum, at the same time increasing volume of the assets repurchase program. Therefore, QE was increased to 275 billion pounds against the previous level of 200 billion pounds. In the follow-up comments the head of the Bank of England Mervin King said that the expansion of the assets repurchase program has been provoked by the slow growth of the global economy, however QE will have a positive impact on the British economy in the future. According to him these measures are preventive since Britain is in the middle of the drastic crisis now.

It became known today that consumer confidence index Gfk in the UK fell to -32 points in October against the forecast of -30 points. Thus, the level of confidence of British consumers fell to 32-month low. As it became known earlier retail price index BRC in the UK rose by 0.2% m/m (+2.7% y/y) in September. Volume of retail sales BRC in the UK increased by 0.3 y/y in September. Thus, according to the survey of the British Consortium of Retailers volume of retail sales rose slightly on annual basis last month; however monthly dynamics is mixed. Prices for food continued to grow, demand for clothes and footwear fell despite the seasonality. Earlier it became known that retail price index BRC in the UK increased by 0.2% m/m (+2.7% y/y) in September. Volume of retail sales BRC in the UK increased by 0.3 y/y in September. Thus, according to the survey of the British Consortium of Retailers volume of retail sales rose slightly on annual basis last month; however monthly dynamics is mixed. Prices for food continued to grow, demand for clothes and footwear fell despite the seasonality. Therefore, basic demand is minimal at the moment. The data released earlier showed that volume of production output in the UK increased by 0.2% m/m (-1.0% y/y) in August.

 

[LF.Anastasia]

CHF: Swiss Franc is getting weaker at the beginning of the week

At the Forex currency market Swiss Franc rate is losing positions on Monday, largely due to the currency intervention conducted by the Bank of Japan because investors expects similar measures from the Swiss national Bank.

Forex forecast: MACD indicator for the pair USD/CHF is in the positive area and is going down, giving a sell signal; while volumes are minimal. Stochastic Oscillator has come out of the oversold zone, and is giving a buy signal.

Forex recommendations: in case of breakdown at the level of 0.8740, the pair USD/CHF will go to 0.8750 and 0.87800.

This morning Franc carries the can for the decision of the other regulator in respect to other currency- the Bank of Japan had conducted currency intervention, which resulted in sharp weakening of the JPY. Investors worry now that Swiss National Bank can take the same step.

Macro-economic situation in Switzerland remains almost unchanged this morning. Surplus of trade balance amounted to 1850 billion SHF. It became known yesterday that consumption indicator UBS in Switzerland rose to 0.84 points in September against revised level of 0.80 points in August. Taking into account that the data reflects the figures of the months when SNB has fixed the rate of the Franc, the index looks very much positive. Producer prices and import prices in Switzerland declined by 0.1% m/m (-2.0% y/y) in September; Franc hardly reacted to statistics. Statistics released earlier showed that unemployment rate in Switzerland remained at the level of 2.8% in September as expected. Employment sector is stable so far; however repercussion of the expensive national currency is possible.

According to the annual report of the SNB, over the second half of the year economy of the country will move in the sideways, due to the impact of expensive Franc and sharp decline in foreign demand. Thus, GDP in Switzerland will amount to 1.5%-2.0% this year and main growth will attribute to the results of the first part of the year. SNB noted in the comments that if stringent monetary measures had not been taken the economy would have slipped to a recession. SNB expects that inflation will be at the level of 0.4% in 2011 and at the level of 0.3% next year.

We would remind that kick-start for consolidation was triggered last week when the pair USD/CHF went down, following EUR/CHF, which had been actively sold out by one of the Swiss Banks and British Clearing Bank, as dealers explained. It is worth noting that SNB gave indications in September that could have been interpreted as follows: regulator’s power to support the Franc is fading away. Recall that according to the rumors which grow louder among investors in the market, SNB can revise its stand on the key levels and peg exchange rate of the pair EUR/CHF to around 1.25. Therefore, reserves of the CNB seem to disappear before our eyes along with determination of the Bank to curb the Franc. Earlier trade union of Switzerland urged authorities and the Bank to toughen the fight against expensive Franc suggesting to increase minimum allowable exchange rate of the pair EUR/CHF in order to avoid recession. Representative of the Trade Union believe this measure will also support employment sector.

 

[LF.Anastasia]

JPY: Japanese Yen weakened after intervention

The Japanese Yen rate fell sharply at the Forex currency market on Monday after currency intervention conducted by the Bank of Japan at the beginning of the week. In general, this step had been expected, judging by plenty of long positions opened on the pair USD/JPY last week.

Forex forecast: MACD indicator for the pair USD/JPY is in the negative area, and is moving along the signal line, not giving a clear signal. Oscillator is going up steadily in the neutral zone and is giving a buy signal.

Forex recommendations: in case of breakdown at the level of 79.45, the pair will go to 79.65 and 79.00. If downward breakdown does not take place, the pair will consolidate at the current levels.

Thus, long-awaited event took place: the Bank of Japan has conducted currency intervention on Monday morning in order to relieve the pressure of JPY on the national economy.

Mr. Azumi, Finance Minister of Japan, confirmed the fact of infusion into the currency market, which became especially important when the Yen had reached historical highs in pairing with the USD last week.

Therefore, Central Bank of Japan has ventured to carry out the third currency intervention since the beginning of the year, which resulted in decline of the Yen by 5%. However, current dynamics is not impartial to assess efficiency of the intervention; the intervention in August helped to weaken the Yen for only 24 hours.

According to statistics released this morning, number of begun housing construction in Japan fell by 10.8% y/y in September against the forecast of growth by 7.6% y/y. In addition, orders in construction sector of Japan declined by 9.3% y/y in September against the growth of 9.3% y/y in August.

The Bank of Japan left interest rate in the previous range of 0-0.1% per annum, as expected, at the same time, increasing program of asset purchases to Y50 trillion from Y55 trillion. In the follow-up comments Japanese regulator stressed that risks to economy shall be thoroughly considered as well as downside risks to price forecast in the future. According to the estimates of the Bank of Japan exchange rate of the Yen will remain high for a while, the Bank has not clarified if currency intervention threatens the JPY or not.

From the fundamental point of view Japanese economy is stable as far as it is possible after the disaster in March. However, the impact of the expensive Yen can provoke resumption of talk about mitigation of fiscal conditions. At a two-day meeting last week the Bank of Japan left interest rate the level of 0.10% per annum, as expected. Regulator has commented that he is going to continue lending program until 30 April 2012. The Bank has refrained additional stimulation of the economy deciding to wait for the more complete results. Volume of assets purchase was maintained at 50 trillion yen. The head of the Bank of Japan Mr Shirakawa had confirmed this earlier when he said that it is necessary to monitor carefully the impact of the European debt crisis on the Japanese economy, including Forex market and commodity platforms.

 

[LF.Anastasia]

AUD: Australian Dollar has started a week with a drawdown

At the Forex currency market the Australian Dollar rate declines on Monday in response of decreasing interest in risk among investors.

Forex forecast: MACD indicator for the pair AUD/USD has broken through the signal line from bottom to top this week, and is now in the positive area, giving a buy signal. Stochastic Oscillator is coming out of the overbought zone and starting to shape a sell signal.

Forex recommendations: in case of breakdown at the level of 1.0510, the pair will go to 1.0500 and 1.0480. If downward breakdown does not take place, the pair will consolidate at the current levels.

Macro-economic background in Australia remains almost unchanged on Monday. Current rise in AUD is explained by investors’ active interest in risk which led the currency to two-month highs. Threfore, today’s correction is quite logical.

The data released earlier showed that consumer confidence WESTPAC in Australia rose by 0.4% m/m, to the level of 97.2 points in October. As noted by monetary politician Evans it is possible that the rate will go down in November, since low growth of the index indicates general pessimistic sentiment.

Unemployment rate in Australia declined to 5.2% in September versus the level of 5.3% in August. This data demonstrated dynamics for the first time since this March. Employment rate rose by 20.4 thousand last month, while analytics expected the growth of not more than 10 thousand. As noted in the Bureau of Statistics in Sydney, coal mining companies hire staff to meet demand for raw materials from China and India.

According to the data released earlier, CPI in Australia rose by 0.6% q/q (+3.5% y/y) in Q3 against the forecast of growth by 0.5% on quarterly basis. At the same time, inflation increased by 0.9% on quarterly basis in Q2; slowdown in CPI is obvious. It is worth noting that seasonally-weighted CPI rose by 0.3% (it is being tracked by RBA). Growth of inflation has been minimal since Q3 in 1997. It is possible now that at the meeting on 1 November the RBA will decrease the rate from the current 4.75% per annum.

Business confidence NAB in Q3 amounted -4 points while in Q3; while the index had been at the level of +5 points in Q2. According to observers’ estimates the level of employment, sales and corporate profit in the country has dropped considerably. Business conditions in the three- month term amounted +5 points against +10 points previously and amounted to level of +18 points on annual basis against prior +27 points. Sharp decline in the indicator kicked off a quarter earlier, is still going on.

 

[LF.Anastasia]

EUR/USD: Euro continues to lose positions

The pair EUR/USD continues to lose positions at the Forex currency market on Tuesday morning as there is plenty of negative news.

By 9.50 MSK the Euro is at 1.3813 against yesterday’s closing level of 1.3858.

As it became known yesterday Prime Minister of Greece Mr. Papandreou is going to bring the issue of aid to the country from EU and writing off 50% of debts to referendum; which has intensified tension among investors, as in general, the issue was considered to be closed.

In addition, RBA decreased interest rate in Australia and now traders expect that the head of European central Bank Mario Draghi who has assumed office today, will do the same.

Also a two-day meeting of the Federal Reserve will start today.

Most likely the pair EUR/USD will not go beyond the range of 1.3780-1.3870 at the trading session on Tuesday.

 

[LF.Anastasia]

GBP: British Pound is being sold out on Tuesday

At the Forex currency market the British Pound Sterling rate continues to subside on Tuesday, because investors are moving away from external risks.

Forex forecast: MACD indicator for the pair GBP/USD is growing in the negative area, shaping a buy signal. Stochastic Oscillator has come out of the overbought zone, shaping a sell signal.

Forex recommendations: in case of break down at the level of 1.6020, target for the sale will be the levels of 1.6000 and 1.5980.

Macro-economic situation in Great Britain is still stable this morning. The UK is actually the only country which did not bring negative news to the market.

The head of the Bank of England Mervyn King has drawn attention to the fact that Britain has effective medium-term financial plan and if QE1 had not been introduced, situation with bank lending would have been much worse. However, it is a double-edged sword, as no one can guarantee that QE2 can increase the volume of borrowing.

Meanwhile, King expects sharp decline of inflation in 2012. CPI in the UK rose by 0.6% m/m (+5.2% y/y) in September against the growth of 4.5% y/y in August. Obviously, inflationary pressure has soared upward, which creates new obstacles to economy. We would remind that in the outcome of the meeting in October, the Bank of England decided to leave interest rate unchanged at the level of 0.50% per annum, at the same time increasing volume of the assets repurchase program. Therefore, QE was increased to 275 billion pounds against the previous level of 200 billion pounds. In the follow-up comments the head of the Bank of England Mervin King said that the expansion of the assets repurchase program has been provoked by the slow growth of the global economy, however QE will have a positive impact on the British economy in the future. According to him these measures are preventive since Britain is in the middle of the serious crisis now.

Member of MPC Mr. Dale noted earlier that he also expects sharp decline in CPI at the beginning of 2012. According to Mr. Will, a member of the Bank of England and MPC, British economy demonstrates slow growth rate and probable recession in Q4 would not have been a great surprise.

It became known yesterday that consumer confidence index Gfk in the UK fell to -32 points in October against the forecast of -30 points. Thus, the level of confidence of British consumers fell to 32-month low. As it became known earlier retail price index BRC in the UK rose by 0.2% m/m (+2.7% y/y) in September. Volume of retail sales BRC in the UK increased by 0.3 y/y in September. Thus, according to the survey of the British Consortium of Retailers volume of retail sales rose slightly on annual basis last month; however monthly dynamics is mixed. Prices for food continued to grow, demand for clothes and footwear fell despite the seasonality. Earlier it became known that retail price index BRC in the UK increased by 0.2% m/m (+2.7% y/y) in September. Volume of retail sales BRC in the UK increased by 0.3 y/y in September. Thus, according to the survey of the British Consortium of Retailers volume of retail sales rose slightly on annual basis last month; however monthly dynamics is mixed. Prices for food continued to grow, demand for clothes and footwear fell despite the seasonality. Therefore, basic demand is minimal at the moment. The data released earlier showed that volume of production output in the UK increased by 0.2% m/m (-1.0% y/y) in August.

Debates regarding monetary policy are still going on in the UK. Thus, Mr. Bean noted last week, that, in the result of QE program, the level of inflation can rise by 0.5%; however positive effect of the incentive program is that GDP will get additional +0.5%.

 

[LF.Anastasia]

CHF: Swiss Franc continues to move away from local highs

At the Forex currency market Swiss Franc rate continues to move away from previous highs, as investors’ interest now definitely with the USD. Perhaps, the flow of speculative money in Franc has been prevented by Swiss Bank; however, official statement has not been made.

Forex forecast: MACD indicator for the pair USD/CHF is in the positive area and is going down, giving a sell signal, while volumes are minimal. Stochastic Oscillator has come out of the oversold zone, and is going up in the neutral zone, giving a buy signal.

Forex recommendations: in case of breakdown at the level of 0.8820, the pair USD/CHF will go to 0.8835 and 0.8850.

In addition to external factors, Franc continues to carry the can for the decision of the other regulator in respect to other currency- the Bank of Japan had conducted currency intervention at the beginning of the week, which resulted in sharp weakening of the JPY. Investors worry now that Swiss National Bank can take the same step.

According to the annual report of the SNB, over the second half of the year economy of the country will move in the sideways, due to the impact of expensive Franc and sharp decline in foreign demand. Thus, GDP in Switzerland will amount to 1.5%-2.0% this year and main growth will attribute to the results of the first part of the year. SNB noted in the comments that if stringent monetary measures had not been taken the economy would have slipped to a recession. SNB expects that inflation will be at the level of 0.4% in 2011 and at the level of 0.3% next year.

We would remind that kick-start for consolidation was triggered last week when the pair USD/CHF went down, following EUR/CHF, which had been actively sold out by one of the Swiss Banks and British Clearing Bank, as dealers explained. It is worth noting that SNB gave indications in September that could have been interpreted as follows: regulator’s power to support the Franc is fading away. Recall that according to the rumors which grow louder among investors in the market, SNB can revise its stand on the key levels and peg exchange rate of the pair EUR/CHF to around 1.25. Therefore, reserves of the CNB seem to disappear before our eyes along with determination of the Bank to curb the Franc. Earlier trade union of Switzerland urged authorities and the Bank to toughen the fight against expensive Franc suggesting to increase minimum allowable exchange rate of the pair EUR/CHF in order to avoid recession. Representative of the Trade Union believe this measure will also support employment sector.

Macro-economic situation in Switzerland remains almost unchanged this morning. Surplus of trade balance amounted to 1850 billion SHF. It became known yesterday that consumption indicator UBS in Switzerland rose to 0.84 points in September against revised level of 0.80 points in August. Taking into account that the data reflects the figures of the months when SNB has fixed the rate of the Franc, the index looks very much positive. Producer prices and import prices in Switzerland declined by 0.1% m/m (-2.0% y/y) in September; Franc hardly reacted to statistics. Statistics released earlier showed that unemployment rate in Switzerland remained at the level of 2.8% in September as expected. Employment sector is stable so far; however repercussion of the expensive national currency is possible.

 

[LF.Anastasia]

JPY: Japanese Yen tries to regain from yesterday’s fall

At the Forex currency market the Japanese Yen rate tries to strengthen on Tuesday, following yesterday’s weakness caused by currency intervention conducted by the Bank of Japan.

Forex forecast: MACD indicator for the pair USD/JPY is in the negative area, and is moving along the signal line, not giving a clear signal. Oscillator is going up steadily in the neutral zone and is giving a buy signal.

Forex recommendations: in case of breakdown at the level of 78.25, the pair will go to 78.45 and 78.80. If upward breakdown does not take place, the pair will consolidate at the current levels.

According to the minutes of the meeting of the Bank of Japan of 6-7 October, which were released today, some members of the regulator are convinced that downside risks are increasing and it is important for the Central Bank to act promptly. One of the members of the Central Bank suggested that additional stimulation of the credit policy can be required.

Thus, long-awaited event took place: the Bank of Japan has conducted currency intervention on Monday morning in order to relieve the pressure of JPY on the national economy. Mr. Azumi, Finance Minister of Japan, confirmed the fact of infusion into the currency market, which became especially important when the Yen had reached historical highs in pairing with the USD last week. Therefore, Central Bank of Japan has ventured to carry out the third currency intervention since the beginning of the year, which resulted in decline of the Yen by 5%. However, current dynamics is not impartial to assess efficiency of the intervention; the intervention in August helped to weaken the Yen for only 24 hours.

According to statistics released earlier this week, number of begun housing construction in Japan fell by 10.8% y/y in September against the forecast of growth by 7.6% y/y. In addition, orders in construction sector of Japan declined by 9.3% y/y in September against the growth of 9.3% y/y in August.

The Bank of Japan left interest rate in the previous range of 0-0.1% per annum, as expected, at the same time, increasing program of asset purchases to Y50 trillion from Y55 trillion. In the follow-up comments Japanese regulator stressed that risks to economy shall be thoroughly considered as well as downside risks to price forecast in the future. According to the estimates of the Bank of Japan exchange rate of the Yen will remain high for a while, the Bank has not clarified if currency intervention threatens the JPY or not.

From the fundamental point of view Japanese economy is stable as far as it is possible after the disaster in March. However, the impact of the expensive Yen can provoke resumption of talk about mitigation of fiscal conditions. At a two-day meeting last week the Bank of Japan left interest rate the level of 0.10% per annum, as expected. Regulator has commented that he is going to continue lending program until 30 April 2012. The Bank has refrained additional stimulation of the economy deciding to wait for the more complete results. Volume of assets purchase was maintained at 50 trillion yen. The head of the Bank of Japan Mr Shirakawa had confirmed this earlier when he said that it is necessary to monitor carefully the impact of the European debt crisis on the Japanese economy, including Forex market and commodity platforms.

 

[LF.Anastasia]

AUD: Australian Dollar is still on sale

At the Forex currency market the Australian Dollar rate continues to decline on Tuesday for the second consecutive day in response to external negative factors.

Forex forecast: MACD indicator for the pair AUD/USD is in the positive area, giving a buy signal. Stochastic Oscillator has come out of the overbought zone and s going down in the neutral zone, giving a sell signal.

Forex recommendations: in case of breakdown at the level of 1.0410, the pair will go to 1.0400 and 1.0380. If downward breakdown does not take place, the pair will consolidate at the current levels.

Today, Reserve Bank of Australia announced the decrease of the interest rate to 4.50% per annum, by 25 basis points, which in general agreed with expectations.

In the follow-up comments the RBA said that inflation is being curbed now due to the high rate of the currency and low demand of population; regulator expects that in 2012 inflation will be at the level of 2-3%. The Bank also emphasized deterioration of the conditions in the labour market and decrease in prices for the raw materials. Concern about developments in Eurozone is still high, and growth rate of the national economy seems to be moderate.

According to RBA, lending rates are now slightly higher than the average level, even despite softening of general conditions.

Note also, that RBA hinted at further lowering of the rates if general conditions do not improve.

We would remind that according to the data released earlier, CPI in Australia rose by 0.6% q/q (+3.5% y/y) in Q3 against the forecast of growth by 0.5% on quarterly basis. At the same time, inflation increased by 0.9% on quarterly basis in Q2; slowdown in CPI is obvious. It is worth noting that seasonally-weighted CPI rose by 0.3% (it is being tracked by RBA). Growth of inflation has been the lowest since Q3 in 1997. The data released earlier showed that consumer confidence WESTPAC in Australia rose by 0.4% m/m, to the level of 97.2 points in October. Monetary politician, Mr. Evans noted today that it is possible that the rate might go down in November, since low growth of the index indicates general pessimistic sentiment.

Unemployment rate in Australia declined to 5.2% in September versus the level of 5.3% in August. This data demonstrated dynamics for the first time since this March. Employment rate rose by 20.4 thousand last month, while analytics expected the growth of not more than 10 thousand. As noted in the Bureau of Statistics in Sydney, coal mining companies hire staff to meet demand for raw materials from China and India.

Business confidence NAB in Q3 amounted -4 points while in Q3; while the index had been at the level of +5 points in Q2. According to observers’ estimates the level of employment, sales and corporate profit in the country has dropped considerably. Business conditions in the three- month term amounted +5 points against +10 points previously and amounted to level of +18 points on annual basis against prior +27 points. Sharp decline in the indicator kicked off a quarter earlier, is still going on.

 

[LF.Anastasia]

EUR/USD: Euro was given hope

The pair EUR/USD is traded slightly upward at the Forex currency market on Wednesday morning after the fall yesterday.

By 9.50 MSK the Euro is at 1.3714 against yesterday’s closing level of 1.3713.

Europe tries to minimize aftereffects of Greek statement. A special meeting of the leaders of European countries at the summit G20 will start today. Heads of ECB, IMF, Germany and France together with prime-minister of Greece Papandreou will discuss alternate solutions.

A two-day meeting of the U.S. Federal reserve will finish today and outcome of this meeting should be of interest.

Most likely the pair EUR/USD will not go beyond the range of 1.3680-1.3780 at the trading session on Wednesday.