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[LF.Anastasia]

GBP: British Pound resumed decline after a break

The British Pound Sterling rate traded downward at the Forex currency market on Friday morning after a break yesterday. Investors continue to move away from risks at the world capital markets, which, among other things, affects exchange rate of the Pound.

Forex forecast: MACD indicator for the pair GBP/USD remains in the positive area, it goes down, at the same time, volumes are decreasing as well, and is giving a sell signal. Stochastic Oscillator is moving along the signal line and is not giving a clear signal.

Forex recommendations: in case of breakdown at the level of 1.6110 the pair GBP/USD will go to1.6100 and 1.6090.

Yesterday’s meeting of the Bank of England was in general uneventful; contrary to expectations interest rate was kept at the level of 0.50% per annum, current size of the assets purchase program was left unchanged. There were some assumptions in the market in advance of the meeting that the regulator can expand QE program in order to mitigate ongoing weakness of British economy, nevertheless the Bank of England has taken a clear “wait-and-see” attitude.

We would remind that last time the rate was changed in March 2009.

Statistics released on Thursday is noteworthy: volume of industrial output in the UK fell by 0.3% m/m (-2.6% y/y) in March. In general it agreed with forecasts; however the market was not too happy.

Sales at the similar trading floors BRC in the UK fell by 3.3% y/y in April against the forecast of growth of 0.6%. The Pound has almost not reacted to this statistics, as it is completely focused on external background and negative sentiment of investors who are moving away from risks. House price index RICS in the UK fell to -19 points in April against the level of -11 points in March. This is a negative signal as the decline is rather significant.

British CBI reported downgrade of economic growth outlook to 0.6% for this year against prior estimate of 0.9% in February. Forecast for 2013 was remained unchanged at +2.0%.CBI believes that inflationary levels will remain above expectations due to increasing energy prices.

Levels of manufacturing activity in the UK are coming up to the state of stagnation in April. The index grew up to 50.5 points against the forecast of 51.5 points which is the weakest growth since December 2011. Indicators for March have been revised to 51.9 points from 52.1 points, which proves that economy of Eurozone is still having significant impact and prevents economic recovery in Britain.

 

[LF.Anastasia]

CHF: Swiss Franc is weakening again

At the Forex currency market Swiss Franc rate traded downward on Friday due to another surge of negative factors in the world capital markets.

Forex forecast: MACD indicator for the pair USD/CHF has broken through the signal line from bottom to top and is going up in the positive area, giving a buy signal. Stochastic Oscillator remains in the overbought zone and is giving a similar signal.

Forex recommendations: in case of breakdown at 0.9295 the pair USD/CHF will go to 0.9300 and 0.9320.

Franc continues to retreat which can only please local monetary authorities: the currency has not weakened so significantly since this March.

GDP rose by 0.1% q/q (+1.3% y/y) in Q4 against the forecast of zero changes (+1.1% y/y). The data indicates that Swiss economy has adjusted to expensive Franc. Thus, the regulator expects that inflation in 2012-2014 will be in the range of -0.6% to +0.6% and GDP growth will be at the level of 1.0% this year.

Statistics released last week was not very positive: PMI in the manufacturing sector of Switzerland fell to 46.9 points in April against the level of 51.1 points in March. Earlier, Ministry of Finance reiterated approval of pegging of the rate of Franc to the Euro. It will mean that the level of 1.20 will be preserved for a long time. Consumption indicator UBS in Switzerland rose to 1.22 points in March against provisional estimate of 0.9 points. Currency reserves rose to 237.5 billion in March against previous level of 224.9 billion francs. PMI SVME in Switzerland increased to 51.1 points in March against the forecast of 49.5 points. It also became known that unemployment rate in Switzerland fell to 3.1% in April against 3.2% earlier.

Mr. Jordan became the governor of Swiss National Bank in April; he has been performing the duties since Mr. Hildebrand left his post. Jordan has already stated that he would continue to implement existing monetary policy. He is going to protect current level of 1.20 for the pair EUR/ CHF. According to him, Franc remains overvalued. In general, views of the new governor found support in SNB. The Bank believes that considering problems in Eurozone, it is still required to maintain peg of Franc with the Euro. Jordan said a week earlier that the regulator was not going to turn to negative interest rate and would make all efforts to maintain the level of 1.20 in the pair EUR/Franc.

 

[LF.Anastasia]

JPY: Japanese Yen remains in steady range

The Japanese Yen rate traded upward at the Forex currency market on Friday remaining in the oversold range of 79.42-80.39.

Forex forecast: MACD indicator for the pair USD/JPY slides down in the negative zone and is giving a sell signal. Stochastic Oscillator goes up in the neutral zone and is giving a weak buy signal.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 79.90 the pair USD/JPY will go to 80.00 and 80.15. Probably the pair will go to 79.50.

Macro-economic background for JPY is quiet on Friday morning.

Statistics released this morning was all good news: balance of current account in Japan amounted to +Y1.589 trillion in March against forecast of +Y1.449 trillion. At the same time, bank lending rose by 0.4% y/y in April. Therefore, the Country of the Rising Sun demonstrates surplus of current account for the second consecutive month which is a very good indication. Stabilization in European economy would have been good support for Japan; however there is no chance of it so far.

Information which makes rather frequent appearances in press shows that the Bank of Japan can give up additional stimulation, largely due to inflationary risks. Minutes of the meeting of the Bank of Japan of 9-10 April state that it is still required to track the effect of the monetary easing, which took place in February and also monitor international prices for raw materials. Apart from that the regulator did not make radical propositions.

We would remind that interest rate was left in the narrow range of 0-0.1% per annum, however the regulator decided to expand economic stimulus program up to 40 trillion yen (+10 trillion yens). At the same time, the bank informed about plans to buy bonds with maturities of 3 years, whereas earlier the regulator bought only securities with two year maturity.

Real revised GDP amounted to -0.2% q/q (-0.7% y/y) in Q4. Unemployment rate remained at the level of 4.5% in March; preliminary retail sales fell by 1.2% m/m (+10.3% y/y) last month against forecast of decline of 0.5% m/m. In addition, preliminary industrial production rose by 1.0% m/m (+13.9% y/y) in March against expectations of growth of 2.3% m/m. Preliminary index of leading indicator in Japan rose to the level of 96.6 points in March versus previous level of 96.0 points (growth has been observed for three consecutive months).

According to representative of the Bank of Japan Mr. Nasimura, measures taken by the Bank of Japan in February helped to stabilize exchange rate of the Yen and stimulate stock market; therefore, the regulator is ready to take more actions if required. Monetary politician has stressed earlier that Central Bank is going to make vigorous efforts in the sphere of monetary policy in order to achieve planned inflation target at 1%, while the major risk factor is still the same- that is overall slowdown in the world economy.

 

[LF.Anastasia]

AUD: Australian Dollar is still on sale at the end of the week

At the Forex currency market the Australian dollar rate traded downward at the end of the week after yesterday’s attempts to regain. The currency was not able to continue rebound because of the negative external background.

Forex forecast: MACD indicator for the pair AUD/USD descends in the negative area and is giving a sell signal. Stochastic Oscillator remains in the oversold zone and is giving a similar signal.

Forex recommendations: in case of breakdown at the level of 1. 0060 the pair will go back to 1.0050 and 1.0030.

Statistics released this week showed that unemployment rate in Australia fell to the lows of the year in April, reaching 4.9% against 5.2% a month earlier. Number of new jobs rose by 15 thousand last month against expectations of decline of 0.5 thousand. Report illustrated that employment increased due to the rise in the part- time jobs (+26 thousand); however number of full time jobs fell by 10.5 thousand. Such indicator on unemployment rate reduces chances that interest rate will be lowered in the near future.

Speaking about rate we can say that: meeting of the Reserve Bank of Australia, which was held at the beginning of May, astonished and alarmed market. Interest rate was reduced by 50 basis points to the level of 3.75% per annum. The head of RBA, Mr. Stevens has referred to inflation in his comments, saying that slowdown in inflation give cause for government’s concern. It is logical that the lending rate has been reduced to 3.75% from 4.25% in order to create more flexible lending conditions. However it is obvious that Australian economic system faces serious difficulties in development. According to RBA projections, inflation will become lower in the next two years; however it will remain in the range of 2-3%. Note, that CPI rose by 0.1% q/q (+1.6% y/y) in Q1 against expectation of growth of 0.6% q/q (+2.2% y/y).

Other sections of macro-economic background are still alarming: trade balance amounted to –A$1.6 billion in March against the forecast of –A$1.2 billion. Growing deficit is not the best indication for Australian economy. It became known earlier that retail sales in Australia rose by 0.9% m/m in March against expectations of +0.2% m/m. In addition, business confidence index NAB increased to 4 points in April versus the level of 3 points in March.

RBA released a quarterly monetary policy report at the end of last week, which disappointed investors again: the regulator has lowered projections for economic growth and inflation, as weak employment sector and uncertainty in the housing sector impedes progress in other sectors.

 

[LF.Anastasia]

NZD: New Zealand Dollar remains near the lows of the year

At the Forex currency market the New Zealand Dollar remains near the lows of the year on Friday under pressure from external environment.

Forex forecast: MACD indicator for the pair NZD/USD goes down in the negative area, and maintains a sell signal. Stochastic Oscillator remains in the oversold zone and is giving a similar signal.

Forex recommendations: in case of breakdown at the level of 0.7840 the pair will go to 0.7830 and 0.7810. Consolidation close to current levels is possible.

Macro-economic background in New Zealand is stable by today’s trading session.

Mr. Bollard, the head of the Reserve Bank of New Zealand noted this week, that exchange rate of the NZD may remain high even in case of decline in commodity prices; recent weakening of the national currency is directly associated with fundamental basis. At the same time, financial system of New Zealand is very vulnerable to external influence therefore, the RBNZ is prepared to pour liquidity into economy if situation in Europe deteriorates.

Statistics released on Thursday showed that manufacturing PMI in New Zealand fell to 48 points in Aprol against revised level of 53.8 points in March.

Statistics released earlier showed that, business confidence rose to 33.8 points in March, as per NBNZ estimates, versus the level of 28.0 points in February. Boom in the construction sector of the country remains the main catalyst for the rise in business confidence. According to the data released earlier activity in production sector NZ fell to 54.5 points in March against the level of 57.7 points in February.

At the meeting in April, the Reserve Bank of New Zealand left interest rate unchanged at the level of 2.5% per annum which agreed with market expectations. The head of RBNZ Mr. Bollard said in the comments that inflationary pressure is limited and CPI is not going to exceed specified framework. He believes that New Zealand economy demonstrates recovery, and at the same time activity in the real estate sector is increasing.

GDP in New Zealand increased by 0.8% q/q (+1.9% y/y) in Q3 2011 against forecast of +0.6% on quarterly basis. GDP in Q2 rose by 0.1% q/q (+1.5% y/y) versus the level of +0.9% q/q (+1.6% y/y) in Q1. Actually there is stagnation in the economy of New Zealand. GDP had almost stopped its growth, however started to revive later.

Business sentiment index NZIER was at the level of 13.0 points in Q1 this year against the level of 0 points in Q4 2011. House price index REINZ fell by 1.4% m/m (+25.2% y/y) in January against preliminary expectations of decline of 0.1% m/m. Unemployment rate in the country dropped to 6.3% in Q4 2011 against the level of 6.6% a quarter earlier. Business confidence NBNZ in New Zealand rose to 35.8 points in April against preliminary expectations of 33.8 points. In addition, trade balance declined to +NZ$134million against the level of +NZ$202 million in February.

 

[LF.Anastasia]

EUR/USD: Euro has found a new motive for drawdown

The pair EUR/USD is going down at the Forex currency market on Monday morning.

By 8.25 Moscow time the Euro is at 1.2889 against closing session level of 1.2916 on Friday.

Market has to deal with news that starting from 18 May the Bank of China will reduce reserve requirements for commercial banks by 50 basis points to 20.0%; market also declines in anticipation of a decision on forming government in Greece.

At the same time, this afternoon, players will wait for publication on industrial output in Eurozone for March, which is projected to decline

In general, external background is negative for the Euro.

Most likely, the pair EUR/USD will not go beyond the range of 1.2860-1.2970 at the trading session on Monday.

 

[LF.Anastasia]

GBP: British Pound is still under pressure

The British Pound Sterling lacks enthusiasm at trades in the Forex currency market on Monday. It continues to weaken due to pressure from external background.

Forex forecast: MACD indicator for the pair GBP/USD remains in the positive area, it goes down, at the same time volumes are decreasing as well, and is giving a sell signal. Stochastic Oscillator has come into oversold zone and is giving a similar signal.

Forex recommendations: in case of breakdown at the level of 1.6060 the pair GBP/USD will go to1.6050 and 1.6030.

External background caused sales of the Pound, as investors are moving away from risks due to fears triggered by Greek problems.

Statistics released last week was noteworthy: volume of industrial production fell by 0.3% m/m (-2.6% y/y) in March. It agreed with the forecasts; however market was not too happy.

Sales at the similar trading floors BRC in the UK fell by 3.3% y/y in April against the forecast of growth of 0.6%. The Pound has almost not reacted to this statistics, as it is completely focused on external background and negative sentiment of investors who are moving away from risks. House price index RICS in the UK fell to -19 points in April against the level of -11 points in March. This is a negative signal as the decline is rather significant.

Levels of manufacturing activity in the UK are coming up to the state of stagnation in April. The index grew up to 50.5 points against the forecast of 51.5 points which is the weakest growth since December 2011. Indicators for March have been revised to 51.9 points from 52.1 points, which proves that economy of Eurozone is still having significant impact and prevents economic recovery in Britain.

British CBI reported downgrade of economic growth outlook to 0.6% for this year against prior estimate of 0.9% in February. Forecast for 2013 was remained unchanged at +2.0%. CBI believes that inflationary levels will remain above expectations due to increasing energy prices.

Meeting of the Bank of England Last week was in general uneventful; contrary to expectations interest rate was kept at the level of 0.50% per annum, current size of the assets purchase program was left unchanged. There were some assumptions in the market in advance of the meeting that the regulator can expand QE program in order to mitigate ongoing weakness of British economy, nevertheless the Bank of England has taken a clear “wait-and-see” attitude. We would remind that last time the rate was changed in March 2009.

 

[LF.Anastasia]

CHF: Swiss Franc remains weak

At the Forex currency market Swiss Franc rate continues to weaken on Monday.

Forex forecast: MACD indicator for the pair USD/CHF has broken through the signal line from bottom to top and is going up in the positive area, giving a buy signal. Stochastic Oscillator remains in the overbought zone and is giving a similar signal.

Forex recommendations: in case of breakdown at 0.9320 the pair USD/CHF will go to 0.9330 and 0.9350. Consolidation near achieved levels is possible.

Franc has been retreating from high price values for the third consecutive week- it is a good signal for local economy.

Investors today will watch for publication of the data on producer price index in imports for April.

Statistics released last week was not very positive: PMI in the manufacturing sector of Switzerland fell to 46.9 points in April against the level of 51.1 points in March. Earlier, Ministry of Finance reiterated approval of pegging of the rate of Franc to the Euro. It will mean that the level of 1.20 will be preserved for a long time. Consumption indicator UBS in Switzerland rose to 1.22 points in March against provisional estimate of 0.9 points. Currency reserves rose to 237.5 billion in March against previous level of 224.9 billion francs. PMI SVME in Switzerland increased to 51.1 points in March against the forecast of 49.5 points. It also became known that unemployment rate in Switzerland fell to 3.1% in April against 3.2% earlier.

Mr. Jordan became the governor of Swiss National Bank in April; he has been performing the duties since Mr. Hildebrand left his post. Jordan has already stated that he would continue to implement existing monetary policy. He is going to protect current level of 1.20 for the pair EUR/ CHF. According to him, Franc remains overvalued. In general, views of the new governor found support in SNB. The Bank believes that considering problems in Eurozone, it is still required to maintain peg of Franc with the Euro. Jordan said a week earlier that the regulator was not going to turn to negative interest rate and would make all efforts to maintain the level of 1.20 in the pair EUR/Franc.

GDP rose by 0.1% q/q (+1.3% y/y) in Q4 against the forecast of zero changes (+1.1% y/y). The data indicates that Swiss economy has adjusted to expensive Franc. Thus, the regulator expects that inflation in 2012-2014 will be in the range of -0.6% to +0.6% and GDP growth will be at the level of 1.0% this year.

 

[LF.Anastasia]

JPY: Japanese Yen keeps staying in the range

At the Forex currency market the Japanese Yen rate keeps staying in the range of 79.42-80.39 at the beginning of the week despite investors’ risk aversion.

Forex forecast: MACD indicator for the pair USD/JPY slides down in the negative zone and is giving a buy signal. Stochastic Oscillator goes up in the neutral zone and is giving a weak buy signal.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 80.00 the pair USD/JPY will go to 80.05 and 80.25. The pair might go to 79.50.

It became known today that price index for corporate goods in Japan dropped by 0.2% y/y in April against expectation of decline of 0.3%. The Yen has ignored this statistics, as investors are focused on external developments.

Statistics released this morning was all good news: balance of current account in Japan amounted to +Y1.589 trillion in March against forecast of +Y1.449 trillion. At the same time, bank lending rose by 0.4% y/y in April. Therefore, the Country of the Rising Sun demonstrates surplus of current account for the second consecutive month which is a very good indication. Stabilization in European economy would have been good support for Japan; however there is no chance of it so far.

Real revised GDP amounted to -0.2% q/q (-0.7% y/y) in Q4. Unemployment rate remained at the level of 4.5% in March; preliminary retail sales fell by 1.2% m/m (+10.3% y/y) last month against forecast of decline of 0.5% m/m. In addition, preliminary industrial production rose by 1.0% m/m (+13.9% y/y) in March against expectations of growth of 2.3% m/m.

Preliminary index of leading indicator in Japan rose to the level of 96.6 points in March versus previous level of 96.0 points (growth has been observed for three months in a row).

According to representative of the Bank of Japan Mr. Nasimura, measures taken by the Bank of Japan in February helped to stabilize exchange rate of the Yen and stimulate stock market; therefore, the regulator is ready to take more actions if required. Monetary politician has stressed earlier that Central Bank is going to make vigorous efforts in the sphere of monetary policy in order to achieve planned inflation target at 1%, while the major risk factor is still the same- that is overall slowdown in the world economy. Interest rate was left in the narrow range of 0-0.1% per annum, however the regulator decided to expand economic stimulus program up to 40 trillion yen (+10 trillion yens). At the same time, the bank informed about plans to buy bonds with maturities of 3 years, whereas earlier the regulator bought only securities with two year maturity.

 

[LF.Anastasia]

AUD: Australian Dollar remains weak

At the Forex currency market the Australian Dollar rate remains under pressure on Monday because of weakness of the external background.

Forex forecast: MACD indicator for the pair AUD/USD descends in the negative area and is giving a sell signal, while volumes are high. Stochastic Oscillator remains in the oversold zone and is giving a similar signal.

Forex recommendations: in case of breakdown at the level of 1. 0000 the pair will go back to 0.9990 and 0.9970.

The data released this morning showed that mortgage lending in Australia rose by 0.3% m/m in March against expectation of -2.3%. This statistic is not bad; however the AUD is focused on negative external events which encourage players to move away from risks.

Statistics released last week showed that unemployment rate in Australia fell to the lows of the year in April, reaching 4.9% against 5.2% a month earlier. Number of new jobs rose by 15 thousand last month against expectations of decline of 0.5 thousand. Report illustrated that employment increased due to the rise in the part- time jobs (+26 thousand); however number of full time jobs fell by 10.5 thousand. Such strong figures on unemployment rate have reduced chances that interest rate will be lowered in the near future.

In other respects, macro-economic background is still alarming. Trade balance amounted to –A$1.6 billion in March against the forecast of –A$1.2 billion. Growing deficit is not the best indication for Australian economy. It became known earlier that retail sales in Australia rose by 0.9% m/m in March against expectations of +0.2% m/m. In addition, business confidence index NAB increased to 4 points in April versus the level of 3 points in March.

RBA released a quarterly monetary policy report at the end of last week, which disappointed investors again: the regulator has lowered projections for economic growth and inflation, as weak employment sector and uncertainty in the housing sector impedes progress in other sectors.

Meeting of the Reserve Bank of Australia, which was held at the beginning of May, astonished and alarmed market. Interest rate was reduced by 50 basis points to the level of 3.75% per annum. The head of RBA, Mr. Stevens has referred to inflation in his comments, saying that slowdown in inflation give cause for government’s concern. It is logical that the lending rate has been reduced to 3.75% from 4.25% in order to create more flexible lending conditions. However it is obvious that Australian economic system faces serious difficulties in development. According to RBA projections, inflation will become lower in the next two years; however it will remain in the range of 2-3%. Note, that CPI rose by 0.1% q/q (+1.6% y/y) in Q1 against expectation of growth of 0.6% q/q (+2.2% y/y).