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[LF.Anastasia]

GBP: New week started with correction for the British Pound

At the Forex currency market the British Pound Sterling rate is traded slightly upward at the Forex currency market on Monday morning taking advantage of the relatively tranquil external background and regaining from sales at the end of last week.

Forex forecast: MACD indicator for the pair GBP/USD remains in the positive area and maintains outset movement, not giving any signals. Stochastic Oscillator goes down in the neutral zone and is shaping a sell signal.

Forex recommendations: in case of break down at the level of 1.6465, the pair will go to 1.6425 and 1.6400. If downward breakdown does not take place, the pair will consolidate close to the current levels.

It became known last Friday that net volume of borrowing in the public sector of Great Britain was at the level of -stg1.961 billion in July against the value of stg1.350 billion in June. In addition, other indices also showed that volumes of various public borrowings also went down, indicating fairly high level of effectiveness of the current economic programs.

British Ministry of Finance said commenting statistics that tax revenues continue to increase despite poor state of the banks.

It became known earlier that unemployment rate in the UK was at the level of 4.9% in July. At the same time, level of unemployed increased by 37.1 thousand. CPI in the UK fell by 0.1% m/m (4.2% y/y) In June against the forecast of growth by 0.2% m/m. Earlier Confederation of British Industry- CBI has reduced GDP forecast for the current year to 1.3% against the forecast of 1.7% in May. According to experts, sovereign crisis in Europe, debt problems in the U.S. and Japanese disasters will not enable British economy to strengthen considerably. Meanwhile, preliminary GDP in the UK increased by 0.2% on quarterly basis (+0.7% y/y) in Q2. The head of the Bank of England Mr. King noted this week commenting inflationary indices that, CPI can easily reach 5% and MPC can use interest rate or QE to control risks, if required.

It also became known this week that inflation in the UK remains unchanged on monthly basis in July (+4.4% y/y) against growth of 4.2% y/y in June.

In addition, house prices in the UK reduced by 2.1% m/m (-0.3% y/y) in August, as per Rightmove estimates. According to RPI estimates, index of retail prices in the country fell by 0.2% m/m (+5.0% y/y) in July; while in June the indicator had demonstrated the same level of +5.0% y/y.

Publication of the minutes of the last meeting of the Bank of England became a significant event of last week and took players by surprise: all 8 members of MPC voted to keep the rate unchanged. It means that balance of power between “doves” and “hawks” has changed significantly. Wil and Dale who had been previously set belligerently, have joined the camp of conservatives. Posen voted for the increase in the volume of securities repurchase from market for stg500 billion. He also noted in the follow-up comments that interest rate policy will entirely depend on the recovery of world economy and the economy of Eurozone.

 

[LF.Anastasia]

CHF: Swiss Franc is gearing up for the rise

At the Forex currency market Swiss Franc rate tries patience of the national regulator once again; tension is preserved at the external background and therefore Franc is in demand with investors as a “safe harbor”. This situation encourages Franc to grow, which, in its turn contradicts to the idea of Swiss National Bank about ideal levels of CHF.

Forex forecast: MACD indicator is in the negative area for the pair USD/CHF, and is going up, shaping a buy signal. Stochastic Oscillator goes down in the neutral zone and is giving a sell signal.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 0.7890, the pair USD/CHF will go to 0.7920 and 0.7950. If upward breakdown does not take place, the pair will go to 0.7820 and 0.7780.

Macro-economic situation in Switzerland has not changed significantly this morning.

Swiss statistics will be released only in the second part of the week, on Thursday, investors will receive information about the index of investor economic expectation ZEW in August, Index the leading indicator KOF will be made public on Friday.

Last week, Swiss National Bank held a round of talks with Ministry of Finance, which resulted in the declaration of complete mutual understanding in economic issues. Thus, Ministry of Finance intends to spend 2 billion francs to support economy, since exchange rate of the national currency is too overvalued which is harmful for economic system.

In addition, authorities of the country stated that decision on the target level of Franc will be made by the CNB. We would recall situation of last week: Swiss National Bank intervened into the trades at the currency market; judging by the forwarding sector, SNB continued to infuse liquidity at the trading floors to curb the growth of the Franc. Swiss National Bank had also restricted three- month Libor rate to 0-0.25% (it had amounted to 0-0.75% previously). They also stated that increasing rate of the Franc is a negative factor for the national economy; therefore Libor rate will tend to zero and the SNB is going to infuse liquidity into the market in the nearest future to “chill out” the Franc. SNB identified the threat to economic development and stability as the major reason for this.

It became known this week that producer prices and imports prices in Switzerland declined by 0.7% m/m (-0.5% y/y) in July against the fall of 0.6% m/m in June. In addition, consumer confidence index in Switzerland fell to -17 points in Q3 against the forecast of -5 points. The data released earlier showed that unemployment rate in Switzerland remained at the level of 3.0% in July. According to statistics released earlier, level of retail sales in Switzerland rose by 7.4% y/y in June against the revised level of -3.9% y/y in May. In addition, index of PMI SVME increased to 53.5 points in July versus the forecast of 52.5 points.

 

[LF.Anastasia]

JPY: Japanese Yen remains near the highs of March, which it has reached once again recently

At the Forex currency market the Japanese Yen rate is traded upward on Monday morning, while the Bank of Japan keeps its eagle eye on the developments in the pair USD/JPY, regardless of this, last Friday, the Yen managed to reach highs of March once again.

Forex forecast: MACD indicator is in the negative area for the pair USD/JPY, and is moving along the signal line, not giving a clear signal. Stochastic Oscillator is doing the same in the neutral zone; however it started to go up and is shaping a buy signal.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 76.70, the pair will go to 76.90 and 77.50. If upward breakdown does not take place the pair will consolidate close to the current levels.

It seems that Japanese authorities may lack strength and capabilities to “pacify” the JPY. Last Friday the currency had reached the highs of March once again; just a few weeks after the regulator has poured about 5 trillion yen into the market during currency intervention.

Now the Yen is only affected by market preference which is obviously in favor of the safe currency.

Representative of the monetary authorities of Japan, Mr. Noda said this morning that government is elaborating solution for the problem of expensive Yen and it is possible that the third edition of the emergency budget will contain measures which will support economy that suffers from impact of expensive YPY. According to the politician, close cooperation of the Big Seven and of Big 20 can contribute to full reversal of the ascending channel of the JPY.

Monetary politician regards the fall in Q2 as a temporary phenomena; he said that it is required to monitor risks, caused by expensive Yen. In addition, it is not possible to resolve the issue of deflation immediately and prices in the country will recover gradually. Statistics released earlier was mixed: unemployment rate in June was at the level of 4.6%; household spending fell by 4.2% y/y in June; net national CPI increased by 0.4% in June against the forecast of +0.5%. Exports in Japan decreased by 1.6% y/y in June against the forecast of decline by 4.1% y/y; imports rose by 9.8% y/y, while expected growth had been of 11.0% y/y.

According to the previous estimates of the Bank of Japan, real level of GDP will rise by 0.4% in the fiscal year of 2011 (forecast of April had been more optimistic: +0.6%). In the fiscal year of 2012, GDP growth is expected in the volume of 2.9% which would agree with the April forecast. Next year CPI is predicted to be at the level of +0.7%. Real GDP in Japan decreased by 0.2% on quarterly basis (-1.3% y/y) in Q2. GDP fell less than expected, and Minister of Finance of the country of the rising sun said that Japan will demonstrate the rise of economy next quarter.

It became known earlier that leading indicators index in Japan was left unrevised, showing growth by 3.8 points against the rise of 3.4 points in May. At the same time, coincident indicators index in Japan increased by 2.7 points in June against the growth of 2.6 points in May. The data released earlier showed that composite index of consumer confidence in Japan increased to 37.0 points in July against the value of 35.3 points in June. It also became known that current account surplus in Japan was -50.2% y/y in June, Y526.9 billion against decline of 51.7% y/y in May. It became known also that revised volume of industrial output in Japan increased by 3.8% m/m in June against preliminary value of +3.9% m/m.

 

[LF.Anastasia]

AUD: Australian Dollar is still weak

At the Forex currency market the Australian Dollar rate continues attempts to grow, which are not very successful.

Forex forecast: MACD indicator remains in the negative area for the pair AUD/USD, and is moving along the signal line, not giving a clear signal. Stochastic Oscillator goes down in the neutral zone, giving a sell signal.

Forex recommendations: in case of breakdown at the level of 1.0380, the pair will go to 1.0360 and 1.0340. If downward breakdown does not take place, the pair will stay close to the current levels.

Economic situation in Australia has not changed significantly this morning.

Minutes of the last meeting of the Reserve Bank of Australia which were made public earlier showed that leading economic indicators demonstrated moderate increase in employment, and if the world financial turmoil would continue, it could become a factor of pressure to household spending and sentiments in the business circles, which in its turn, would have a negative impact on the general projections of the Central Bank. At the same time expensive raw material in the world pushes the level of inflation upward. In addition, the document says that high exchange rate of the AUD and low level of households demand, have a restrictive effect on inflation. Among other things at the last meeting, arguments in favour of rate increase were suppressed by the downside risks to demand and high level of stress at the global financial exchanges.

According to the data released this week, index of leading indicators Westpac in Australia increased by 0.2% m/m (+1.6% y/y) in June against the growth of 3.0% y/y in May. However, the rate of index’s decline is minimal, considering that the index has been steadily decreasing since 2010. This index indicates prospects for economic activity for the next 3-9 months and judging by its dynamics, rapid growth can be hardly expected.

We would remind that according to the decision of the Reserve Bank of Australia interest rate in the country was left at the previous level of 4.75% per annum. In the follow-up comments, the head of the RBA, Mr. Stevens said that external uncertainty prevents the rise in the interest rate in Australia at the moment. He said that “it was agreed that it was reasonable to maintain current course of monetary policy especially taking into account acute sense of uncertainty at the financial markets recently. At the next meeting the RBA will continue to estimate varying prospects for growth and inflation”.

 

[LF.Anastasia]

CAD: Canadian Dollar needs strong catalyst for strengthening

At the Forex currency market the Canadian Dollar rate demonstrates feeble attempts to strengthen, which, however, requires a stronger catalyst.

Forex forecast: MACD indicator is moving up in the positive area for the pair USD/CAD, giving a buy signal. Stochastic Oscillator goes up rapidly in the neutral zone and is giving a sell signal, while approaching overbought zone.

Forex recommendations: in case of breakdown at the level of 0.9910, the pair will go 0.9925 and 0.99500. If upward breakdown does not take place, the pair will aim to 0.9830.

At became known earlier that net CPI in Canada increased by 0.2% m/m (+1.6% y/y) in July. The indicator fell by 0.7% m/m (+3.1% y/y) in June.

The Bank of Canada believes that GDP of the country will account to 2.8% in 2011 (reduction by 0.1% versus forecast of April); and it will be: 2.6% in 2012 and 2.1% in 2013. According to the Bank evaluation, export performance in Canada is negative, because low demand in the USA prevents the rise of the indicator and expensive CAD makes situation more complicated. The growth in the interest rate in Canada will directly depend on stability in the economic development. The head of the Bank of Canada Mr. Carney said earlier that there are several significant obstacles on the way of Canadian economic development. First of all it is the growth of the Canadian Dollar and secondly, it is European debt crisis, plus to this, drawn-out dialogue about the U.S. national debt also casts a dark shade on the Canadian economy. Central Bank will be able to waive further economic stimulation only when economic system will show steady self-sustained growth.

As it became known, number of begun construction in Canada increased to 205.1 thousand in July which is higher than the forecast at 194.5 thousand and above the previous level of 196.6 thousand. In addition, trade deficit in Canada was at the level of -$1.6 billion in June against the level of -$1 billion in May. This is probably related to the problems in the neighboring U.S.

Earlier, the Bank of Canada left interest rate at the previous level of 1.0%, which agreed with the forecast. According to the follow-up comments of the regulator, certain monetary incentives can be phased out in the nearest future and current level of inflation, which is about 3.7%, is assessed as temporary. At the same time, global inflationary pressure is obviously growing.

 

[LF.Anastasia]

EUR/USD: Activity in the major pair is low

The pair EUR/USD is traded slightly upward at the Forex currency market on Tuesday morning.

By 9.15 MSK the Euro is at 1.4370 against yesterday’s closing level of 1.4357.

Activity in this segment of the market is low; investors are looking forward to the second part of the week when monetary authorities of large enterprises will have a meeting in Jackson Hole. It is expected that the Chairman of the U.S Federal Reserve Bernanke will give implication about new stimulus measures, and the head of ECB Trichet will assure that European economy will come out of a recession with minimal losses.

This afternoon, investors will be interested in preliminary index of business activity of industry in Germany, France and Eurozone. Index of investor economic expectations ZEW in Germany in August will become known later. Index of consumer confidence in Eurozone in August and the level of sales of new houses in the U.S. will be made public tonight.

Most likely the pair EUR/USD will not go beyond the range of 1.4300-1.4420 at the trading session on Tuesday.

 

[LF.Anastasia]

GBP: British Pound remains under pressure despite growth in the morning

At the Forex currency market the British Pound Sterling rate has made attempts to strengthen on Tuesday morning after three- days of sales; however technical signals indicate pressure on the currency.

Forex forecast: MACD indicator for the pair GBP/USD remains in the positive area and maintains outset movement, not giving any signals. Stochastic Oscillator goes down in the neutral zone and is shaping a sell signal.

Forex recommendations: in case of break down at the level of 1.6465, the pair will go to 1.6425 and 1.6400. If downward breakdown does not take place, the pair will consolidate close to the current levels.

Economic situation in the UK remains almost unchanged this morning.

Unemployment rate in the UK was at the level of 4.9% in July. At the same time, level of unemployed increased by 37.1 thousand. CPI in the UK fell by 0.1% m/m (4.2% y/y) In June against the forecast of growth by 0.2% m/m. Earlier Confederation of British Industry- CBI has reduced GDP forecast for the current year to 1.3% against the forecast of 1.7% in May. According to experts, sovereign crisis in Europe, debt problems in the U.S. and Japanese disasters will not enable British economy to strengthen considerably. Meanwhile, preliminary GDP in the UK increased by 0.2% on quarterly basis (+0.7% y/y) in Q2. The head of the Bank of England Mr. King noted this week commenting inflationary indices that, CPI can easily reach 5% and MPC can use interest rate or QE to control risks, if required.

It is worth noting that inflation in the UK remains unchanged on monthly basis in July (+4.4% y/y) against growth of 4.2% y/y in June.

In addition, house prices in the UK reduced by 2.1% m/m (-0.3% y/y) in August, as per Rightmove estimates. According to RPI estimates, index of retail prices in the country fell by 0.2% m/m (+5.0% y/y) in July; while in June the indicator had demonstrated the same level of +5.0% y/y.

It became known last Friday that net volume of borrowing in the public sector of Great Britain was at the level of -stg1.961 billion in July against the value of stg1.350 billion in June. In addition, other indices also showed that volumes of various public borrowings also went down, indicating fairly high level of effectiveness of the current economic programs.

British Ministry of Finance said commenting statistics that tax revenues continue to increase despite poor state of the banks.

 

[LF.Anastasia]

CHF: Swiss Franc remains in the six-day range

At the Forex currency market Swiss Franc rate remains in the six-day range on Tuesday morning, expecting developments in the financial area at the end of the week.

Forex forecast: MACD indicator is in the negative area for the pair USD/CHF, and is going up, shaping a buy signal. Stochastic Oscillator goes down in the neutral zone and is giving a sell signal.

Forex recommendations: off the market.

Feasible event scenario at Forex: in case of breakdown at the level of 0.7890, the pair USD/CHF will go to 0.7920 and 0.7950. If upward breakdown does not take place, the pair will go to 0.7820 and 0.7780.

It is worth keeping an eye on the trade balance in Switzerland in July today: the fall in the indicator can affect the exchange rate of the Franc.

Main Swiss statistics will be released at the end of the week; on Thursday, investors will await information about the index of investor economic expectation ZEW in August, index the leading indicator KOF will be made public on Friday.

It became known this week that producer prices and imports prices in Switzerland declined by 0.7% m/m (-0.5% y/y) in July against the fall of 0.6% m/m in June. In addition, consumer confidence index in Switzerland fell to -17 points in Q3 against the forecast of -5 points. The data released earlier showed that unemployment rate in Switzerland remained at the level of 3.0% in July. According to statistics released earlier, level of retail sales in Switzerland rose by 7.4% y/y in June against the revised level of -3.9% y/y in May. In addition, index of PMI SVME increased to 53.5 points in July versus the forecast of 52.5 points. Last week, Swiss National Bank held a round of talks with Ministry of Finance, which resulted in the declaration of complete mutual understanding in economic issues. Thus, Ministry of Finance intends to spend 2 billion francs to support economy, since exchange rate of the national currency is too overvalued which is detrimental to economic system.

In addition, authorities of the country stated that decision on the target level of Franc will be made by the CNB. We would recall situation of last week: Swiss National Bank intervened into the trades at the currency market; judging by the forwarding sector, SNB continued to pour liquidity at the trading floors to curb the growth of the Franc. Swiss National Bank had also restricted three- month Libor rate to 0-0.25% (it had amounted to 0-0.75% previously). They also stated that increasing rate of the Franc is a negative factor for the national economy; therefore Libor rate will tend to zero and the SNB is going to infuse liquidity into the market in the nearest future to “chill out” the Franc. Weighty argument of the SNB was that there is a threat to economic development and stability.

 

[LF.Anastasia]

JPY: Japanese Yen tends towards upper bound of corridor

At the Forex currency market on Tuesday, the Japanese Yen rate is moving away from the highs of March that it had reached once again earlier; it is still in the two-week range, however tends towards its upper bound.

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

Forex recommendations: in case of breakdown at the level of 76.85, the pair will go to 77.00 and 77.50. If upward breakdown does not take place the pair will consolidate close to the current levels.

Japanese economic structure does not represent any fundamental changes this morning.

For the time being, quotes of Yen’s exchange rate are based only on the preferences of the market, which are obviously in favour of the safe currency; however such situation is unlikely to last long. Market is in anticipation of new round of currency intervention which can exceed 5 trillion yen this time.

According to the previous estimates of the Bank of Japan, real level of GDP will rise by 0.4% in the fiscal year of 2011 (forecast of April had been more optimistic: +0.6%). In the fiscal year of 2012, GDP growth is expected in the volume of 2.9% which would agree with the April forecast. Next year CPI is predicted to be at the level of +0.7%. Real GDP in Japan decreased by 0.2% on quarterly basis (-1.3% y/y) in Q2. GDP fell less than expected, and Minister of Finance of the country of the rising sun said that Japan will demonstrate the rise of economy next quarter.

It became known earlier that leading indicators index in Japan was left unrevised, showing growth by 3.8 points against the rise of 3.4 points in May. At the same time, coincident indicators index in Japan increased by 2.7 points in June against the growth of 2.6 points in May. The data released earlier showed that composite index of consumer confidence in Japan increased to 37.0 points in July against the value of 35.3 points in June. It also became known that current account surplus in Japan was -50.2% y/y in June, Y526.9 billion against decline of 51.7% y/y in May. It became known also that revised volume of industrial output in Japan increased by 3.8% m/m in June against preliminary value of +3.9% m/m.

Representative of Japanese monetary authorities Mr. Noda said earlier that government elaborates on the solution for the problem of expensive Yen and it is possible that the third edition of the emergency budget will contain measures to support economy which suffers from impact of expensive YPY. According to the politician, close cooperation of the Big Seven and of Big 20 can contribute to complete turnaround in the ascending channel of the JPY.

 

[LF.Anastasia]

AUD: Australian Dollar is in no hurry to accelerate its growth

The Australian Dollar rate continues to grow at the Forex currency market on Tuesday morning; however volumes of the rise are not too high, due to uncertainty of the external background and “wait -and- see” attitude of the majority of investors.

Forex forecast: MACD indicator remains in the negative area for the pair AUD/USD, and started to make upward reversal, giving a buy signal. Stochastic Oscillator also reverses upward in the neutral zone; however its buy signal is weak at the moment.

Forex recommendations: in case of breakdown at the level of 1.0470, the pair will go to 1.0490 and 1.0510. If upward breakdown does not take place, the pair will stay close to the current levels.

Calendar of Australian macro-economic developments is almost empty this week; the data on the price of new houses in July will be released on Wednesday, however they are of the secondary importance and will unlikely to affect the rate of the AUD. External background will remain the major driver for the pair AUD/USD.

According to the data released last week index of leading indicators Westpac in Australia increased by 0.2% m/m (+1.6% y/y) in June against the growth of 3.0% y/y in May. However, the rate of decline in the index is minimal, considering that the index has been steadily decreasing since 2010. This index indicates prospects for economic activity for the next 3-9 months and judging by its dynamics, rapid growth can be hardly expected.

We would remind that according to the decision of the Reserve Bank of Australia interest rate in the country was left at the previous level of 4.75% per annum. In the follow-up comments, the head of the RBA, Mr. Stevens said that external uncertainty prevents the rise in the interest rate in Australia at the moment. He said that “it was agreed that it was reasonable to maintain current course of monetary policy especially taking into account acute sense of uncertainty at the financial markets recently. At the next meeting the RBA will continue to estimate varying prospects for growth and inflation”.

Minutes of the last meeting of the Reserve Bank of Australia which were made public earlier showed that leading economic indicators demonstrated moderate increase in employment, and if the world financial turmoil would continue, it could become a factor of pressure to household spending and sentiments in the business circles, which in its turn, would have a negative impact on the general projections of the Central Bank. At the same time expensive raw material in the world pushes the level of inflation upward. In addition, the document says that high exchange rate of the AUD and low level of households demand, have a restrictive effect on inflation. Among other things at the last meeting, arguments in favour of rate increase were suppressed by the downside risks to demand and high level of tension at the global financial sector.