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[LF.Anastasia]

CHF: Swiss Franc Stays Put Near Highs

At the Forex currency market Swiss Franc rate stays put on Tuesday, keeping position near local highs.
Forex forecast: MACD indicator is in the negative area for the pair USD/CHF and goes down, forming a pair sell signal; while volumes are increasing. Stochastic Oscillator tends to come out of the oversold zone; however it has been keeping this position for a few days already, maintaining a pair sell signal.
Forex recommendations: in case of breakdown at the level of 0.8340, the pair USD/CHF will go to 0.8326 and to new lows of 0.8300. If downward breakdown does not take place, the pair will consolidate close to the current levels.
Swiss consumer price index in May will be made known today (the index fell to 0.1% m/m in April against the previous level of 0.6%).
It became known earlier that the level of trade balance in Switzerland rose by 1.52 billion in April against the rise of 1.0 billion in March. In addition, exports in Switzerland increased by 7.9% in April against the fall by 3.1% in March. Index of leading indicators KOF in Switzerland rose to 2.30 points in May against the forecast of growth by 2.22 points.
In addition, index of PMI SVME in Switzerland increased to 59.2 points against the forecast of 57.5 points. It proves once again that national economy has learnt to be effective even in circumstances where national currency is expensive.
GDP in Switzerland slowed down growth rate in QI this year, increasing by 0.3% on quarterly basis (+2.4% y/y) against the rise of 0.8% last quarter and the forecast of growth of 0.6 %.
According to estimates of the SNB, the main activator for economic growth in Switzerland is still national consumer demand, triggered by the rise in the demand for houses and health care expenditure, as well as high level of export.
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%.

 

[LF.Anastasia]

GBP: British Pound Sterlin Is Still Under Pressure

At the Forex currency market the British Pound Sterling rate is traded downward on Tuesday; sales which started at the beginning of the week still go on.
Forex forecast: MACD indicator for the pair GBP/USD has crossed the signal line from bottom to top, started to increase, and is giving a pair buy signal. Stochastic Oscillatoris moving along the signal line in the neutral zone, and is not giving a clear signal.
Forex recommendations: in case of breakdown at the level of 1.6330, the target for purchase will be the levels of 1.6310 и 1.6280. If downward breakdown does not take place, the pair can consolidate close to the current levels.
Representative of the IMF Mr. Lipsky noted yesterday that financial policy of the UK fits the situation and his colleague, Mr. Chopra stressed that growth in Britain was revised in 2011, due to the GDP in QI and commodity prices. Comprehensive recommendation from the International Monetary Fund was to continue to reduce deficit and carry out accommodative monetary policy.
A meeting of the Bank of England will be held on Thursday this week. According to the economists from Barclays, regulator will raise the rate not in August but in November because new signs of weakness in the British economy and its dependence on the external demand are not favourable at the moment to start monetary policy tightening.
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.
Representative of the MPC of the Bank of England Mr. Sentence, who is going to retire next week noted this week that he has always stood for gradual rise in the interest rate and the level of confidence in the Bank of England can suffer, due to the current financial situation. He also stressed that existing situation does not require urgent special changes in the monetary policy, however sharp increase in rates is possible in the future.
The Bank of England thinks that interest rate will reach the level of 0.75% by the end of this year; while by Q4 2012 it will be 1.75%, i.e. the Bank have made provisions for one rise in interest in 2011 and four in 2012. Inflationary prospects were described as “uncertain” and Central Bank admits that CPI will reach the level of 5% this year. Although the Bank of England expects that CPI will be slightly above 1.9% in two years time, Representative of the Bank of England Mr. Fisher noted earlier that bad state of economy could prompt the Central Bank to further policy easing. In addition, in case of unexpected economic downturn there is a chance that economic stimulation with the help of repurchasing of the securities from the market will continue.
He also noted that he would think about the second round of QE.
At the same time, Barclays Bank indicated that according to the swap curve SONIA, which reflects weighted average index of the Pound - Overnight, the rise in the rate should not be expected before 2012- by 25 basis points.

 

[LF.Anastasia]

EURO/USD: External Background Is Unfavourable Fore The USD

The pair EUR/USD is traded upward at the Forex currency market on Tuesday, as investors are still concerned about slowdown in the U.S economic recovery.
By 8.55 Moscow time the Euro is at 1.4605 against yesterday’s closing level of 1.4575.
Market still has doubt regarding sustainability of the U.S. growth and a threat that Federal Reserve will raise standards to the largest Banks of the country, only builds up pressure at the trading floors.
Investors’ attention today will be focused on the retail sales data in Eurozone in April; Federal Reserve chairman Ben Bernanke will give presentation tonight, describing prospects for economic development of the country.
Most likely the pair EUR/USD will not go beyond the range of 1.4520-1.4650 at the trading session on Tuesday.

 

[LF.Anastasia]

JPY: Japanese Yen Is Aiming At Steady Growth

The Japanese Yen rate proceeds with the growth at the Forex currency market on Wednesday morning.
Forex forecast: MACD indicator is in the negative area for the pair USD/JPY and started to go down sluggishly, giving a pair sell signal. Stochastic Oscillator has come into oversold zone, giving a pair sell signal.
Forex recommendations: in case of breakdown at the level of 80.00 the pair will go to 79.80 and 79.65. If downward breakdown does not take place, the pair will consolidate in the current range. The following Japanese news was released today:
– Trade balance deficit in May (first 20 days) rose to Y1.053 trillion against the level of Y465 billion in April;
– Surplus of current account amounted to Y405.6 billion in April;
– Exports volume for the first 20 days in May totaled - 9.3% y/y versus the fall of -12.4% in April.
Repercussion of the earthquake in March still has severe impact on macro-economic data.
As it was made public earlier, preliminary volume of retail sales in Japan reduced by 4.8% y/y in April against expectations of fall to -6.0% y/y; In addition, net CPI in Japan rose by 0.1% y/y in May against the increase of 0.2% in April. Japan has confronted with the rise in inflation for the first time over 28 months, which is crucial for the economy; however, it requires confirmation over the next few months. Japanese consumer prices grew by 0.6% y/y excluding food, and prices for utilities and food skyrocketed.Prime Minister of Japan Naoto Khan is going to resign as soon as reconstruction of the country after the earthquake will gain stability. Some markets have been discussing such possibility for some time already, while political forces demand Khan’s resignation.
The head of the Bank of Japan Mr. Shirakawa said in the middle of the week that economy of the country is still under severe pressure and its recovery is expected in the second half of the fiscal year. According to him shortage in supply is decreasing faster than expected; however excessive focus on the level of business activity can lead to risks.
Japanese statistics released last Tuesday showed that industrial output in Japan was favourable, however below the forecast. Unemployment rate increased to 4.7%. In addition, household spending continues to demonstrate negative dynamics.

 

[LF.Anastasia]

CHF: Swiss Franc Maintains Position Unchanged

At the Forex currency market Swiss Franc rate continues to stay put in the middle of the week, and this has been observed for a last few days.
Forex forecast: MACD indicator is in the negative area for the pair USD/CHF and goes down, forming a pair sell signal; while volumes are increasing. Stochastic Oscillator tends to come out of the oversold zone; however it has been keeping this position for a few days already, maintaining a pair sell signal.

Forex recommendations: in case of breakdown at the level of 0.8340, the pair USD/CHF will go to 0.8326 and to new lows of 0.8300. If downward breakdown does not take place, the pair will consolidate close to the current levels.
It became known today that unemployment rate in Switzerland fell to 2.9% n May aganst the level of 3.1% in April and the forecast of 3.0%. Therefore, strong Franc is not an obstacle for the does not prevent cohesive economy in Switzerland.
The data released on Tuesday showed that CPI in Switzerland remained unchanged on monthly basis (+0.4% y/y) in May against the forecast of decline by 0.1% m/m (+0.3% y/y).
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%.
It became known earlier that the level of trade balance in Switzerland rose by 1.52 billion in April against the rise of 1.0 billion in March. In addition, exports in Switzerland increased by 7.9% in April against the fall by 3.1% in March. Index of leading indicators KOF in Switzerland rose to 2.30 points in May against the forecast of growth by 2.22 points.
In addition, index of PMI SVME in Switzerland increased to 59.2 points against the forecast of 57.5 points. It proves once again that national economy has learnt to be effective even in circumstances where national currency is expensive.
GDP in Switzerland slowed down growth rate in QI this year, increasing by 0.3% on quarterly basis (+2.4% y/y) against the rise of 0.8% last quarter and the forecast of growth of 0.6 %.
According to estimates of the SNB, the main activator for economic growth in Switzerland is still national consumer demand, triggered by the rise in the demand for houses and health care expenditure, as well as high level of export.

 

[LF.Anastasia]

GBP: British Pound Goes Down Again

At the Forex currency market the British Pound Sterling rate goes down on Wednesday morning.
Forex forecast: MACD indicator for the pair GBP/USD has crossed the signal line from bottom to top, started to increase, and is giving a pair buy signal. Stochastic Oscillator is moving along the signal line in the neutral zone, and is not giving a clear signal.
Forex recommendations: in case of breakdown at the level of 1.6450, the target for purchase will be the levels of 1.647 и 1.6485. If upward breakdown does not take place, the pair can consolidate close to the current levels.
It became known today that retail price index BRC in Great Britain rose by 2.3% y/y in May against the growth of 2.5% y/y in April. Slowdown in the retail price growth is not a good sign.
In other respects, economic situation in Great Britain has not changed fundamentally.
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.
The Bank of England thinks that interest rate will reach the level of 0.75% by the end of this year; while by Q4 2012 it will be 1.75%, i.e. the Bank have made provisions for one rise in interest in 2011 and four in 2012. Inflationary prospects were described as “uncertain” and Central Bank admits that CPI will reach the level of 5% this year. Although the Bank of England expects that CPI will be slightly above 1.9% in two years time, Representative of the Bank of England Mr. Fisher noted earlier that bad state of economy could prompt the Central Bank to further policy easing. In addition, in case of unexpected economic downturn there is a chance that economic stimulation with the help of repurchasing of the securities from the market will continue.
Representative of the IMF Mr. Lipsky noted earlier that financial policy of the UK fits the situation and his colleague, Mr. Chopra stressed that growth in Britain was revised in 2011, due to the GDP in QI and commodity prices. Comprehensive recommendation from the International Monetary Fund was to continue to reduce deficit and carry out accommodative monetary policy.
A meeting of the Bank of England will be held on Thursday this week. According to the economists from Barclays, regulator will raise the rate not in August but in November because new signs of weakness in the British economy and its dependence on the external demand are not favourable at the moment to start monetary policy tightening.

 

[LF.Anastasia]

EURO/USD: Euro Is Being Corrected After The Rise On Thursday

The pair EUR/USD is traded slightly downward at the Forex currency market on Wednesday morning after yesterday’s rise followed after the speech of the head of the U.S. Federal reserve Ben Bernanke.
By 9.10 Moscow time the Euro is at 1.4674 against yesterday’s closing level of 1.4690.
Bernanke stressed in his speech in Atlanta that American economy still needs support, since its revival looks disappointing slow. Federal Reserve will do whatever is necessary to keep inflation within acceptable bounds, although it seems that regulator is not scared of such poor dynamics of economic growth.
Macro-economic calendar is not very eventful today, therefore external background will be the main actuator for the market.
Most likely the pair EUR/USD will not go beyond the range of 1.4610-1.470 at the trading session on Wednesday.

 

[LF.Anastasia]

AUD: Australlian Dollar Is On Sale

At the Forex currency market the Australian Dollar rate goes down in the middle of the week despite favourable data on the level of mortgage lending.
Forex forecast: MACD indicator is in the positive area for the pair AUD/USD, moving upward from the signal line, and giving a shape to a buy signal. Stochastic Oscillator goes down in the neutral zone giving a sell signal.
Forex recommendations: off the market.
Feasible event scenario at Forex: in case of breakdown at the level of 1.0650, the pair will go to 1.0630 и 1.0610. If downward breakdown does not take place, the pair will consolidate at the current levels.
According to the data released on Wednesday, mortgage lending in Australia increased by 4.8% m/m in April. Meanwhile, revised data on mortgage lending for March amounted -1.1% (-1.5% m/m previously). Therefore, Australian economy continues to recover from the flooding in January. Another reason that helps improvement in the mortgage sector is market’s belief that the RBA will keep interest rate unchanged for a long time.
The Reserve Bank of Australia has left interest rate at the previous level of 4.75% per annum and stressed that current course of policy is quite acceptable, which triggered sales of the AUD because it might mean that monetary policy tightening will continue to be suspended in the next few months.
It was announced earlier that inflation in Australia increased by 0.2% m/m (+3.3% y/y), as per TD Securities estimates. It is the weighted average inflation index which is a guideline in decision making for the Bank of Australia, and it is slowing down its growth rate now (in April: +0.3% m/m), indicating that prospects of the increase in the interest rate in the coming months are slipping away.
It became known last week that index of business activity in the Australian service sector (PSI) declined to 49.9 points in May. Therefore, it fell below the key level of 50 points. In April the indicator grew to 51.5 points.
The RBA admits that if economic situation will develop according to expectations, interest rate increase will become a necessity.
Earlier representatives of the Ministry of Finance in Australia said that level of GDP is not the way to determine further movement of economy, although the Ministry still expects further improvement in the country’s economic growth. We would remind that GDP in Australia fell by 1.2% on quarterly basis (+1.0% y/y) in QI, which is the maximum fall in 20 years.

 

[LF.Anastasia]

NZD: Growth Of The New Zealand Dollar Was Suspended

The New Zealand dollar rate fell at the Forex currency market on Wednesday after steady growth yesterday. The speech of the U.S. Federal Reserve chairman Mr. Bernanke made yesterday does not promote encourage investors’ interest in high-yielding currencies.
Forex forecast: MACD indicator is in the positive area for the pair NZD/USD, and goes up, giving a pair buy signal. Stochastic Oscillator is increasing in the neutral zone, and is increasing, giving a similar signal.
Forex recommendations: in case of breakdown at the level of 0.8190 the pair will go to 0.8210 and 0.8240. If upward breakdown does not take place the pair will consolidate close to the current levels.
It became known today that construction volume in New Zealand fell to -6.3% q/q in QI against the level of +1.1% in QIV last year.
In other respect the economic situation in New Zealand remained almost unchanged. The Reserve Bank of New Zealand at the meeting, which will take place on Thursday, 9 June, is going to resolve interest rate issue and give assessment of the current state of the economy and its further development prospects.
Terms of trade index in New Zealand rose to the 37-year highs in QI, demonstrating growth by 0.9% (+6.8% y/y). It could be one of the indications that New Zealand economy is recovering as it reflects changes in prices for exports and imports. We would like to point that the index is strongly correlated with the index of living standard in the country which is a positive sign.
It became known last week that construction permits in New Zealand fell by 1.6% m/m in April against the forecast of growth by 0.5%. 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.
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 have been doing a good job, and take every step to bring economy to its normal state.
Note: that budget deficit in New Zealand amounted to NZ$10.17 billion within 9 months, as of 31 March, which had been 15% higher than expected by economists.

 

[LF.Anastasia]

AUD: Australlian Dollar Goes Down Under The Presure From Statistics

Australian Dollar rate goes down at the Forex currency market on Thursday because of the poor data on the employment market of Australia.
Forex forecast: MACD indicator is in the positive area for the pair AUD/USD, moving upward from the signal line, and giving a shape to a buy signal, however it is very weak. Stochastic Oscillator goes down in the neutral zone, giving a sell signal.
Forex recommendations: in case of breakdown at the level of 1.0570 the pair will go to 1.0540 and 1.0510. If downward breakdown does not take place the pair will consolidate at the current levels.
The data released on Thursday showed that Australian economy created less jobs than expected; employment rate in Australia increased by 7.8 thousand in May against the forecast of growth by 25 thousand.
At the same time unemployment rate remained at the level of 4.9%, the same as in April.
Investors were frustrated with this data, since it indicates slowdown in the recovery rate of the local economy, caused in particular by the flooding in January.
The Reserve Bank of Australia has left interest rate at the previous level of 4.75% per annum and stressed that current course of policy is quite acceptable, which triggered sales of the AUD because it might mean that monetary policy tightening will continue to be suspended in the next few months.
As it was announced earlier inflation in Australia increased by 0.2% m/m (+3.3% y/y), as per TD Securities estimates. It is the weighted average inflation index which is a guideline in decision making for the Bank of Australia, and it is slowing down its growth rate now (in April: +0.3% m/m), indicating that prospects of the increase in the interest rate in the coming months are slipping away.
According to the data released on Wednesday, mortgage lending in Australia increased by 4.8% m/m in April. Meanwhile, revised data on mortgage lending for March amounted -1.1% (-1.5% m/m previously). Therefore, Australian economy continues to recover from the flooding in January. Another reason that helps improvement in the mortgage sector is market’s belief that the RBA will keep interest rate unchanged for a long time.
Earlier representatives of the Ministry of Finance in Australia said that level of GDP is not the way to determine further movement of economy, although the Ministry still expects further improvement in the country’s economic growth. We would remind that GDP in Australia fell by 1.2% on quarterly basis (+1.0% y/y) in QI, which is the maximum fall in 20 years.
It became known last week that index of business activity in the Australian service sector (PSI) declined to 49.9 points in May. Therefore, it fell below the key level of 50 points. In April the indicator grew to 51.5 points.