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[LF.Anastasia]

CAD: Canadian Dollar did not cease subsidence

At the Forex currency market the Canadian Dollar rate continues to weaken on Friday.

Forex forecast: MACD indicator is in the positive area for the pair USD/CAD and is moving along the signal line, not giving a clear signal. Stochastic Oscillator began barely noticeable reversal in the neutral zone, shaping a sell signal.

Forex recommendations: in case of breakdown at the level of 0.9850, the pair will go to 0.9870 и 0.9890. If upward breakdown does not take place, the pair will consolidate close to the current levels.

Canadian Minister of Finance Mr. Flaherty stressed the need of the speedy recovery of the European economy, since it affects the level of investor confidence. Speaking about national economy Flaherty said that Canada can serve as an example for other countries citing as an example statistics of IMF which states that by 2016 Canada will become one of two countries of the Big Seven, which is projected to have a balanced budget.

According to the plan of the Finance Ministry of Canada presented earlier, the country shall revert to the budget surplus in 2014.

The Bank of Canada stated earlier that CPI in the country will begin to rise, as soon as it exceeds expected level. At the same time value of key index of net CPI is also growing.

It became known earlier that balance of current account in Canada was at the level of –CAD $8.92 billion in QI against the level of CAD$10.28 billion in QIV last year. In addition, real GDP of basic prices increased by 0.3% (+2.8% y/y) in QI against revised level of -0.1 % m/m in February.

Inflation in Canada increased by 3.3% y/y, and 0.3% m/m in April against the forecast of 3.4% y/y and 0.5% m/m; while energy costs rose by 17.1% y/y, as per the estimates of the Canadian Statistics Service.

Note: GDP increased by 1.0% on quarterly basis (+3.9% y/y) in QI against the rise of 0.8% a quarter earlier.

At the beginning of June the Bank of Canada left the interest rate unchanged at the level of 1.00% per annum which agreed with market expectations. The regulator said in the follow-up comments that minimization in incentives shall be thoroughly considered, although eventually all the incentives will be phased out. According to the Bank of Canada, core inflation remains relatively low and economy is active, as expected. At the same time expensive Canadian Dollar may well become a break on national economic growth and provide a restraining effect on inflation.

 

[LF.Anastasia]

EURO/USD: Europeanunified currency remains under severe pressure

The pair EUR/USD continues todecline at the Forex currency market on Monday morning under pressure fromexternal background.

By 9.00 Moscow time the Euro isat 1.4228 against yesterday’s closing level of 1.4308.

External background stillexerts pressure – on 22 June a meeting of the U.S. Federal Reserve willbe held where the issue of the interest rate will be resolved, economicoutlooks will be estimated and directives will be given for the furthermonetary policy. the Dollar is gaining strength because of proximity of themeeting.

Greek issue also continues toput pressure on the Euro- decision on the new aid package was postponed untilthe beginning of July.

The day is going to be relativelyquiet in terms of macro-statistics; external background will dictate movementdirection to the market.

Most likely the pair EUR/USDwill not go beyond the range of 1.4170-1.4290 at the trading session on Monday.

 

[LF.Anastasia]

GBP: British Poundcontinues to subside

At the Forex currency marketthe British Pound Sterling continues to subside at the beginning of a new week,tending to break down the level of 1.61.

Forex forecast: MACD indicatoris in the positive area for the pair GBP/USD and goes down, giving a pair sellsignal. Stochastic Oscillator goes down in the neutral zone and is shaping asell signal, approaching oversold zone.

Forex recommendations: in caseof breakdown at the level of 1.6100, the target for purchase will be the levelsof 1.6080 and 1.6050. If downward breakdown does not take place, the pair willconsolidate close to the current levels.

According to the Markit,household finance index fell to 35.1 points in June against the level of 36points in May. This is a negative signal for the British economy, indicatingthat unwillingness to spend money is still preserved.

Earlier, Finance Minister ofGreat Britain Mr. Osborne said that the country is on the track to recoveryalthough monetary and credit side of the economy remains weak. According to himthe British economy continues to struggle with difficulties, which willeventually lead to way out of the problems. As it became known in the middle ofthe week, consumer confidence index Nationwide in Great Britain rose to 55points in May against the forecast of 45 points, a maximum growth on monthlybasis in 2005. Thus, royal wedding had a stimulating effect.

The Bank of England believesthat interest rate will reach the level of 0.75% by the end of this year; whileby Q4 2012 it will be 1.75%, i.e. the Bank have made provisions for one rise ininterest in 2011 and four in 2012. Inflationary prospects were described as“uncertain” and Central Bank admits that CPI will reach the levelof 5% this year. Although the Bank of England expects that CPI will be slightlyabove 1.9% in two years time, Representative of the Bank of England Mr. Fishernoted earlier that bad state of economy could prompt the Central Bank tofurther policy easing. In addition, in case of unexpected economic downturnthere is a chance that economic stimulation with the help of repurchasing ofthe securities from the market will continue.

As reported in the edition of“Independence”, the Bank of England must be prepared to savenational economy from the threat of double dip recession, and according to thecomments of BDO representative, the regulator shall leave interest rate at thecurrent level of 0.50% per annum and do not use it as a shield againstinflation. Rating agency Moody's warned Great Britain earlier that the countrycan lose its AAA rating due to the inefficient fiscal policy.

Representative of MRS, Mr.Wheal, one of the remaining “hawks” in the Bank of England,stressed that the soonest rise in the interest rate will reduce the need forits further raise, and it is necessary to increase the rate despite the factthat the level of inflation turned out to be below the forecast. According tohim all conditions, required for the preventive measures of the Bank of Englandhave been created, and the sooner the BoE launches tightening policy, thegreater flexibility it will give to the regulator in the future.

It became known last week thatvolume of retail sales in the UK fell by 1.4% m/m (+0.2% y/y) in May. Sales inBritain demonstrated decline for the first time since January 2010, and it isnot a very good sign for the economy.

 

[LF.Anastasia]

CHF: Swiss Franc has been weakening for the third consecutive session

At the Forex currency marketSwiss Franc rate preserves downward trend on Monday morning after reaching newhistoric highs last week.

Forex forecast: MACD indicatoris in the negative area for the pair USD/CHF, continues to reverse upward,giving a pair buy signal, while volumes are increasing. Stochastic Oscillatorremains close to the overbought zone, giving a similar signal.

Forex recommendations: in caseof breakdown at the level of 0.8500, the pair USD/CHF will go to 0.8540 and0.8560. If upward breakdown does not take place, the pair will consolidateclose to the current levels.

The situation in Swiss economyremains almost unchanged this morning.

Last week, at the meeting ofthe Swiss National Bank the three month rate Libor was left in the previousrange of 0-0,75% with a tendency to 0.25%. At the same time the SNB has notedthat GDP growth will amount to 2% this year, inflation in 2011 is predicted ataround +0.9% (previously +0.8%), in 2012: +1.0% (previously 1.15), in 1013:+1.7% (previously +2.0%).

Julius Baer Group believes thatit 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 awhole for a year”. However it is quite possible that local economy andits recovery process are strong enough to cope with the interest rate rise to1%-1.5%.

GDP in Switzerland has sloweddown 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 %.The data released last week showed that CPI in Switzerland remained unchangedon monthly basis (+0.4% y/y) in May against the forecast of decline by 0.1% m/m(+0.3% y/y).

Statistics released this weekshowed that producer prices and prices for imports decreased by 0.2% (-0.4%y/y) in May against the forecast of growth by 0.1% m/m. It became known earlierthat unemployment rate in Switzerland fell to 2.9% in May against the level of3.1% in April and the forecast of 3.0%. It is positive data for Swiss economybecause strong Franc does not prevent cohesive economic growth. As it becameknown earlier level of trade balance in Switzerland rose by 1.52 billion inApril against the growth of 1.0 billion in March. Index of leading indicatorsKOF in Switzerland rose to 2.30 points in May against the forecast of growth by2.22 points.

It is worth noting that indexof PMI SVME in Switzerland increased to 59.2 points against the forecast of57.5 points. It proves once again that national economy has learnt to beeffective even in circumstances where national currency is expensive.

 

[LF.Anastasia]

JPY: Japanese Yen aims at strengthen again

The Japanese Yen rate isstrengthening slightly at the Forex currency market on Monday morning after twodays of significant sales, which shows that investors are interested in the Yenas a protective currency.

Forex forecast: MACD indicatorfor the pair USD/JPY is in the negative area and is moving along the signalline, not giving a clear signal. Stochastic Oscillator goes down in the neutralzone, giving a sell signal.

Forex recommendations: off themarket.

Feasible event scenario atForex: in case of breakdown at the level of 80.20 the pair will go to 80.40and 80.55. If upward breakdown does not take place, the pair will go to 80.00.

It became known today thattrade balance deficit amounted to Y853.7 billion (forecast –Y710.1billion) in May against the surplus a year earlier. It became known earlierthat revised real GDP in Japan fell by 0.9% on quarterly basis (-3.5% y/y) inQ1 against the forecast of -0.8%. This data only confirms the view thatJapanese economy is weak – GDP fell lower than expected, although theforecast had been quite pessimistic. According to the data released earliertrade balance deficit in May (first 20 days) rose to Y1.053 trillion againstthe level of Y465 billion in April. It also became known that exports volumefor the first 20 days in May totaled - 9.3% y/y versus the fall of -12.4% inApril.

The Bank of Japan stressed lastFriday that the rise in exports and in consumer sentiment is noticeable; whileuncertainty in the economy is fading away and we can expect improvement in thegeneral state of economy in the Country of the Rising Sun.

Last week, Finance Minister ofJapan Mr. Noda, who has not been in public for quite a long time, said thatauthorities continue to closely monitor currency market; and they remainconfident that currency rates should reflect macro-economic foundation. In theevent that motion will be chaotic in nature, Finance Ministry intends to takedrastic measures. The head of the Bank of Japan Mr. Shirakawasaid in the middle of the week that economy of the country is still undersevere pressure and its recovery is expected in the second half of the fiscalyear. According to him shortage in supply is decreasing faster than expected;however excessive focus on the level of business activity can lead to risks.

Preliminary volume of retailsales 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 theincrease of 0.2% in April. Japan has confronted with the rise in inflation forthe first time over 28 months, which is crucial for the economy; however, itrequires confirmation over the next few months. Japanese consumer prices grewby 0.6% y/y excluding food, and prices for utilities and food skyrocketed.

 

[LF.Anastasia]

AUD: Australian Dollar is going downward again

At the Forex currency market the Australian Dollar rate is back to decline on Monday morning, as external background does not presuppose purchases.

Forex forecast: MACD indicator is in the positive area for the pair AUD/USD, goes down and is crossing the signal line from top to bottom, giving a sell signal. Stochastic Oscillator goes down in the neutral zone giving a sell signal and approaching oversold zone.

Forex recommendations: in case of breakdown at the level of 1.0500, the pair will go to 1.0470 and 1.0450. If downward breakdown does not take place, the pair will consolidate at the current levels.

The situation in the Australian economy remains almost unchanged this morning.

The head of RBA Mr. Stevens said earlier, that updated statistics will be available at the end of July; policy evaluation will be based on it. According to him, eventually, at some point, the rise in the interest rate will become a necessity to control prices, however at the last meeting the level required to raise interest rate has not been reached.

Thus, the Reserve Bank of Australia has confirmed its previous hawk opinion, despite the interval in the interest rate rise which has lasted for 6 sessions.

At the same time the RBA does not worry about high rate of the AUD, on the contrary, Stevens noted that expensive AUD promotes economic adjustment. It is worth noting that the RBA intends to pursue preemptive tactic, therefore, the rates can be raised before autumn.

The Reserve Bank of Australia 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.

According to the data released last week, consumer confidence index Westpac in Australia fell by 2.6% m/m, to 101.2 points in June against preliminary forecast of decline by 1.3%, to 103.9 points. In addition, a number of begun construction in Australia increased by 3.1% q/q in Q1, while the forecast had been -0.6%. It became known earlier that inflation expectations in Australia in June remained at the May level at 3.3%.

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.

 

[LF.Anastasia]

NZD: New Zealand Dollar is on sale

The New Zealand dollar rate istraded downward at the Forex currency market on Monday, as investors’interest in risk remains very low.

Forex forecast: MACD indicatoris in the positive area for the pair NZD/USD, goes down, giving a sell signal.Stochastic Oscillator descends in the neutral zone, giving a buy signal.

Forex recommendations: off themarket.

Feasible event scenario atForex: in case of breakdown at the level of 0.8090 the pair will go to 0.8110and 0.8130. If upward breakdown does not take place the pair will aim at0.8030..

Economic situation in NewZealand is stable as a whole.

It became known last week, thatconsumer confidence index Westpac in New Zealand increased to 112.0 points inQ2 against the level of 97.7 points in Q1. Consumer confidence ANZ increased to112.5 points in June against the preliminary level of 103.3 points. Inaddition, volume of retail sales in New Zealand rose for the first time in thelast three quarters in Q1, which is a good sign of the economic recovery. Thus,indicator increased by 0.9% q/q which agreed with the forecast, excludinginflation.

Earlier, the Reserve Bank ofNew Zealand decided to keep interest rate unchanged at the minimum of 2.50% perannum, since it is going to continue its work on improvement in economicsystem. According to the head of the RBNZ, NZD has been overvalued because ofhigh export prices for raw materials, therefore, national currency rate, whichhas increased over the last two months, has adverse impact on the rebalancingof the economy in New Zealand. Bollard expressed confidence that decline of theNZD will be gradual because currency intervention will not be able to changethe trend.

Agency Fitch stated that NewZealand economy has demonstrated stabilization of the budget; however it is notsufficient yet to revise the rating outlook of the country from the current“negative”. Moody’s noted that authorities of New Zealandhave been doing a good job, and take every step to bring economy to its normalstate.

Note: that budget deficit inNew Zealand amounted to NZ$10.17 billion within 9 months, as of 31 March, whichhad been 15% higher than expected by economists. Terms of trade index in NewZealand 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 recoveringas it reflects changes in prices for exports and imports. We would like topoint that the index is strongly correlated with the index of living standardin the country which is a positive sign.

 

[LF.Anastasia]

GBP: British Pound begun to grow

At the Forex currency market the British Pound Sterling begun to grow on Tuesday after significant sale last week.

Forex forecast: MACD indicator is in the positive area for the pair GBP/USD and is moving along the signal line, not giving a clear signal. Stochastic Oscillator has slowed down its decline in the neutral zone and is ready for reversal and started to shape a buy signal.

Forex recommendations: in case of breakdown at the level of 1.6240, the target for purchase will be the levels of 1.6280 and 1.6300. If upward breakdown does not take place, the pair will consolidate close to the current levels.

Great Britain continues to adhere to its position regarding Eurozone, saying that Greece should resolve its problems by itself.

It became known yesterday, that volume of retail sales in the UK fell by 1.4% m/m (+0.2% y/y) in May. UK sales demonstrated decline for the first time since January 2010 which is not a very good sign for the economy.


In other respects, economic situation in the country remains unchanged.

As reported in the edition of “Independence”, the Bank of England must be prepared to save national economy from the threat of double dip recession, and according to the comments of BDO representative, the regulator shall leave interest rate at the current level of 0.50% per annum and do not use it as a shield against inflation. Rating agency Moody's warned Great Britain earlier that the country can lose its AAA rating due to the inefficient fiscal policy.

Representative of MRS, Mr. Wheal, one of the remaining “hawks” in the Bank of England, stressed that the soonest rise in the interest rate will reduce the need for its further raise, and it is necessary to increase the rate despite the fact that the level of inflation turned out to be below the forecast. According to him all conditions, required for the preventive measures of the Bank of England have been created, and the sooner the BoE launches tightening policy, the greater flexibility it will give to the regulator in the future.

This week, Finance Minister of Great Britain Mr. Osborne said that the country is on the track to recovery although monetary and credit side of the economy remains weak. According to him the British economy continues to struggle with difficulties, which will eventually lead to way out of the problems. As it became known in the middle of the week, consumer confidence index Nationwide in Great Britain rose to 55 points in May against the forecast of 45 points, a maximum growth on monthly basis in 2005. Thus, royal wedding had a stimulating effect.

The Bank of England believes 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.

 

[LF.Anastasia]

CHF: Swiss Franc reverted to growth

At the Forex currency market Swiss Franc rate is traded upward on Tuesday, keeping on yesterday’s trend.

Forex forecast: MACD indicator is in the negative area for the pair USD/CHF, however it is moving along the signal line, not giving a any signals. Stochastic Oscillator goes down in the neutral zone, giving a sell signal.

Forex recommendations: in case of breakdown at the level of 0.8400, the pair USD/CHF will go to 0.8380 and 0.8360. If downward breakdown does not take place, the pair will consolidate close to the current levels.

As it became known today, money supply M3 in Switzerland reduced to 5.6% y/y in May against the level of 6.9% y/y in April.

Statistics released this week showed that producer prices and prices for imports decreased by 0.2% (-0.4% y/y) in May against the forecast of growth by 0.1% m/m. It became known earlier that unemployment rate in Switzerland fell to 2.9% in May against the level of 3.1% in April and the forecast of 3.0%. It is positive data for Swiss economy because strong Franc does not prevent cohesive economic growth. As it became known earlier level of trade balance in Switzerland rose by 1.52 billion in April against the growth of 1.0 billion 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.

At the meeting of the Swiss National Bank last week, three month rate Libor was left in the previous range of 0-0,75% with a tendency to 0.25%.
At the same time the SNB said that GDP growth would amount to 2% this year. Inflation in 2011 is predicted at around +0.9% (previously +0.8%), in 2012: +1.0% (previously 1.15), in 1013: +1.7% (previously +2.0%).

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%.

GDP in Switzerland has 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 %. 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. The data released earlier 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).

 

[LF.Anastasia]

JPY: Japanese Yen tends towards strengthening

The Japanese Yen rate is traded slightly upward at the Forex currency market on Tuesday.

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.

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 80.20, the pair will go to 80.00 and 79.70. If downward breakdown does not take place, the pair will move towards 80.50/60.

Japan announced on Tuesday that they intend to cooperate with their European counterparts in order to resolve problems in Greece more effectively.In general, economic situation in Japan remains almost unchanged.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.It became known earlier that revised real GDP in Japan fell by 0.9% on quarterly basis (-3.5% y/y) in Q1 against the forecast of -0.8%. This data only confirms the view that Japanese economy is weak – GDP fell lower than expected, although the forecast had been quite pessimistic. According to the data released earlier trade balance deficit in May (first 20 days) rose to Y1.053 trillion against the level of Y465 billion in April. It also became known that exports volume for the first 20 days in May totaled - 9.3% y/y versus the fall of -12.4% in April.

At the meeting of the Bank of Japan last week, regulator decided to leave interest rate unchanged, in the target range of 0-0.1% per annum. In addition, the regulator announced the launch of a new lending program at a rate of 0.1%; the amount of available funds will be Y500 billion. This measure is aimed at supporting economic recovery and can maintain the process of recovery that is hardly noticeable at the moment.The Bank of Japan stressed last Friday that the rise in exports and in consumer sentiment is noticeable; while uncertainty in the economy is fading away and we can expect improvement in the general state of economy in the Country of the Rising Sun.

This week, Finance Minister of Japan Mr. Noda, who has not been in public for quite a long time, said that authorities continue to closely monitor currency market; and they remain confident that currency rates should reflect macro-economic foundation. In the event that motion will be chaotic in nature, Finance Ministry intends to take drastic measures. 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.