Fundamental View

[Samirofi]

Date : 24 June 2013

The dollar is starting the week on a firmer footing, with the Aussie once again taking most of the strain in this move. The question markets will be asking themselves this week is whether the reaction to the Fed last week was overdone. For FX, the best way to judge this is by looking at emerging market currencies, where the reaction was most pronounced last week. India, Russia and Turkey seeing their currencies between 1.5% and 3.5% lower vs. the dollar.

If we see some signs of turn-around here, then we could be shaping up for a week when the dollar stabilises and Fed fears recede. On the majors, such as the yen and Aussie, the moves seen have served to further enhance the recent (for the Aussie) and longer-term (for the yen) trends which investors seem broadly comfortable with, so the impetus to fight the Fed on these pairs is a lot weaker.

JPY: It could be a long week for the yen, waiting for the CPI, jobs and production data scheduled for Friday. BoJ governor Kuroda was sounding bullish on the economy last week, but so far it’s been too early to start seeing the signs of adjustment in the inflation numbers that the authorities so crave.


CAD: Weaker CPI data (rising 0.7% YoY) saw a bunch of stops triggered once USDCAD had budged through the previous year’s high of 1.0421, with a high at 1.0489 reached during the European afternoon.


AUD: There were some signs of life on the Aussie during Friday, but considering the extent of the sell-off seen on Thursday, they were relatively muted. It’s clear that the prospect of lower official rates in Australia, concerns over China and the likely ‘tapering’ from the Fed is proving to be a toxic combination for the Aussie. Fresh pressure is being seen early in the European session.

Thanks.\

[Samirofi]

At its meeting today, the Board decided to leave the cash rate unchanged at 2.75 per cent. Recent information is consistent with global growth running a bit below average this year, with reasonable prospects of a pick-up next year. Commodity prices have declined further but, overall, remain at high levels by historical standards. Inflation has moderated over recent months in a number of countries. Globally, financial conditions remain very accommodative

http://www.rba.gov.au/media-releases/2013/mr-13-13.html

[Samirofi]

Global growth downgraded

Global economic growth has not been particularly strong, and has now been downgraded by the HSBC.Global growth was revised from 2.8% to 2.0% in 2013, and from 3.1% to 2.6% in 2014. In its report, HSBC said that it had lowered its forecast due to the US Federal Reserve decision to cut QE, as well as a sharp slowdown in China and other emerging countries such as India and Brazil. The report revised China’s GDP from 8.2% to 7.4% for 2013 and from 8.4%. to 7.4% for next year. Weaker global growth will make it even more difficult for the Eurozone economy to get back on its feet and emerge from a rough recession

[Samirofi]

Germany exported goods to the value of 88.2 billion euros and imported goods to the value of 75.2 billion euros in May 2013. Based on provisional data, the Federal Statistical Office (Destatis) also reports that German exports decreased by 4.8% and imports by 2.6% in May 2013 on May 2012. The month-on-month comparison showed opposite developments of exports and imports upon calendar and seasonal adjustment. While exports decreased by 2.4% on April 2013, imports increased by 1.7%. The foreign trade balance showed a surplus of 13.1 billion euros in May 2013. In May 2012, the surplus had amounted to 15.6...

https://www.destatis.de/EN/PressServ...13_224_51.html

[Samirofi]

Return : 8 July 2013



Maximum Demand : US Dollar

Maximum supply : Japanese Yen

[Samirofi]

Mixed U.S. Economic Data
Ahead of the government's key labor market report, mixed economic data from the U.S. on Wednesday failed to provide any solid direction for the market. Economic data released from the U.S. showed better than expected private sector jobs creation in the month of June and a surprise fall in weekly jobless claims. Meanwhile, U.S. trade deficit widened more than expected in May and an index of service sector signaled slower growth for the month of June.

According to the ADP National Employment Report, released on Wednesday, private sector employment in June increased by 188,000, up from a revised gain of 134,000 jobs in May. Economist had expected an increase of 161,000 private sector jobs, compared to a gain of 135,000 jobs (originally reported) in May. Also on Wednesday, the Labor Department reported that initial jobless claims for the week ending June 29 registered a decline of 5,000 to a seasonally adjusted 343,000 as compared to the previous week's revised figure of 348,000. Economists had expected jobless claims number to come-in at 345,000, slightly down from previous weeks original figure of 346,000.

Meanwhile, another report released by the Commerce Department on Wednesday showed U.S. trade deficit widened sharply in May to $45.0 billion from $40.1 billion in April. Reported deficit was much larger that analysts expectation of deficit to remain steady at $40.3 billion for the month of May. Also, the Institute for Supply Management (ISM) reported weaker than expected reading on the services sector. The ISM Non-manufacturing (Services) PMI slipped to 52.2% in June, compared to 53.7% registered in May. Economists had projected June reading to improve further to 54.3.


ECB, BoE Policy Meetings

Investors are now gearing up for monetary policy decisions from the European Central Bank (ECB) and Bank of England (BoE). ECB and BoE are scheduled to announce their monetary policy decisions on Thursday.

ECB is widely expected to leave its key interest rates at 0.5%. The main focus would be on ECB President Mario Draght's Press Conference, scheduled later on Thursday, after the rate decision announcement. Draghi’s comments on the state of the economy would significantly affect the Euro.

Also on Thursday, BoE is expected to keep its benchmark rates and asset purchase program, that currently stands at 375 billion pounds, unchanged. Market will look for some future guidance regarding central bank's monetary policy action from the first meeting of BoE's new Governor, Mark Carney.


U.S. jobs report to take center stage

Uncertainty as to when the Fed will begin to taper its massive $85 billion monthly bond buying program has elevated market volatility in this week, which is very important for the Forex market. Currency markets witnessed big moves as investors await for the biggest economic event of the month, monthly jobs report from the U.S. The Fed has already laid a road-map that decision to reduce the pace of its monetary stimulus would depend on labor market conditions and hence Friday's jobs report, that would provide further clarity on the conditions of the U.S. labor market, becomes the most important factor to watch.

The Labor Department is scheduled to release the Non-farm payrolls report for June on Friday. Economists anticipate a weaker non-farm payrolls number with an addition of 162,000 jobs in June as compared to 175,000 in May. The unemployment rate for June, meanwhile, is expected to show some improvement and is seen ticking down 0.1% for June to 7.5% from 7.6% in May. Although markets are pricing a relatively weaker non-farm payrolls number for June, as compared to that in May, unemployment rate is what markets will be focusing more on. A stronger than expected numbers would definitely be a positive surprise for the markets but would simultaneously support the conviction that U.S. economy is headed in the right direction and that the Fed tapering is more likely to start later this year

• Draghi's comments, accompanied with prospects of tapering Fed's monetary stimulus, could act as a catalyst for the market and is likely to produce severe volatility for currency market. However, jitters over Friday's key jobs data might keep the overall investor sentiment subdued on Thursday.
• Further, should Friday's jobs number beat forecasts, it would increase investors confidence that the Fed taper plan is nearing and would make other major currencies vulnerable to a sever downside risk against the U.S. Dollar.

[Samirofi]

Asian stocks advanced on Monday even if only modestly, as China’s growth data met expectations. Japanese markets are closed today for a holiday keeping volumes limited.

- The MSCI Asia Pacific excluding Japan Index rose 0.2% to 439.95 as of 14:31 in Hong Kong

China expanded by 7.5% in the 2 ^nd quarter from a year earlier, matching estimates, yet as the industrial output numbers were weak, the downside risks to growth continue.

- China’s CSI 300 Index closed 1.40% higher at 2307.30 - Hong Kong’s Hang Seng closed 0.12% higher at 21303.31

In Australia, resource stocks led the gains as metal price climbed after China`s growth data release. The Australian dollar also rose after China’s GDP above $0.91. - The S&P/ASX 200 closed 0.15% higher at 4981.11 - New Zealand’s NZX 50 closed 0.83% higher at 4606.24

In South Korea the benchmark index reversed the early losses after China`s data, as the mainland is South Korea top export destination. - Kospi closed 0.28% higher at 1875.16

[PCMNewsdesk]

Speculations increased that the Bank of Japan might announce signs for an expansion of their monetary easing measures on their statement tonight, which is in contrast to the plans of the Federal Reserve for finishing their stimulus. As a result, the JPY kept its losses against its U.S. counterpart for the second day in a row. The USD was at 99.83 JPY from 99.86 yesterday, establishing a two-day drop of 0.9 percent. Meanwhile, the EUR/JPY remained nearly unchanged at 130.46, after having declined 0.6 percent the previous day. But the USD lost slightly to 1.3068 versus the EUR from 1.3062.
Besides the BOJ, also Federal Reserve CEO Bernanke will present the semi-annual monetary policy report to the Congress this week, beginning with the House Financial Services Committee tomorrow. Furthermore, today releasing data might show that industrial production climbed 0.3 percent last month, the strongest growth since February. In addition, a separate Bloomberg survey referred that U.S. consumer prices rallied 1.6 percent in June compared to a year earlier following a 1.4 percent rise in May. This would be below the central bank’s inflation target of 2 percent.
Also the ZEW Center for European Economic Research in Mannheim will publish their latest numbers today and might probably confirm an improvement of investor sentiments in Europe’s biggest economy. According to Bloomberg polls, the index of investor and analyst expectations.

[PCMNewsdesk]

Growing rumors that the central bank of Australia might lower their key benchmark rate to a new record on their next summit in August as well as concerns of a cooling Chinese economy prevented the AUD to reach its biggest two-day surplus since November 2011. Referring to Bloomberg news, the chances for a cut of borrowing costs to 2.5 percent by Reserve Bank of Australia might rate above 50 percent among traders. Furthermore, economists explained that the latest currency jumps have influenced the inflation outlook. The nation’s statistics bureau will release their report for the second quarter on the 24th of July. But additional declines were haltered by speculations Federal Reserve’s Governor Bernanke may present signs for a continuation of an accommodative monetary policy to stabilize the U.S. business in his today’s speech. As a result, the AUD tumbled 0.3 percent to 0.9230 USD, after having advanced 2.3 percent in the previous two days. The AUD/JPY traded at 91.79 from 91.69 yesterday, while the NZD/JPY was at 78.35 from 78.22. Also the USD gained 0.2 percent against the NZD and climbed to 78.79 U.S. cents. The Bloomberg Correlation-Weighted Indexes confirmed that theAUD was the worst performer among all tracked currencies and shrank 9.2 percent in the last three months. Meanwhile, the USD fetched 0.4 percent to 99.46 JPY following a 0.8 percent drop yesterday. The EUR/USD appreciated 0.2 percent to 1.3139. In contrast, the GBP suffered from expectations that the Bank of England Governor Carney will announce a tighter connection between interest rates and the needs of the economic developments. Therefore the GBP dropped to a four-month low versus the EUR and was at 0.8692, after reaching 0.8707 the day before, the weakest since the 13th of March.

[Samirofi]

Minutes of the Bank of England Monetary Policy Committe Meeting

Volatility had picked up sharply in financial markets, and there had been falls in the prices of many risky assets and marked rises in short and longer-term interest rates, as participants sought to interpret comments by policymakers about the future stance of US monetary policy and the prospects for an easing in the rate of asset purchases by the Federal Open Market Committee (FOMC). The paths implied by market instruments for policy rates in many advanced economies had moved up sharply. Rates on overnight index swaps (OIS) three years forward had risen by around three quarters of a percentage point in...

http://www.bankofengland.co.uk/publi...13/mpc1307.pdf