Market Review – Fundamental Perspective

[PCMNewsdesk]

Today, a report might show that retail sales climbed in July, the fourth month in a row. In advance, the USD rallied to the strongest level within a week amid speculation that positive data might scale the probability that the Federal Reserve could reduce their monthly asset purchase program. Referring to Bloomberg News, the U.S. Commerce Department might confirm that the retail sales increased 0.3 percent in June following a 0.4 percent estimate. Last week, some officials of the U.S central bank signaled their readiness for taking first steps to reduce the monetary stimuli on their September gathering on the 17th and 18th next month. Also the Bloomberg Dollar Index climbed 0.1 percent to 1,021.47 after having appreciated 0.4 percent the previous day, the first in more than five days.
In contrast, the economists are expecting a heightening of the monetary easing by the Bank of Japan as the factory orders drop in June. Tonight released report by the Cabinet Office showed that the machine orders declined 2.7 percent in June compared to May as it fetched 10.5 percent, while a Bloomberg gauge predicted a 7 percent decrease. In addition, minutes of the BOJ’s July meeting will be published today and will present the expectation of a moderately growth of the world’s third-biggest economy; although concerns regarding consumer prices might remain. As a result, the JPY weakened against all of its most traded peers. Furthermore, the Bloomberg Correlation-Weighted Indexes verified that the JPY has fallen 8.3 percent since January, the worst performer after the AUD. The EUR advanced 5.2 percent in the same period and the USD strengthened 4.2 percent. Therefore the USD ascended 0.4 percent and was at 97.24 JPY by touching 97.44, the highest since the 7th of August. The EUR/USD remained nearly unchanged at 1.3308, while the JPY shrank 0.4 percent to 129.41 versus the EUR.

[PCMNewsdesk]

Yesterday, the development of the U.S. retail sales fulfilled the economists’ expectations by advancing 0.2 percent in July and appreciated for the fourth month in a row. In contrast, the Canadian business showed signs that the growth might lag behind compared to its biggest trading partner; especially after e report confirmed weak labor market data. In July, the economy lost 39,400 jobs and remained clear behind the predicted surplus of 10,000 workers by a Bloomberg poll. As a result, the CAD tumbled for the third day in a row and tumbled 0.4 percent to 1.0343 CAD versus the USD. In the last quarter, the CAD declined 1.9 percent compared to the other tracked currencies by the Bloomberg Correlation-Weighed Indexes, while the USD lost 0.1 percent and the AUD 8.8 percent in the same period. Today, the Bank of Canada is selling 2.7 billion USD in bonds with a maturity of 10 years and also futures on crude oil, the nation’s main export, added 0.4 percent and rallied to 106.52 USD per barrel.
Referring to yesterday’s positive data, the probability rises further that the Fed will reduce their monthly bond buying program of 85 billion USD by 10 billion USD to 75 billion USD on their September meeting. Nevertheless, the USD succeeded to keep its gains from the day before. Furthermore, the tomorrow releasing New York Fed’s general economic index might increase to 10 this month, the best since February, according to economists’ estimates. All readings above zero are signs for growth in the so-called Empire State area. Also, the latest labor market figures will publish tomorrow and could confirm that jobless claims shrank by 18,000 to 335,000 in the first two weeks in August. In addition, the Bloomberg Correlation-Weighted Indexes confirmed that the USD has advanced 4.1 percent in the past six months, the best performance among all tracked currencies, while the EUR fetched 3.3 percent and the JPY tumbled 2.1 percent in the same period.

[PCMNewsdesk]

Yesterday, gold performed the biggest increase since the 24th of July and climbed 0.8 percent to 1,346.61 USD per ounce responding to the rising demand due to a weakening USD. Also other metals and oil benefited from the development of the U.S. currency and appreciated. But later today, the labor market data like initial jobless claims of the U.S. economy will be released and might show a slight surge to 335,000 in the second week in August from 333,000 the week before. Besides the jobless claims also consumer prices will be published and referring to a report by Bloomberg economists, consumer prices probably advanced by 0.2 percent in July boosting the inflation up and after having risen 0.5 percent in June. Furthermore, the representatives of the Federal Reserve forewarned for too high expectations for the economic growth and pledged for caution in the efforts to change the current policy of the central bank. In succession, the USD lost against nearly all of its most traded counterparts.
A speaker of the Japanese government confirmed that the plans for a lowering of cooperate taxes by Prime Minister Abe have not made any progresses so far, which increased the downward pressure on the JPY. Nevertheless, the USD/JPY dropped 0.5 percent to 97.67 JPY following a decrease of 0.1 percent yesterday. The 17 nation’s currency enforced against the USD and climbed 0.3 percent to 1.3297, while the JPY gained 0.2 percent and traded at 129.88 versus the EUR. Also the Bloomberg U.S. Dollar Index lost 0.2 percent to 1,022.55.
Meanwhile, the GBP benefited from estimates that today releasing retail sales including automotive fuel might rally 0.7 percent last month continuing the 0.2 percent surplus in June. The GBP climbed 0.2 percent to 1.5526 USD.

[PCMNewsdesk]

This week a range of German data might confirm that the largest economy of the European Union is gaining momentum, which spurred the EUR close to a five day high. Referring to estimates by Bloomberg news, German producer prices probably climb in the 7th month and also gauges of purchasing managers in manufacturing and services industries shows that the recovery of the euro-zone accelerated. Economists’ estimates are predicting an increase of producer prices by 0.2 percent in July compared to a month before, finishing a period of six month with contracting figures. In addition, a poll of German manufacturing could rally to 51.1 this month from 50.7 in July and also the services index, releasing by the London-based Markit Economics on the 22nd of August, might advance to 51.7 from 51.3. Furthermore, a Bloomberg pool for an index of both activities in the euro zone probably strengthened to 50.9 from 50.5. All readings above 50 are signs for growth.
In contrast, Japan’s trade deficit increased in July, which added downward pressure on the JPY. Tomorrow releasing minutes of Australia’s Reserve Bank might announce no change for the nation’s key benchmark rate. As a result, the EUR/USD appreciated to 1.3333 from 1.3329 on Friday, after having touched 1.3380, the best since the 9th of August. Versus the JPY, the 17 nation’s currency kept its level and was at 129.97 JPY, while the USD tumbled 0.1 percent to 97.48 JPY snapping earlier gains of 0.3 percent. Since the beginning of this year, the EUR has showed a win of 5 percent referring to the Bloomberg Correlation-Weighted Indexes, the best performance among the tracked currencies followed by the USD with 3.8 percent. The JPY lost 8.8 percent in the same period.

[PCMNewsdesk]

Tonight, the Reserve Bank of Australia released the minutes of their two-day summit in August as well as speeches of their leading officials. But the main announcement was that the central bank is planning to link the future direction of their policy more on the development of currency and they emphasized that a further cut of the key interest rate has not been scheduled yet.
Australia’s currency strengthened 2.7 percent versus the USD since the 5th of August as the AUD/USD reached a three-year low. As a result, the AUD declined the second day in a row, while government bonds with a maturity of 10 years appreciated to 4.05 percent, the best within 16 months. The yield for three-year-bonds climbed to 2.8 percent, a level unseen since the 8th of July. Also the volatility of the AUD based on one month increased to the highest within two weeks and advanced 40 basis points to 12 percent. Therefore the nation’s currency lost 0.3 percent and traded at 90.87 U.S. cents after having touched 92.33 U.S. cents yesterday and before tumbling 0.8 percent in succession, the most since the 31st of July. According to the Bloomberg Correlation-Weighted Indexes, the AUD showed the weakest performance among all tracked peers and slid 10 percent in the last six months.
In addition to the AUD, also the currency of the neighbor nation, the NZD, declined against nearly all of its most traded currency counterparts. It was a result of the latest statements by the Governor of the New Zealand central bank, who expressed that they are willing to tighten the restrictions for bank lending to circumvent increases of the current interest rates. Besides the AUD, also the NZD declined versus the USD and weakened 0.9 percent to 0.7993. Compared to the AUD, the Bloomberg Correlation-Weighted Indexes confirmed, too, that the NZD followed the AUD once more and has shrunk 2.3 percent in the first half of 2013.

[PCMNewsdesk]

Speculations regarding a third rescue package for Greece heated up once more as Germany’s Finance Minister Schaeuble explained the need for a further package on a campaign stop. Referring to the “Süddeutsche Zeitung”, economists discussed that this would be the only other possibility apart from a further debt cut. The financial aids might provide from the EU Structural Funds and it should revive the recovery of the Greek economy as well as supply a part of the nation’s budget for debt repayments.
Today, investors are eagerly awaiting the release of a range of important U.S. data like labor market as well as housing data, which might add signs for an accelerating recovery of the nation’s economy. In addition, the yesterday released minutes of the Federal Reserve showed that majority of their members agreed on a predominant line for a stepwise reduction of the current monetary easing. Both announcements will boost the probability for a start of the
reduction within this year and therefore the USD enforced against most of their counterparts. Nevertheless, concerns remain that a reduction of the current monthly bond purchasing program might lead to an exodus of capital towards countries, which offer higher yields. The next Federal Open Market Committee summit will take place on the 17th and 18th of September.
Besides the U.S. business, the European economy might pick up speed referring to estimates of today publishing manufacturing and services figures. Furthermore, the Reserve Bank of Australia announced in their yesterday’s minutes that the central bank will reserve the possibility for further rate cuts and lowered the key benchmark to a record-low of 2.5 percent. The USD climbed 0.1 percent to 1.3340 versus the EUR after rallying 0.5 percent yesterday. The USD/JPY appreciated 0.2 percent to 97.90 from yesterday’s level. Similar to the USD, the EUR advanced 0.1 percent against the JPY and was at 130.62 JPY.

[PCMNewsdesk]

Investors punished the CAD after the nation’s retail sales remain below economists’ expectations adding concerns that the economy is curbing. The Statistics Canada announced that retail sales shrank 0.6 percent to 40.1 billion CAD due to flooding in Alberta and a construction strike in Quebec, while Bloomberg estimates predicted a loss of 0.4 percent. Furthermore, the Bank of Canada has held its key interest rate unchanged at 1 percent since September 2010 with the
aim to push the nation’s business. Also, Canada’s gross domestic product rallied 1.6 percent in the second three months this year, but it depreciated already 0.5 percent in June referring to a survey by Bloomberg News, while consumer prices are forecasted to climb 1.4 percent in July compared to a year earlier, before releasing numbers tomorrow. Moreover, futures on crude oil, the nation’s largest export, fetched 1.3 percent to 105.20 USD per barrel, after having fallen briefly to a two-week low yesterday. As a result, the CAD lost against nearly all of its most traded peers; especially versus the USD, it dropped the fifth day in a row, the worst intraday decline in two months. The sales figures decreased in June, after manufacturing sales and wholesale have tumbled before. In addition, a surprising slump of jobs in July followed the first contraction of the Ivey purchasing-managers index of this year. Tomorrow, an inflation gauge might show that it was below the central bank’s target rate in July for the 15th month in a row. Therefore the USD/CAD lost 0.4 percent to 1.0516 by briefly touching 1.0531, the lowest intraday level since the 10th of July.
Further gains of the South Pacific currencies were limited by rising expectations that the Federal Reserve will agree on a start for the cut the monetary easing on their next meeting in September. The AUD kept its yesterday’s level nearly unchanged and was at 0.9018 USD, while the NZD traded at 0.7835 USD from 0.7830 the previous day.

[PCMNewsdesk]

As assumed on Friday, the USD established its weekly loss due to the heating speculations regarding the increasing probability that the Fed might start to reduce their monthly bond purchasing program of 85 billion USD. Last week’s data showed a strengthening U.S. economy, but today releasing durable goods orders might weaken 4 percent in July, for the first time in four months compared to the previous month as it rallied 3.9 percent. Furthermore, the new home sales, which were published on Friday, shrank the most within three years in July, but mortgage applications will not be disclosed until the 28th of August. In contrast, tomorrow publishing German business climate is probably gaining for the fourth month in a row confirming a continuing improvement. Tomorrow announced business climate index of Europe’s largest economy by the Ifo institute might appreciate to 107 from 106.2 in July, referring to economist's expectations, while the German unemployment rate probably remain unchanged at 6.8 percent, according to another gauge by Blomberg News. Since May 2012, the jobless rate has not
dropped below this level.
Therefore the USD traded at 1.3384 versus the EUR after having declined 0.4 percent last week. The USD/JPY slid slightly to 98.67 from 98.72 on Friday, while the 17 nation’s currency remained at 132.06 JPY by briefly touching 132.43 on the 23rd of August, the best since the 25th of July. Also the Bloomberg U.S. Dollar Index was little changed at 1,026.11 from last week’s 1,026.15. The GBP/USD traded at 1.5570 and the GBP/JPY was at 153.42. The NZD/USD touched 0.7831 and the NZD bought 77.16 JPY.

[PCMNewsdesk]

Yesterday, the U.S. Secretary of State emphasized that the use of chemical weapons against their own people by the Syrian government will be resulting in consequences. Median reports kept signs that the UN experts were able to collect a range of data regarding incident last week. Therefore an intervention by the U.S. government becomes increasingly probable. But speakers of the U.S. government expressed that President Obama has not taken any definite decision whether a military action might follow. As a result, fears grew that the oil supplies from this region might be affected and prices for crude oil climbed 0.5 percent to 106.43 USD per barrel, while Standard & Poor’s 500 Index futures fell 0.2 percent.
Besides oil, also the JPY benefited from the rising demand for so-called haven assets as Asian shares as well as shares of emerging markets declined and advanced against nearly all of its most traded counterparts. The USD/JPY dropped 0.3 percent and was at 98.24 from the day before as it has rallied 0.2 percent, while also the EUR decreased 0.2 percent against the JPY to 131.46 following yesterday’s 0.3 percent losses. Meanwhile, the USD remained nearly unchanged at 1.3375 versus the EUR.
Today, the Ifo institute will release a range of important figures of the current state of the German economic. Germany is the biggest business in Europe and is also called the engine of the economy of the euro zone. According to median estimates by Bloomberg news, the business confidence might expand the fourth month in a row and also the institute’s business climate index, which is based on a gauge among 7,000 executives, probably succeeded to appreciate to 107.0 compared to 106.2 in July. The 17 nation’s currency added 0.5 percent towards its U.S. counterpart in August, the best performance followed by the GBP. In the same time, the JPY shrank 0.4 percent in the last month.

[PCMNewsdesk]

A threatening military intervention by the U.S. and UK in Syria drove many traders into investments of so-called secure currencies like the JPY or the CHF, which benefited from the rising demand. As a result, the JPY showed best performance in the last 10 weeks versus the USD and climbed 1.5 percent yesterday, the most since the 11th of June and before dropping 0.1 percent to 97.11 today. Similar to the USD, the EUR enforced slightly versus the JPY and was at 130.02, 0.1 percent above yesterday’s close. While the EUR kept its level nearly unchanged at 1.3393 USD, the CHF appreciated to 0.9179 against the USD, the best since the 21st of August.
In addition to gold, silver has performed a strong recovery since its 35-months low in June and succeeded to gain almost 30 percent to currently 24.59 USD per ounce, which surpassed the rise of gold by nearly 18 percent in the same period. Silver benefited by fears of inflation as well as from positive signs of the Chinese economy. Furthermore, the demand for silver has rocketed in India due to intensified and complicated import and export rules for gold since the middle of July. Also ETF’s and coins are enjoying growing popularity among investors. According to Bloomberg News, the holdings of silver by funds climbed 6 percent to a new record around 644 billion ounces in this year. Meanwhile, the fund holdings in gold have decreased to the lowest
since November 2010 and are currently at 63 billion ounces.