The past week was marked by some volatility in the major currency pairs. However, these movements are for the most part the tools are multi-directional and eventually five-day US dollar recorded a neutral result against the euro and the yen only slight losses. The only exception was the opposition "buck" and the pound, where there is a stable advantage of the British currency, supported by data on the economy, "islands", at a time when statistics shtatovskih betrayed very comforting results of economic indicators.
The main reason for the frustration of "green" were data on retail sales and producer prices, which showed unsatisfactory demand and supported by the illusory hope of growth of inflation. Retail sales in September rose by only 0.1% m / m and not 0.2% m / m, as expected, while producer prices in the same month, went down even deeper in negative territory, -0.5% m / m, -1.1% y / y after a 0.0% m / m, -0.8% y / y.
Consumer inflation also did not shine - the September CPI showed a 0.2% m / m, 0.0% y / y vs. -0.1% m / m, 0.2% y / y, when the forecast assumed a 0.2% m / m -0.1% y / g. However, it is less upsetting the market and even supported the "buck" because core CPI, which excludes prices of food and energy, more closely tracked the Fed's decision-making on monetary policy, rose more than expected - by 0.2% m / m and up 1.9% y / y after a 0.1% m / m, 1.8 % y / y at the forecast and see the same 0.1% m / m, + 1.8% y / y. Support for "green" and has had a growth index of consumer sentiment from the University of Michigan in October, which is in the preliminary assessment rose to 92.1 after 87.2 in September. Performances of top management of the Federal Reserve, though only slightly, but still cheered dollar. If the statements of the Federal Reserve of New York William Dudley were somewhat uncertain because He warned that his opinion about a rate hike this year depends on the economic data, the rhetoric of the Federal Reserve Bank of Cleveland L. Mester was kept in the "hawkish" colors - she said that the economy is close to full employment and it is able to cope with higher interest rates. This week, the important statistics on the US economy will be small. Among interesting publications include data on the situation in housing construction - it is assumed that new buildings increased by 1.2% m / m in August after contracting by 3.0% m / m, and the number of permits declined slightly, -0.9% m / m vs. 3.5% m / m before. Warning may attract and reports of layoffs last week - is expected to increase the number of claims for unemployment benefits - up to 266 thousand. 255 thousand. If the figures do not give out surprises, it is unlikely that their publication will provoke activity in the market. One factor may be the influence of speech Fed top managers (Dudley Powell) and head of the Institute D.Yellen in the coming Tuesday.Statements indicating solid intention of raising this year, will support the US currency.
The single European currency held last week in multidirectional fluctuations against the dollar and ended the session on the opening prices. Attitude to the European currency unit built mainly on news from the US. In the beginning was the mood of the market on the side of the euro, as shtatovskih statistics gave rise to a reduction in confidence in the imminent tightening of monetary policy of the Fed, in the second half of the week the situation changed in favor of the "bugs", again, on the reports on economic data States, indicate that the likelihood of raising rates this year remains high. Euro zone economic indicators published and little impact on the market, they provide short-term and minor. Industrial production unit decreased in August by 0.5% m / m and + 0.9% y / y after a 0.8% m / m, 1.7% y / y in July, the latest assessment of the September consumer price index (CPI) has confirmed that there are signs of deflation, -0.1% y / y, and the report ZEW institute announced decline in business sentiment in Germany - in October, the index of economic sentiment collapsed immediately to the level of 1.9 to 12.1, the index of opinions on the current situation fell to 55.2 from 67.5.News this week could have a "disservice" to the European currency - the activity rate of the Eurozone (PMI) for October, in the preliminary assessment, in the sphere of production and services is expected to decrease - to 51.7 from 52 to 53.5 after 54, respectively.
This order prospects may trigger selling the euro, which is called "hearsay." Not very encouraging and important event for the euro this week - the announcement of the ECB's monetary policy. The market strengthened speculation that there may be a surprise in terms of the expansion of programs to mitigate the probability that significantly increased against the background of further reduce inflation and other indicators clearly less encouraging euro area economy, including the expected contraction in activity.
Last week, the leader in the foreign exchange market has once again become the British sterling. The pound rose against all its major opponents, but its rally was not "serene." In the first half of trading on the "cable" was under severe pressure on all fronts on the reports of the fall in inflation in the "Isles". The September consumer price index (CPI) showed at least more than 20 years, registering -0.1% m / m, -0.1% y / y after a 0.2% m / m, 0.0% y / y in August. These signs of deflation led to the fall of the expectations of an early rise in interest rates and the collapse of Britain sterling. Helped restore the pound weak data on the US economy. At the same time, it is not only supported the British currency. Shopping sterling stimulated by reports that the unemployment rate in August dropped to 5.4% from 5.5% seen in the previous expectations of 5.5%, which was very close to the lows observed in 2008.
Also in August, increased wages in the "Isles" to + 3.0% y / y after +2.9% y / y in the previous period. UK economic data this week will not be many, the most important and influential seen reports of retail sales for September. It is expected that the amount will be increased and noted 0.3% m / m, + 4.7% y / y after a 0.2% m / m, + 3.7% y / y in August, which is positive for the pound and can support. Another report on the situation in public finance, waiting with an indication of ongoing public sector loans - in September was probably +10.0 bn. Pounds against +12.1 bn. In the last month of summer, indicating a low probability of a significant reduction in the budget deficit and can blow some pessimism . The political part of the news will be presented performances of top management of the Bank of England and its head M.Karni. Increased volatility against the background of these functionaries BoE possible if they have any - any warning about the need to bring the timing of rate hikes in the islands. However, most likely, the sterling will trade under the influence of external messages and, given that not much significant news in other regions, it is likely to see a continuation of range trading in the pair GBP / USD, which began late last week.
The dollar / yen held last week session in a narrow sideways range, emerging more than a month. Attempts to "bull" by the yen push the price beyond this form in favor of the Japanese currency, to support weak data on the US economy turned out to be unproductive, and as a result the pair finished trading with only a slight fall.Obviously, the reduction of the belief that US interest rates will soon be raised, causing the growth of the stock market, has pushed for active traders practicing transactions carry trade, in which Yen plays the role of funding currency, and it saved the "green" from a significant loss. In addition, data on the Japanese economy is left high likelihood of expansion of programs to mitigate, as demonstrate clearly not optimistic results. Orders for machinery and equipment in September fell at an accelerated pace, -19.1% y / y after -16.5% y / y in August, industrial production decreased -1.2% m / m, -0.4% y / y, the growth of bank credit and money aggregates slowed, and prices of Japanese producers are already six months remain in negative territory - in September, -3.9% y / y vs. -3.5% y / y in August. This week, in the list of data on the Japanese economy, the most interesting are reports of the September results of the external trade. The trade balance is expected to decline in the deficit to -50.8 billion. To -358.8 billion. Yen in the previous month. However, the belief that this pair will be aimed volatility there. Rather, consolidation will continue because the market will wait for the event next week, namely the Fed's decisions on monetary policy.
Author: Arkady Nagiyev
Fundamental analysis of the currency market Forex4you