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  • Fundamental analysis 15 November 2012

    Arkady Nagiyev
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    Political surprises from Japan brought out trading activity in the market, but only in currency pairs which involve yen. The dollar and European currencies were continuing to trade in narrow corridors. As a result expectations that Greece may get 44 milliard euros supported the unified currency and let it strengthen a little bit against the dollar. At the same time announcement from the Bank of England resulted in the sterling pound trading, which closed the day with losses against the dollar. Concerning the yen, it turned out to be under pressure against its all majors because of a probable crisis in the Land of the Rising Sun and fell to the summer law. The US news didn’t influence investors. There were no news in the reports of the last meeting of FOMC: there were disagreements concerning bond buying program next year. It also stated that the economy is growing gradually, but unemployment rate remains high. Economic statistics published yesterday also didn’t influence the market events. Retail trade decreased in October, they say that it is caused by the Sandy hurricane, retail trade index fixed -0.3% m/m, but it had been expected -0.2%. Selling prices also decreased in October – the price index fell by 0.2% m/m after +1.1% m/m in September, but it had been expected by forecast 0.2% m/m. Positive dynamics in material resources and stock of goods was observed, its index increased in September by 0.7% m/m with sale increase by 1.4% m/m. Forecasts had expected less increase, only by 0.6% m/m. Today the consumer price index (CPI) for October will be published – the index may show 0.1% m/m, 2.1% y/y after0.6% m/m, 2.0% y/y before. The number of unemployment insurance appeals is expected to increase a little bit for the last week – to 362 thousands from 355 thousands, and according to forecasts industry activity index in Philadelphia is expected to decrease to the level 2.3 against 5.7. Speech of the  head of the FRS B. Bernanke at the summit in Atlanta will be of great interest, where housing  and mortgages markets will be discussed.

    EUR

    The unified currency strengthened a little bit against the dollar, but it didn’t go out of the limits of consolidated ranges, which had been formed before. It is obvious that investors started to buy the unified currency because there are signs of stabilization in problems with Greece and it becomes probable that Greece will be granted a delay to implement budget reforms and will get the next aid tranche. Maybe announcement of the FRS about their decision to continue assets buying, which was published in the protocol of the last meeting,  also supported the euro.  The economic statistics of the Eurozone, published yesterday, showed some problems, which had been forecasted by the market. Industry in the Eurozone decreased sharply – in September the index fixed  -2.5% m/m, -2.3% y/y after +0.9% m/m, -1.3% y/y. Forecasts expected that the index would fall less, it is expected to see -2.0% m/m and -2.1% y/y. Today’s news may disappoint euro bulls, which more likely will not be ignored. Forecasts expect  fall in the GDP according to the results of all EU leading economic statistics for the 3rd quarter , and of the whole Eurozone in general. Preliminary estimation of the main economic  index of France may show 0.0% q/q, 0.0% q/q after 0.0% q/q, +0.2% y/y, Germany +0.2% q/q, +0.8% y/y against +0.3% q/q, +1.0% y/y, Spain -0.3% q/q, -1.6% y/y with the previous -0.4% q/q, -1.3% y/y and Italy -0.5% q/q, -2.8% y/y after -0.8% q/q,-2.6% y/y. It is expected that the recession in Eurozone in general intensifies to -0.2% q/q, -0.6% y/y against -0.2% q/q, -0.4% y/y for the second quarter. If these statistics confirm, it will be understandable that the crisis in Eurozone is continuing to influence negatively a real economy of Eurozone and bring out optimism at the market. Less weak results may cause great buying of the unified currency.

    GBP

    The pound was treated negatively at the last trading session. It was caused by the publication of quarterly report about inflation by the Bank of England and the announcement of the head of this institution M. King. The report told about worsening forecasts of economic growth and the they need more time to decrease  the rate of inflation to the definite level. Maybe the pound decreased as a result of King’s announcement, who told that “the pound strengthening for the last year is not the best changing”  and “economy needs weaker currency”. These words could be regarded as a hint at probable decrease of the pound rate, because a perspective of further economic stimulation in the nearest future was named as scarcely probable. Economic statistics of the islands consists of labour market index and unemployment rate . It showed that unemployment rate is continuing to decreased – according to the standards of the International Labour Organization (ILO) it decreased to 7.8% from July till September in comparison with 8.0% from April till June. But the number of unemployment insurance appeals suddenly increased by 10 thousands, it testifies to a probable slowdown of positive process. Today’s news about British economy will consist of the publication of retail trade statistics for October . It is expected that sale decreases according to monthly and annual statistics, -0.1% m/m,  1.6% y/y after  0.6% m/m, 2.5% y/y before. Of course it didn’t improve attitude to the pound and may cause further pressure on the British pound.

    JPY

    Japanese currency turned out to be the most vulnerable at the last trading session on Wednesday. An announcement of the Prime Minister of the Land of the Rising Sun Y. Noda about dissolution of the Lower House of the Parliament on Friday brought pressure upon the yen, and it fell against its all main opponents. It is more likely that such reaction was caused by the fact that oppositional Liberal Democratic party come to power, which doesn’t support quantitative easing and may intensify pressure on the Central Bank of Japan. There were no important Japan economic statistics today. Probably mood of the previous day didn’t change at the current session, as the yen is continuing to fall against its all opponents. Currency pairs which involve yen approached to the technical levels, which may prevent the yen from falling.

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