MasterForex Trend analysis of currency pairs and Comments (Updated daily)

Overview of the main economical events of the current day - 14/01/2013

JPY continues to decline, while all main currencies demonstrated growth against USD last week.

Last week resulted in most of the major currencies demonstrating growth against USD. JPY is a notable exception from this observation – a 1.16% decline vs. USD resulted in Japanese currency reaching a new a low. This is explained by the fact that the currency was caught in a perfect storm last week: not only trade balance numbers were disappointing, but newly elected government has accepted a USD 116bn stimulus package – not an unexpected decision however it definitely puts JPY in quite a weak position.

EUR, on the other hand, demonstrated quite a performance fueled by Draghi's comments after ECB meeting, who pointed out that this time the decision was unanimous, showing investors that Eurozone is still capable of finding a consensus.

Seems like this week will be a rather quite one in terms of meetings and press-conferences. In the last couple of weeks US government agreed on the "fiscal cliff problem", Japan started economy stimulation and Eurozone finally made a unanimous decision (albeit not a big one, but it's the effort that counts). If you think about it, it looks like quite a lot of important decisions and the market likely has not yet fully priced all the information in. For investors it means that some trading correction is possible as market participants will adjust to a new reality. As usual there is some data to come out over the week, however it is more on the statistics side rather than some market changing political or macro news. Despite it, keep a close eye on the newsflow – surprises may happen.
 
Overview of the main economical events of the current day - 15/01/2013

Quite a slow day with EUR being the strongest currency

Today was quite a slow day in terms of news which was expected by us though.

JPY keeps falling fast, reaching another 2-year low on the news that Japanese Prime Minister plans to announce a new head of the Central Bank, who is likely to force PM's policy of quantitative easing which is bound to put pressure on the currency. Add a coming raise to the planned inflation rate and it's obvious why the picture isn't so rosy for the Japanese currency right now.

USD declined versus EUR after US President Barack Obama announced during a press conference that USA can not afford any further discussion of the government debt limit, sending a negative signal to the market.

GBP also continued its downward motion against EUR resulting in a longest decline since October after UK government announced it might revise its terms of becoming a EU member.

There are some things to keep an eye for tomorrow coming from the statistics department. UK will release December Housing Prices, inflation update and a bunch of price indexes. Coming from Eurozone expect November Trade Balance figures and German CPI data for December. USA will publish some trading data and oil update and Japan will finish the day with the numbers on the Production of Machinery Orders Received.
 
Overview of the main economical events of the current day - 16/01/2013

USD looks like a defensive option; Japanese officials try to support the currency

Looks like in a current situation with a lack of strong drivers investors are trying to secure their positions and USD seems somewhat like a safe heaven which explains its rising against most of the currencies.

Sure, US government still needs to solve the debt ceiling problem and in theory the country has enough money only till March. However that's theory and real life is something different: it's actually more a political problem than a financial one and it is likely to be solved – and investors seem to agree with that. Just a little piece of a historical evidence – the level of the debt ceiling has been increased roughly 80 times in last 50 years, so it is not something uncommon. And while there bound to be some scary headlines like the one we saw yesterday saying that Fitch might downgrade USA's rating if the problem is not solved, we remain optimistic and think that a negative turn of events is highly unlikely in this case – however some short term volatility is possible.

Japan's economy minister surprised financial markets by warning of the potential ill effects of a sharply weaker yen. We see this change in rhethoric as an attempt to slow down JPY depreciating, which is falling rapidly lately. And while JPY has been rising against USD for some time yesterday, that is explained by market participants overreacting the incorrect news headline, which suggested that Japanese government think JPY is too weak already. Once the headline was corrected, USD quickly recovered some of its losses.

That basically illustrates the state of the markets today: investors are paranoid and quickly react to any bit of news as they are hungry for trading ideas. Seems like once some drivers become clearer we might expect less intraday volatility afterall.
 
Overview of the main economical events of the current day - 17/01/2013

EU and Japanese officials are concerned about their national currencies exchange rates.

EUR-crosses have recovered in the European session after comments from ECB officials negated comments from Eurogroup head Juncker that the EUR exchange rate is "dangerously high". EURUSD and EURGBP have both regained about 50% of the losses of the past two sessions, but crosses like EURAUD and EURJPY have seen a more subdued recovery. This morning ECB Nowotny said the EURUSD rise is "not a big concern" while member Praet suggested the EUR remains an input for policy but not a goal in itself. Both comments follow ECB President Draghi who said the currency was at its longterm average level, and suggest the EURUSD is not yet a major concern.

JPY has continued to correct higher for the second session driven by signs other Government members may not be on board with PM Abe's prescription for aggressive JPY weakness. LDP secretary Ishiba, considered an important pillar of support to successful contest the upper house elections, followed Economics Minister Amari in suggesting excessive JPY weakness could hurt certain industries. We think the market is beginning to come around to the view that BoJ will be unable to satisfy elevated expectations for a strong response next week (Jan 22); it is not even clear if big response comes next week, or pending the change of the Governor in early April.

Coming from USA we saw a release of so called "Beige Book" which describes current state of US economy. According to the document, American economy is recovering with most of the indicators demonstrating at some growth. This is likely to strengthen USD even further as a defensive option.
 
Overview of the main economical events of the current day - 18/01/2013

EUR strength returns, JPY continues to fall

The recent trends of EUR strength and JPY weakness have returned. The catalyst for the EUR has been a continued improvement in sentiment in the Eurozone debt markets. It all started with local press suggesting that Portugal may be returning to debt markets and continued with strong debt auctions in other European countries such as Spain and Italy.

US data flow continues to be somewhat weak and looks like earnings season will continue to dominate the sentiment over the next few days. Watch out for hits and misses and pay close attention to financial sector companies as their earnings are extremely illustrative in terms of the economy situation. Friday's Chinese data (December IP, retail sales, FAI and Q4 GDP) will be important into next week; there has already been some risk-reduction in Asia today ahead of those figures.

USDJPY has continued trade back-and-forth given the varying political rhetoric and has now almost fully recovered the decline seen since the beginning of the week. Economic Minister Amari announced that his comments on the JPY earlier this week (that excess JPY weakness not desirable) were misinterpreted. Apparently, he actually meant that yen 'is still in the process of correction' from excessive strength and that he did not state that USDJPY at 100 is a "turning point". Still, there is no denying that the political rhetoric has turned more two-way, with LDP heavy-weight Ishiba yesterday suggesting JPY weakness could hurt agriculture industries. Again, we are skeptical that come January 22nd Bank of Japan will release a strong response especially given the already elevated expectations.
 
Overview of the main economical events of the current day - 21/01/2013

Get ready for a busy week

Friday was a relatively slow day with investors trying to secure their positions before the weekend. And while there was not much action, this is likely to change soon with quite a lot of important things to happen over the course of the week.

On Monday expect January Rightmove housing prices index from UK, manufacturing prices from Germany and Canadian wholesale trade balance for November. Also keep in mind that this Monday is a holiday in USA as the country celebrates Martin Luther King's Day.

Tuesday is probably one of the most important days this week. First of all, Bank of Japan is to make an announcement regarding its financial policy. New inflation targets and some kind of quantitative easing are among the things we expect from BoJ – and these are likely to lead to a weaker JPY. On the other side, any positive surprise might turn the currency around which has been falling for quit some time already. There is also some data coming from around the world with most important being secondary housing market sales and crude oil reserves from USA and UK's 10-year bonds placement.

On Wednesday all eyes on Eurozone. Lots of business activity indexes coming from all over Europe will start the day and then turn your attention to UK: Bank of England to release it's last financial policy meeting minutes followed by a number of statistical data.

Thursday and Friday are also somewhat heavy on the statistics but they will probably not move the markets but rather support whatever trends should form during the week.

Finally, the World Economic Forum is happening this weekend in Switzerland and you can expect some market moving quotes coming from the speakers.
 
Overview of the main economical events of the current day - 22/01/2013

JPY is in focus as Bank of Japan started its 2-day meeting

Monday was marked with JPY finally showing some growth versus USD after Bank of Japan started its 2-day financial policy meeting. Last month JPY lost about 6% vs. USD on rumors that BoJ will increase its stimulus measures in order to fight recession and it looks like investors actually appreciate some clarity on the matter. The consensus is that Bank of Japan will expand its asset purchase program by 10tn JPY and an increase in inflation target up to 2% is also possible.

GBP has also increased vs. USD after a release of strong Rightmove housing prices index numbers. According to the index, housing prices demonstrated a 0.2% growth in first weeks of January compared to a 3.3% decline in December.

EUR remained somewhat flat against USD on Monday. While manufacturing prices from Germany demonstrated some increase in December, the growth rates were lower than expected so it was not enough to move the currency.
 
Overview of the main economical events of the current day - 23/01/2013

Market is disappointed by Bank of Japan’s announcement

As expected, Bank of Japan agreed to a 2% inflation target, however the measures proposed to achieve it appear somewhat weak. While BoJ said it will shift to “open-ended asset purchasing method” (purchasing assets without setting a terminate date) in order to stop 2 decades of deflation, the program will kick in only in 2014 with no additional asset purchases planed for this year. Overall, the markets were disappointed and a ‘buy rumor, sell fact’ reaction was seen in USDJPY post-BOJ anoucement.

EUR showed some increase vs. USD after strong ZEW index data from Germany, which suggests that the largest European economy is revving up.

USD on the other hand was under pressure after the release of quite disappointing housing statistics and declining economic activity per Fed’s estimations. This allowed GBP to rise against the American currency even despite declining manufacturing orders in Great Britain.

Today watch out for lots of different statistics coming from all over from Eurozone which are likely to affect EUR. Also Bank of Japan is to publish its monthly report and given the market focus on JPY it is a safe bet to suggest that investors will follow closely the newsflow on the matter.
 
Overview of the main economical events of the current day - 24/01/2013

IMF cuts global GDP outlook and sends EUR into downward spiral

The International Monetary Fund trimmed the growth outlook for the global economy from 3.6% in 2013 to 3.5% citing slow growth in Japan and continuing Eurozone recession as the main reasons. This allowed EUR to hit a weekly minimum vs. USD erasing the gains achieved after ECB head Mario Draghi announced that the worst part of the debt crisis is already behind.

UK jobless claims unexpectedly fell in December along with quarterly measure of unemployment, illustrating the resilience of the labor market in the face of a weak economic recovery. This provided some boost to the national currency allowing GBP to demonstrate gains on Wednesday.

Finally, the U.S. House of Representatives on Wednesday passed a Republican plan to allow the federal government to keep borrowing money through mid-May, clearing it for fast enactment after the top Senate Democrat and White House endorsed it. However the decision was widely expected by the market so there was no strong reaction to this news.
 
Overview of the main economical events of the current day - 25/01/2013

YEN weakness continues; most majors fell against USD

Japanese Government officials put more pressure on the Yen. Early this morning, Japan Prime Minister Abe said that he wanted the Bank of Japan to achieve the inflation target of 2 percent as soon as possible with bold easing if necessary. Japanese Finance Minister Taro later said that government spending must be cut and new bond issuances in 2013 should be kept below tax revenue.

Domestic issues were not the only drivers for JPY weakness. Tensions surrounding territorial disputes with China worsened as a Chinese fishing boat was detained by Japanese authorities around the disputed islands. Further escalations in tensions could lead to protests in China as they had last year, which could hurt consumption of Japanese goods and the economy itself.

Strong Chinese HSBC Manufacturing PMI data likewise surprised markets, coming in stronger than expected and pushing the Japanese Yen lower across the board.

The British Pound fell further against the US Dollar, hitting 6-month lows as UK Prime Minister Cameron continued to defend the referendum on Britain leaving the European Union at the Davos summit. He emphasized that the UK was not turning its back on Europe, but he hoped to make the UK an engine for European growth. Tomorrow, the 4Q GDP in Britain will be the top news for the Sterling, and analyst estimates point to weaker growth figures than seen in 3Q.

Most majors in today’s session fell against the greenback except for the euro. Early in the session, EURUSD declined on a lower-than-expected French PMI report. Yet, the euro quickly retraced as the German PMI Manufacturing and Service report beat median forecasts by analysts polled by Bloomberg News. Tomorrow, German IFO data will be the top news for the EURUSD.
 
Overview of the main economical events of the current day - 28/01/2013

Busy week ahead with lots of statistics planned for release

On Monday expect important statistics from both Eurozone and USA. British housing price index data for January and December retail sales from Germany will start the day, followed by M3 numbers from Eurozone. Next, turn your eyes on USA, which is to publish manufacturing orders and some housing stats.

Tuesday will bring consumer confidence numbers from Germany and lots of really important statistics from USA, including S&P/Case-Shiller housing indexes, consumer confidence and crude oil reserves. Finally, Japan is to publish retail sales data for December, which is likely to be under investors' scrutiny.

While there is some data coming from Eurozone and UK on Wednesday, USA news is to dominate – jobless numbers and GDP figures will start the flow, which to continue with FOMC press-conference – that is a "perfect storm" of US stats coming in one day, so expect increased USD volatility.

Thursday is going to be quite a slow day in terms of releases, providing market with some time to digest Wednesday's numbers. Consumer confidence index and some import-export statistics from UK, Japanese December wages and January preliminary retail prices index from Germany are among the most important numbers. Also look out for US jobless claims, although these figures are unlikely to move the markets given the statistics heavy Wednesday.

Finally, Friday looks extremely light figures-wise with only consumer confidence index for January coming from the University of Michigan.
 
Overview of the main economical events of the current day - 29/01/2013

JPY finally stops its decline, while GBP plummets on disappointing statistics

JPY has finally demonstrated some growth vs. most of the currencies after 11-week long decline – the longest fall in history. Investors seem to have decided that Japanese currency is already too weak which allowed the currency to demonstrate some gains.

USD showed some healthy gains as well as investors are getting ready for 2-day FOMC meeting expecting positive news.

GBP, on the other hand, declined rapidly after disappointing housing prices index figures, that show no change in real estate prices in December on the back of decrease in 6 previous months. Also there was some data released showing that UK economy is falling into recession again, which further pressured the currency.
 
Overview of the main economical events of the current day - 30/01/2013

USD declines against most of major currencies.

EUR demonstrated quite a performance on the back of European stock exchanges reaching a 2-year high due to the hints that the financial crisis might be ending in the region.

JPY has also continued its climb against USD and there were two main reasons for that: first of all, as we said before, JPY already trades at levels that are too low. Second reason is USD’s weakness that appeared due to disappointing consumer confidence numbers from USA.

Another factor that put some pressure on USD is the upcoming FOMC meeting and it looks like investors are playing “buy on rumors, sell on news” game, shorting the currency just before the meeting despite buying it a day before.

Finally, GBP showed some growth vs. USD fueled by Bank of England Head’s comments that UK economy’s growth rates will speed up, which calmed market participants to some extent.
 
Overview of the main economical events of the current day - 31/01/2013

USD continues to be under pressure

USD reached a new low against EUR since November 2011 due to positive economic news from Eurozone, suggesting increasing confidence in union currency. At the same time, investors play the rumor that FOMC will be forced to continue its interventions with the US economy and they have a good reason: according to FOMC, US economic activity is slowing down. Sure, officials commented that the reason for that are the weather conditions and some other temporarily factors, however it looks like the market didn’t buy it and punished the currency. Finally, disappointing GDP data from the States (a 0.1% decline in 4Q vs. expected 1.1% growth) sent USD into a free fall, allowing JPY to show some gains vs. dollar.

EUR on the other hand was enjoying some healthy gains on positive data release: consumer confidence is up reaching 89.2 compared to the consensus of 88.2. Even disappointing statistics from Spain which showed that the recession became deeper in the region in 4Q were not able to stop the growth.
 
Overview of the main economical events of the current day - 01/02/2013

EUR continues to test for new maximums

EUR demonstrated further gains against USD thanks to positive market sentiment that suggest that the worst part of debt crisis is over. And while retail sales in Germany declined below expectations, a positive surprise from jobless data was enough to offset the disappointment. Looks like market participants expect the labor market stabilization to translate into higher retail sales in the coming months.

Positive surprises from UK - consumer confidence data (-26 vs. expected -27) and increased Nationwide Housing Prices Index – provided GBP with that much needed fuel for growth, allowing British currency to show gains versus the dollar.

However, USD did rise against JPY yesterday, and even disappointing labor market figures from USA did not stop the growth of USDJPY as strong Chicago PMI data calmed the markets. Watch out today for jobless claims and personal disposable income numbers from USA as there are likely to affect the markets.
 
Overview of the main economical events of the current day - 04/02/2013

EUR rises on positive statistics; big policy meetings this week

The dollar hit fresh 14-month lows against the euro on Friday as U.S. jobs data reinforced expectations that the Federal Reserve would maintain its monetary easing program. The US Department of Labor said the economy added 157,000 jobs in December, slightly below expectations for a 160,000 increase, while the unemployment rate ticked up to 7.9% from 7.8% in November. November and December nonfarm payrolls figures were revised sharply higher to 247,000 and 196,000 respectively. The single currency also found support after data showed that manufacturing activity in the euro zone improved in January, while inflation and unemployment stabilized, underlining the view that the crisis in the region has turned a corner. Meanwhile, separate reports showed that the rate of inflation in the euro zone fell to 2% in January from 2.2% in December, almost in line with the European Central Bank’s target, while the unemployment rate held steady at 11.7% last month. EUR/USD hit 1.3711 on Friday; the pair’s highest since mid-November 2011, before settling back at 1.3639. EUR/JPY hit a high of 126.97, the pair’s highest since April 2010, before settling at 126.55. The yen remained broadly weaker amid expectations that Japanese Prime Minister Shinzo Abe would keep up pressure on the Bank of Japan to implement more aggressive easing measures to combat deflation.

In the week ahead, investors will be anticipating the outcome of upcoming policy meetings by the ECB, Bank of England and Reserve Bank of Australia, while U.S. and U.K. data on service sector activity will also be in focus.
 
Overview of the main economical events of the current day - 05/02/2013

EUR declines sharply on the back of a corruption scandal

EUR showed the largest fall vs. USD in 2 weeks as Spanish and Italian bond yields jumped up due to political uncertainty, which lead to a declining demand for the union currency.

All in all, EUR declined vs. most of the 16 major currencies fueled by the rumors, that Spanish Prime Minister might be force to resign after local press saying he was implicated in corruption schemes.

JPY declined to 93 vs USD – for the first time since may 2010 as market participants are waiting for ECB meeting, which is set for later this week.

GBP raised from its lowest in 15 months level against EUR as political shocks and rising bond yields made British currency relatively more attractive. Even published negative construction numbers, that suggest that construction is slowing down across the country for 3 months in a row, were not enough to keep GBP from rising against the union currency.
 
Overview of the main economical events of the current day - 06/02/2013

EUR shows gains in the eve of ECB meeting

EUR demonstrates some growth vs USD as market participants are waiting for ECB meeting on Thursday. Investors will be looking for any hints that ECB believes that EUR is too strong as only the Central Bank can introduce the measures to affect this situation.

Another factor helping EUR climb is positive service sector statistics, which surprisingly reached a 9-months high level of 48.6 compared to consensus of 48.2 and 47.2 just a months before. Moreover, weak US data also put some pressure on the dollar, allowing EUR to show gains vs it.

Finally, JPY reached it lowest level in 3 years as Head of Bank of Japan announced he will quit on March 19 – 3 weeks earlier than planned before, underpinning the tough situation in Japan.
 
Overview of the main economical events of the current day - 07/02/2013

EUR erases its gains vs USD

EUR declined vs USD on the back of banking shocks that threat to re-start debt crisis in the region as well as upcoming ECB meeting.

The union currency decreased against most of 16 major currencies as Spanish Prime-Minister is being forced to leave the position. Investors also expect to see losses from Banca Monte dei Paschi di Siena SpA, which put further pressure to EUR.

This week investors are waiting for ECB meeting, during which Central Bank is to evaluate economy conditions and will make an interest rate decision. Market participants are also waiting on comments regarding EUR’s strength as many see high exchange rate as a threat to economy healing.

GBP is trading narrowly vs USD due to housing statistics, finally showing an increase in prices (first since October 2010). The prices grew by 1.3%, which is below expectations of 1.6% but an increase nonetheless. Moreover, Halifax added some optimism saying that first shoots of improvement seen in the end of 2012 are likely to continue this year.
 
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