Fundamental analysis 10 December 2012 | Inside Forex trading

Market mood changed in the second part of the previous week. High demand for dollar was observed. It let the dollar to claw back all its losses against European opponents, and the dollar ended the trade rising against the euro, and falling slightly against the pound.? Demand for dollar was mostly caused by news about the ECB which kept the interest rates unchanged, but worsened the growth outlook for the euro zone. The ECB also gave us to understand that it may also cut the key interest rate. The main topic of this trading session is employment in the USA. It also helped the dollar to strengthen. ADP reported private-sector jobs increased. According to the statistics of unemployment insurance claims, a number of claims reduced. And according to the data of the Ministry of Labor, non-farn sector jobs increased, and its results are better-then-excepted ? by 146 thousands when it was expected 80/90 thousands. At the same time unemployment rate decreased to 7.7% from 7.9%. But, such encouraging numbers didn?t give rise to due reaction. Maybe, it is because of negative counterbalance, connected with the US fiscal cliff concerns, as Democrates and Republicants can?t come to a decision on the budget strategy. Other statistics showed different results ? in October production orders increased by 0.8% m/m and 3.0% y/y, ISM reported Manufacturing PMI fell under 50.0, to 49.5, and business activity in New York increased. Michigan University report noted consumer mood fell, in November construction spending?s increased by 1.4% m/m and 9.6% y/y. ?This week there will be a few important statistics of the USA. Market?s attention is concentrated on information about inflation ? the Producer Price Index (PPI) and Consumer Price Index (CPI) are expected to decrease, in the first case -0.1% m/m, 1.9% y/y after? 0.1% m/m, 2.2% y/y, in the second one -0.4% m/m, 1.8% y.y after ?-0.2% m/m, 2.3% y/y. Such trend may cause the FRS to implement further quantitative easing. But, according to the US regulator, it will be known on Wednesday, when FOMC will announce its decision on interest rate and perspectives of monetary policy after another meeting. This event may be the main one this week. Before coming out of this information, investors? attention will be focused on discussion of the US budget cliff. It will be the main topic for dollar and financial markets.

EUR

A single European currency rose against the dollar at the beginning of previous week and fell against the dollar in the end of the week. Crucial moment for the euro was the ECB meeting on the perspectives of monetary policy. Governor of the European Central Bank M. Dragi announced that the ECB cut growth outlook for eurozone for this year and the next ones. He also told about other discussions of interest rate which took place during the meeting. This situation and information of Bundesbank, which told about probable slow down of Germany economy next year, made the euro to be under pressure, and the euro ended trading week decreasing against dollar, pound and yen. What is more, a single European currency was also negatively influenced by information about Moody?s which cut rating of the ESM rescue fund and also by rumors that this institution is going to cut the rating of Germany. The EU statistics mostly confirmed forecasts of weak economic perspectives. German manufacturing decreased by 2.6% m/m and 3.7% y/y in October, manufacturing PMI of eurozone remained stuck in recession, producer prices index of eurozone continued to slow down, and retail sales decreased by 1.2% m/m and 3.6% per annum. According to forecasts, the EU economic data which will be published this week are expected to support a single European currency ? activity indexes in different sectors of economy for December are expected to increase a little bit in comparison with November, but do not give rise to expectations of exit recession in 4th quarter. ZEW report for the last month is expected to lead to concerns connected with German economy growth on high level. The euro may be rescued by the events in the USA, where budget cliff is discussed. If they do not reach a consensus on this issue, a single European currency may turned out to be in demand.

GBP

British currency copied the movement of euro against dollar during the last week?s trading session. British sterling pound turned out to be in the wave of selling in the end of the week and didn?t managed to save its advantages, achieved before. News from the islands in the second part of the trading week didn?t give rise to good mood concerning the pound ? autumn report of the Minister of Finance of Great Britain noted? that the indexes increased. He also announced about? implementations of new taxes, which will more likely force the economy to reduce. According to economic statistics, activity decreased almost in all sectors of economy ? PMI of construction sector and sector of services fell, and manufacturing PMI increased slightly, but remained in negative zone. Trade deficit increased because of weak external demand, Hometrac reported house prices fell for five successive months. In October Manufacturing decreased again ? 0.8% m/m and -3.0% y/y, when +0.9% m/m and -0.5% y/y was expected, and processing industry decreased to -1.3% m/m,? -2.1% y/y after ?0.0% m/m, -1.7% y/y, when -0.2% m/m, -0.2% y/y was expected. This week there will be a few economic data of islands, among which the most important one will be about employment in Great Britaian. Forecasts expect employment stability in labor market. It is a little bit surprising because of the signals which indicate decrease in GDP in the fourth quarter. Concerning the perspectives, it is more likely that the pound will remain under the influence of external events. And the mood appeared on the market in the end of previous trading week will remain till appearance of new information, and it may leave the British currency under pressure.

JPY

The USD/JPY currency pair remained trading in side corridors and ended trading week neutral on starting prices for two successive trading sessions. News from Europe and the USA caused some volatility, but it didn?t lead the currency pair beyond the ranges of correction. It is obvious that now investors are anxious about the perspectives of monetary policy, which may become known after the elections in Japan, which will be held in the middle of this month. There will be a few economic news about the Land of the Rising Sun ? in the third quarter fixed capital investments decreased by 2.5% after 7.7% before, salaries suddenly rose by 0.2% y/y after -0.5% y/y, and money supply decreased in? November to 5.0% y/y from 10.8% y/y. This week there will be more economic data about Japan. Published final calculation of the GDP for the 3rd quarter reported unchanged results per quarter -0.9% q/q, but it improved to 0.5% per annum from 0.1% y/y announced before. Tankan report for the 4th quarter will be published this week. But, economic statistics will unlikely cause increase in activity of the currency pairs which involve the yen. Market will continue to wait for the results of elections, which will be held in the nearest Sunday and which may answer the question ? whether new government will force the Bank of Japan to be more aggressive in its monetary policy.

Source: http://blog.forex4you.com/fundamental-analysis-10-december-2012/

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