The stability of the dollar / euro exchange rates and Bernanke’s forecast

Ben Bernanke spent an unfortunate statement

In brief: Bernanke has written explanation about their behavior in recent months.

U.S. reports have helped to stimulate demand for the dollar only, because data on the housing market were not as bad as expected. In the United States was started 549 thousand construction jobs, which was 5% below the May figures, having descended to 8-month low. However, it became known that the number of building permits (an indicator pointing to further activity in the sector) in the last month showed an increase of 2,1% to 586,000. This pattern suggests that builders are still hoping that the recovery in the sector will continue.

Today, given the lack of critical reports from the States, all focus will be on Bernanke’s speech on monetary policy and the economy. The Senate will be interested in a lot of questions, but the currency markets will pay attention only to the two key: Fed chief’s assessment of the economy over the past few months and that he sees in the future. During the last of his speech, Ben Bernanke not responded very positively about the economy (this was in February), but acknowledged that the rates at some point still need to improve. The biggest fear then called the labor market and the state of business activity after the program of government incentives have exhausted themselves. In general, he was right in his fears: the housing market feels quite unimportant at the end of the tax benefits granted by the authorities, the labor market re-balancing between recovery and recession, the manufacturing industry gradually slowing growth rates, and inflation is virtually zero.

To date, Bernanke will have to admit that the economy deteriorated, and on stage, even there is a risk of deflation. Looking back on the protocol last meeting FOMC, we can assume that here, the head of Federal Reserve would be forced to take a less aggressive stance, and very pessimistic look into the future, triggering a wave of the market running away from risk.

Still, the euro failed to break the unfortunate level of 1.30 against the dollar, even after strong data from Germany, and successfully passed the Spanish auction. Currency only for a time, crossed the mark, but traders, on reflection, decided not to risk it until they see the main details of this week. Nevertheless, until we get a fairly optimistic: Spain and France argue that their banks have coped with the tests and show excellent results. In addition, economic data also proved quite positive. Prices for German manufacturers in June showed a steady pace of growth and surpassed analysts’ expectations. Prices at the output in June rose 0.6% m / m, demonstrating the 6 th consecutive month of growth. The annual rise in the ratio amounted to 1,7%, which was a record high in January 2009 year. Despite the fact that prices have not yet reached the target level, such a drastic strengthening speaks of the restoration of demand in the largest economy in the region. Today, the euro area does not publish any interesting reports, so that all attention will be on UK and U.S..

Briton yesterday went his own way, different from the way the euro. To exchange a serious shock was the fact that in June the volume of public borrowing in the UK has surpassed analysts’ forecasts, as the pace of cost increases continued to outstrip the dynamics of income. The volume of loans granted to the British public sector, in June, reached the mark Stg14.498 billion that some could not reach before Stg14.725 billion for the same period last year. Analysts had expected less rapid rate of increase in rate – on their forecasts, the volume of borrowing was required to establish Stg13.2 billion Furthermore, the number of applications for mortgages in the UK showed a decrease. In June, it issued 48 thousand mortgage loans to 51 thousand in May.

Nevertheless, after an initial weakening, the currency managed to recover against the dollar and euro. Minutes of the last meeting of the MPC does not allow traders to rest and not allow too seriously change positions before his exit. Besides, a little later there are data on retail sales and GDP for the 2 nd quarter in the first reading! Pay attention to the tone of the protocol. Given the positive signals, which serves recent economic reports, the Committee may well be a more positive look at the future of the economy. Bomb would, if the Sentance in his desire to increase the rate to join one of the members of MPC. In this case, the pound can yank up on the road breaking mark of 1.53 and 1.54. A similar scale can be a shock and a unanimous vote against raising rates. In this case the British would continue to fall, the primary purpose of which will be the level of 1.52.

Yen is experiencing weakness in relation to talk about the possible intervention of the Bank of Japan. Officials continue to express their concern over the prolonged strengthening of the yen. A representative of the Central Bank Yamaguchi confirmed that attentively following the situation on the currency market. Moreover, he expressed concerns about the negative impact of the situation in the U.S. and Europe on the economy that may affect the pace of recovery in Japan.

Ukrainian Globalist
2010-07-21 10:23, Currency news.

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