Fundamental analysis – 15th August 2012


Major currency pairs traded within narrow ranges and closed the trading day almost at their opening prices. However, dollar managed to gain versus the yen, driven by the increase in the US treasury yields. Turning to today, economic calendar will contain some significant data, particularly on consumer price inflation. Consumer price index (CPI) both core and regular are expected to climb by 0.2% m/m in July. Industrial production is anticipated to rise by 0.6% m/m in July after +0.4% m/m earlier. NY fed business activity slightly slowed down in August, possibly to 5.0 versus 7.39 earlier. NAHB housing index is expected to remain without changes at 35 in the month of August. Net long term TIC flows are likely to increase from 55.0 to 63.5 billion dollars in June. In other words, data to come in today are likely to support the dollar.


Euro attempted to climb versus the dollar at the beginning of the session on Tuesday, but failed and retraced back to its opening prices. Some support for the euro came from Germany – the country’s Gross domestic product came in better than expected and registered + 0.3 % q/q, while forecasts anticipated +0.2% q/q. Euro zone’s preliminary GDP for the second quarter shrank by  0.2% q/q, 0.4% y/y. France’s gauge remained without changes compared to the first quarter , posting 0.0% q/q,  0.3% y/y. Data from German research institute ZEW might have upset investors’ sentiment towards the euro – ZEW economic expectorations index slipped to -25.5 in August after -19.6 in June. Current conditions slipped from 21.1 to 18.2 in June, which indicates the beginning of a slowdown of German economy for the next 6 months. As for today, nothing significant is scheduled to come out of Euro zone, so the euro will be driven by the news from the United States mostly.


British pound failed to appreciate against the dollar on the overnight session and, like the euro, ended up neutral. Economic data, released yesterday, was supportive of the sterling. UK inflation climbed better than expected, which calmed down market’s concerns and indicated that the Bank of England is unlikely to proceed with its stimulus program in the near future. According to the data, which came out of Britain, Consumer price index increased by 2.6% y/y in July +2.4% in June. Forecasts expected growth by 2.4% y/y. Core CPI also registered growth by +2.3% y/y versus  2.1% y/y in June. Retail prices came in at +3.2% y/y versus the prior 2.8% y/y. Today looks to be a tough day for the sterling, as the Bank of England releases its meeting minutes results, which can trigger sterling’s sell off. Employment data are also about to be released, most likely with rising jobless claims in July.


Japanese yen was pressured versus the dollar for the most trading day of Tuesday, most likely on the back of a sudden increase in the US treasury yields. Today Japan’s economic calendar will be empty, so the yen will be influenced by the situation in the US bond market . Growing US yields may continue to weigh on the yen.

Written by Forex4you