Fundamental analysis – 13th June 2012
Most currency pairs traded within narrow ranges on Tuesday and trading activity was rather slack on the back of lack of economic statistics from neither of world regions. Traders are now holding on ahead of re-elections in Greece, concerned about their results, as they may have a significant impact on the euro zone and the European currency in particular. Today’s economic calendar will cover demand and inflationary data. Retail sales are expected to come in with 0.1% m/m decline in May after the prior +0.1% m/m, Producer prices are likely o post a decline from -0.2% m/m, 1.9% y/y in May to -0.6% m/m, 1.3% y/y, which gives reasons to anticipate further trend decline in inflation in future. Furthermore , market will be looking forward to hear news from the US 10-year bond auction. And although the upcoming statistics may have a short-term influence on trading today, yet, it will most likely stay within the ranges until the news from Europe come in.
Euro’s trading on Tuesday didn’t differ much from its Monday moves at the close. Doubts about Greek elections and debt situation in Spain pressured the euro on Tuesday. Euro zone economic calendar was empty yesterday, political news continued to cover discussions on how to fight debt crisis. Today’s economic data may add negative sentiment to the euro as inflation indicators in the euro zone key member-countries may register a decline. Final Consumer price index should have decreased in France, posting 0.0% m/m, +2.0% y/y in May after +0.1% m/m, +2.1% y/y earlier. German CPI is expected to come in at -0.2% m/m, +1.9% y/y versus the prior +0.2% m/m, +2.1% y/y. Italy’s index is likely to slip to 0.0% m/m, +3.2% y/y from the previous +0.5% m/m, +3.3% y/y. Euro zone industrial production in April is expected to continue its downtrend, posting -1.0% m/m, -2.7% y/y in April versus -0.3% m/m, -2.2% y/y earlier.
The pound proved to be the most steady currency on Tuesday and registered some profit versus the dollar, most likely on the back of remaining uncertainty in the market, which makes sterling attractive as a safe-haven asset. Short-term sell-off of the pound was triggered by the UK economic statistics – British industrial production remained without changes on a monthly basis in April and slipped 1.0% y/y, while forecasts expected growth by 0.3% m/m and 0.7% decline year on year. Manufacturing production decreased too, posting -0.7% m/m, -0.3% y/y versus the expected +0.1% m/m, +0.5% y/y. UK economic calendar will be empty today, so the pound will most likely stay within earlier formed range. Technical picture suggests to anticipate a possible decline to the levels, wherefrom the currency commenced its growth on the overnight session.
Japanese yen wasn’t an exception and traded sideways on Tuesday’s session too. The currency was slightly pressured by IMF recommendation for the Bank of Japan to intervene in the currency market in order to weaken its national currency if the situation requires such action. Besides that, the representatives of the Fund urged the Bank to take additional stimulus measures to soften Japan’s monetary policy aimed at reaching 1% target inflation level. However, this news didn’t initiate any yen’s sell off, so the currency retraced to its initial positions by the end of the day. Nothing significant has been released out of Japan today, which means that yen will most likely keep on consolidating with high risk of a decline, taking into account present intervention warnings.
Analysis prepared by: