Fundamental analysis – 28th June
Consolidation continues. Investors are not willing to actively trade ahead of the upcoming summit in Europe. Doubts that EU leaders will come up with workable decisions keep traders in safe-haven dollar. As a result, USD appreciated versus its major opponents at the end of the session on Wednesday. US economic data were supportive of the dollar too. Durable goods orders climbed better than expected and posted +1.1% m/m versus the previous forecast of +0.4% m/m and -0.2% m/m in April. Such positive dynamics has been registered for the first time in the last three months, which is surprising. NAR reported existing home sales rose 5.9% m/m, 13.3% y/y, while forecasts predicted +2.3% m/m, 9.9% y/y, which could be considered as the beginning of a positive trend in the US construction sector, taking into account recent increase in demand for initial housing. Turning to today, traders will be looking at jobless claims, expected to slip by 2K to 385 K, and at the final GDP assessment for the first quarter, which will most likely remain unchanged, at +1.9% q/q. Besides these data, today’s economic calendar will also cover Kansas Fed manufacturing activity report. In thespotlight today will be upcoming EU summit, which is considered the major driver for the trading so far.
Euro traded within narrow ranges and slipped versus the dollar at the end of the overnight session. Uncertainty about the EU summit and talks that Germany may refuse to share the euro zone debt burden pressured the euro, as well as the economic data, which came out of Europe yesterday. Today’s data front will cover Euro Commission business sentiment and consumer confidence reports. Europe’s business climate plunged further down from -0.77 to -0.86 in June. Economic sentiment dropped to 89.8 after the previous 90.6. Industrial confidence registered -12.0 after the prior -11.3. Euro zone consumer confidence figures won’t be positive either – forecasts predict -19.6 versus -19.3 earlier in May. German labor market statistics won’t be positive for the euro as well – jobless claims increased by 4 K in June. In other words, the upcoming macro statistics is not likely to be supportive of the single currency. Anyway, market attention will focused on the EU summit mostly.
British pound slipped versus the dollar on Wednesday, driven by the general market sentiment. Concerns about the summit in Europe pushed investors to reduce their long-term positions. UK economic data didn’t contain any negative reports, but they didn’t manage to prevent the sterling from decline either. As for today, a batch of significant data is scheduled to be released, including the UK final Gross domestic product assessment in the first quarter, expected to remain unchanged, at -0.3% 1/1, -0.1% y/y. Current account deficit is likely to widen in the first quarter, most likely to 9.1 bln pounds after -8.5 bln earlier. As we can see, this news don’t look to be supportive of the pound. Weaker than expected results will weigh on the pound. By the way, the first negative signal has been already received – Nationwide reported Housing price index dropped from 0.2% m/m, -0.7% y/y to -0.6% m/m -1.5% y.y in June, when forecasts expected growth by 0.3% m/m and improvement to -0.6% y/y.
Japanese yen fell against the dollar too, but today’s strengthening indicates that concerns about the situation in the euro zone are too high, so that investors will most likely prefer safe-haven yen again. Most economic data will be coming in tomorrow. Today’s statistics covered only retail trade figures in May. The indicator registered growth on a monthly basis, but decline year on year – 0.7% m/m, 3.6% y/y after the previous -0.4% m/m, 5.7% y/y. A for the yen’s outlook, high risk aversion may initiate further yen’s purchases, although constant BoJ intervention warnings will be constraining factor for the currency’s growth.
Analysis prepared by: