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Market Review July 16, 2014

July 16, 2014  

 

Monday didn’t bring Europe any good news. Indices of economic sentiment by ZEW count have renewed yearly minimums. All that is happening against the background of significant fall of industrial production in all of Europe and also low inflation with high unemployment. But the ECB is not in a rush to start mass assets purchase, in spite of growing demand of more active measures of the regulator.

At that, the FRS plans are affecting the market more and more. From the “minutes” it has been found out, that most likely QE would be finished in October. The market has accepted that event quite calmly, because earlier the Fed had marked dates of the end of stimulating programs. More over: recent statistics were quite positive and QE3 fulfilled its goals.
So special attention will be devoted to Yellen speech in Congress. On Tuesday she is expected in Bank committee of the senate, and on Wednesday in the committee of the House of Representatives on financial services. As a reminder recent statistics showed decline of unemployment level up to 6.1% (the figure turned out to be 1.4% lower a year earlier), while the FRS forecasts didn’t imply such optimism.

The data on new jobs have also been exceeding 200K level. On the other hand labor market positive sentiment is provided mostly by growth of partial employment.  If an American works even one hour a day, official statistics don’t take him to account as unemployed. So Yellen might point to such disproportions and leave vector of monetary policy intact.
It is worth mentioning that current unemployment decline was explained by Americans’ employment (even not full time one) and not by trivial decline of the level of participation, as it has been happening in recent months. In general the cycle of low rates is about to end, and perhaps by 2017 we are going to see the rate at 3.5%. If the ECB is going to hold its rate there will be an interesting rally on the EURUSD.

EUR/USD

The Euro has plummeted below the support line. The main trigger of the downfall were negative data on ZEW indices.  The new target on the downside is 1.3520.

USD/JPY

Looks like the pair has encountered some resistance at 101.75. So the asset might retrace a bit after recent ascent. There is support on the downside around 101.23.

GBP/USD

The Pound has taken advantage of yesterday’s economic calendar. But the rally was temporary. Nevertheless the outlook is still bearish; it is supported by current chart pattern.

ECONOMIC CALENDAR

02:00       CNY         Chinese Fixed Asset Investment (YoY)
02:00       CNY         Chinese GDP (QoQ)
02:00       CNY         Chinese GDP (YoY)
02:00       CNY         Chinese Industrial Production (YoY)
05:00       JPY         BoJ Monthly Report
08:30       GBP         Claimant Count Change
08:30       GBP         Unemployment Rate
09:35       EUR         German 10-Year Bund Auction
12:30       CAD         Manufacturing Sales (MoM)
12:30       USD         Core PPI (MoM)
12:30       USD         PPI (MoM)
13:00       USD         TIC Net Long-Term Transactions           27.4B     -24.2B
13:15       USD         Industrial Production (MoM)
14:00       CAD         BoC Monetary Policy Report
14:00       CAD         Interest Rate Decision
14:00       USD         Fed Chair Yellen Testifies
15:15       CAD         BoC Gov Poloz Speaks
16:00       USD         FOMC Member Fisher Speaks
18:00       USD         Beige Book
21:45       BRL         Brazilian Interest Rate Decision