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Daily Forex Brief
London :Thursday 16th May 2013
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Data/ Event Risks
EUR: The inflation data is the final number, so not likely to be a market moving event, but if revised lower it could dent the euro a little as expectations of further stimulus measures from the ECB (negative deposit rate) resurface.
USD: The better weekly claims data last week were a factor in the dollar surge seen into the close, so markets will be more sensitive than normal to the data. The market expects a small move higher, from 323k to 330k.
Idea of the Day
The latest GDP data from Japan reflected the still huge task facing the authorities. Headline growth was better than expected, the economy expanding 0.9% in the first quarter of the current year, but deflation was more entrenched, with the deflator declining 1.2% YoY. Still, this is the picture of the economy before the announcement of a doubling of the monetary base, made early last month. The other indicators seen so far have been a little more encouraging, with Japanese corporates seeing the benefits of the weaker yen, which has had longer to feed through and there are also early signs that wages are starting to adjust upwards, a key factor in breaking the deflationary psychology that has gripped Japan for much of the past twenty years. The firmer dollar stance has helped, with the dollar index within a whisker of making a near 3 year high yesterday. More of the same is on the cards for USDJPY ahead.
Latest FX News
JPY: Mixed messages from the GDP data this morning. Headline GDP growth was firmer than expected, rising 0.9% in the first quarter, with the final quarter of last year revised higher from 0.0% to 0.3%. The offset was the sharp decline in the GDP deflator (a broad measure of prices in the economy), which fell 1.2% YoY (last quarter was a 0.7% decline). The yen weakened, but only modestly so.
AUD: The Aussie notably weaker during the Asia session, with a sustained move below the 0.9900 level. A combination of factors at play, including generally weaker commodity prices together with the softer global growth outlook, together with expectations of more domestic interest rate cuts. The Aussie has been the weakest on the majors so far this month, even over-taking the yen in the loser’s league table.
GBP: A welcome change yesterday from the Bank of England, most notably with inflation projections being revised down and growth forecasts revised higher (most of the past few years have seen the opposite). This did given the pound a lift, but only a modest one. The 1.52 level still offers key support for sterling against the US dollar.
EUR: Even the usually resilient euro is having a tough time fighting the firmer dollar tone, but is outperforming most others and peripheral markets continue to perform well. Just the CAD has performed better over the past week.
Disclaimer
The analysis we provide is based on the average estimate of price movements in one day. Does not guarantee what we deliver is actually a proper and correct. Everything that happens in the decisions you make on your trading transaction is to be Your responsibilities.
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