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15.05.2013 18:22

American focus: the dollar continues to strengthen

U.S. Dollar on Wednesday continued to trade at a higher against many currencies after data on the manufacturing sector of New York and U.S. producer prices.

The index of producer prices in April, adjusted for seasonal variations fell 0.7% amid falling gasoline prices. It was the strongest index falling more than three years. April data showed that inflation is not currently a problem. This means that the Federal Reserve may continue as long as quantitative easing without having to worry about a possible jump in inflation.

Fed Manufacturing Index New York - an indicator of manufacturing activity in New York City - May moved into negative territory, despite the expectations of economists. A negative value means that the majority of respondents expect worsening conditions.

The dollar also provided details of the National Association of Home Builders (NAHB), testifying to the increasing confidence among home builders in May after three months of decline. According to Vecchio, the rise of the housing sector has been one of the engines of recovery of the U.S. economy, and increase the level of confidence is a positive factor for the dollar.

The euro fell to a six-week low against the U.S. dollar after the quarterly economic reports from France, Germany and the euro zone fell short of expectations. Since France is now in a recession, and Germany in the 1st quarter showed weak economic growth, the dollar continued to benefit from the relatively more attractive growth prospects of the U.S. economy.

France reported a decline in GDP in the 1st quarter by 0.2%. This is the third decline in the past four quarters. Germany also announced an economic growth of 0.1% in the 1st quarter, while the expected GDP growth of 0.3%.

While the market is waiting for the final completion of quantitative easing by the Fed, the yen fell sharply against the Bank of Japan's efforts to stimulate the Japanese economy through its own bond purchase program, which was launched in April.

The British pound fluctuates against the dollar, while the pound was originally promoted the latest data, which were presented to the Office for National and showed that by the end of last month the number of applications for unemployment benefits fell substantially, thereby exceeded the estimates of experts, which contributed reduce the unemployment rate.

According to the report, the number of applications for unemployment benefits fell in April for 7300 people to the level of 1.52 million, followed a decline of 7,000 in the previous month. Note that according to the average forecast of economists, the number of applications was reduced to only 3,100 people. In addition, it was reported that in the context of the significantly lower the unemployment rate also fell - to the level of 4.5 percent, while the forecast, it was to remain unchanged - at 4.6 percent.

In the period from January to March, the unemployment rate in the ILO standards, amounted to 7.8 percent of the economically active population, up 0.1 percentage points lower than that from October to December. Note that it is estimated that the unemployment rate would remain unchanged.

However, strengthening the currency did not last long, and after the publication of the quarterly inflation report, the rate has declined markedly. Note that the Bank of England expects that inflation in Britain could rise above 3% in June, and that it may be above 2% in the next 2 years.

As for GDP, it "may gradually grow over the next three years through a program of asset purchases, mitigating conditions in the credit market by lending and financing programs to further stabilize the world economy." MPC of the Bank of England expects GDP growth of 0.3% in Q1. Of 2013. In the current quarter, GDP should grow by 0.5%, while the annual growth should reach 2.2% (versus 2% previously). However, the MPC acknowledged that growth is still "weak and uneven."

This report shows that, in the light of the forecasts for inflation and growth may require additional incentives. Prior to 2016, however, the rate increase is expected.

After the release of the report, Bank of England held a press conference. He noted that there are many obstacles to the growth of the British economy, and most importantly - the eurozone crisis and rising unemployment. He stressed that the policy of the United States should continue to stimulate the economy, because "now do not relax."

15.05.2013 17:21

European stocks close

Market Focus

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  • Earnings Season in U.S.: Major Reports of the Week
  • U.S. commercial crude oil inventories decreased by 4.7 million barrels from the previous week
  • Australian unemployment rate stable at 5.6% in June
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