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01.08.2013 18:20

American focus: the U.S. currency rose against the euro

Value of the dollar against the euro has grown considerably, which helped the U.S. data. A report published by the Institute for Supply Management (ISM), showed that in July, manufacturing activity in the U.S. rose more than expected by economists. The PMI for the manufacturing sector in the United States July rose to 55.4 against 50.9 in May. A reading above 50 indicates expansion of industrial activity. Growth has exceeded the expectations of economists, who had forecast an increase to 52.1. Rise in the index was mainly due to good growth component of production, new orders and employment. At the same time, inventories and prices in July fell.

We also note that a significant fluctuation in the currency, which was noted earlier, was triggered by a statement of the ECB Draghi. He said that the base rate of the European Central Bank at 0.5% would not go up, at least until 2014, and should not be considered the beginning of 2014 as the time horizon of the proposed rate increase.

Thus, M.Dragi repeated statement that the ECB expects saving rates at current or lower levels for an "extended period." For the first time this phrase was used in the last press conference of the ECB.

"Long-term" does not imply a specific time benchmarks, but the head of the ECB has made it clear that we are talking about the period to mid-2014. So interpret statements M.Dragi most analysts, based on the phrase "Our monetary policy provides support for a gradual recovery in economic activity, which will continue until the end of 2013. In 2014.". In addition, the ECB is discussing the possibility of introducing the publication of minutes a few weeks after the meetings themselves, as it does, for example, the U.S. Federal Reserve. This issue will be addressed substantively in the autumn of this year.

Recall that earlier today the ECB left interest rates at 0.5% per annum. This decision coincided with the expectations of most analysts.

The pound dropped significantly against the dollar, losing the position of all previously earned. Note that initially helped by strong growth in the pound on the manufacturing PMI data and the decision of the Bank of England. It is learned that manufacturing activity in the UK in July showed the highest growth in over two years - Purchasing Managers Index (PMI) for the manufacturing sector rose to 54.6 against 52.9 in June.

Meanwhile, we add that today the Bank of England decided in line with expectations, leaving at current levels as the rate and the size of its asset purchase program (0.5% and £ 375 billion, respectively). Unlike last month, this time MPC refrained from accompanying statement.

But in spite of all the positive, the pound was unable to stay on the session high and has fallen off sharply, which is mainly contributed to the ECB President Draghi's comments, as well as U.S. data on manufacturing activity, which were presented later.

We also add that the strengthening of the dollar helped the expectations of tomorrow's publication of employment data, which will be closely monitored by investors, as the Federal Reserve Board has previously stated that the employment data will help determine actions on monetary policy. Economists expect that the U.S. created 180,000 jobs in July.

The Japanese yen fell significantly against the major currencies against the background of large-scale increase of Asian stock markets after more positive than-expected data on the manufacturing sector in China and under the influence of rising expectations of continuing the policy of ultra-low interest rates in the U.S., even after the collapse of the program of bond purchases.

The official report showed that the index of manufacturing activity in China rose at the end of last month to the level of 50.3, down from 50.1 in June. It is worth noting that the last reading was much better than the experts' forecasts - at the level of 49.8. We also add that the last time the official PMI declined below 50, which is the boundary reduction of activity in September 2012. However, we note that the index of manufacturing activity in China from HSBC sold with an official - he was down to 47.7 from the June value at 48.2. July data show that the index is in the drop zone for the third month in a row, including two months of testimony index from HSBC and different official

01.08.2013 17:20

European stock close

Market Focus

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  • Consumer prices in China were up 1.6 percent on year in September,
  • US consumer sentiment surged in early October, reaching its highest level since the start of 2004 says UoM
  • Earnings Season in U.S.: Major Reports of the Week
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