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23.07.2015 18:21

American focus: the dollar fell

The US dollar fell against the euro and the yen, as investors took profits after recent gains of the US currency. A week will be a meeting of the Committee on Open Market Federal Reserve, which will discuss the rise in interest rates and the economy.

The dollar fell as investors booked profits on long-term expectations of strengthening against the dollar. Many analysts and currency managers predict that the US economy will get stronger, which will contribute to the first Fed rate hike in nine years.

The Central Bank may provide more information about its intentions regarding the increase of interest rates in the United States after the two-day meeting, which ended on July 29.

The Fed signaled that interest rates may increase in September, but investors predict that the central bank is likely to take effect at the December meeting. Rising interest rates in the United States will make the dollar more attractive to investors.

If the Fed decides not to raise interest rates in September, the dollar can be traded in the current range against other currencies in a matter of months before the meeting of the central bank in December.

The dollar recovered some lost ground after the publication of the Ministry of Labour that the number of initial claims for unemployment benefits in the US for the week July 12-18 has decreased by 26,000, taking into account the correction for seasonal fluctuations amounted to 255 000. The number of initial claims for benefit Unemployment reached its lowest level since 18-24 November 1973. Economists had forecast that the number of applications for unemployment benefits will be 280,000.

The euro earlier rose sharply against the US currency, approaching the maximum of 15 July. Experts point out that the reason for this growth can be called normal operation stops with the optimism caused by the result of the vote in the Greek parliament. Yesterday the Greek parliament voted in favor of the second package of creditors' claims. MPs 230 votes to 63 approved a bill on the measures needed for the final negotiations on the 3rd program of financial aid to Greece of 86 billion euros ($ 93 billion). Approved steps simplify judicial decisions and incorporate into national law of the EU directive on the reorganization of troubled banks. Thirty-six deputies of the ruling party Syriza did not support the position of Tsipras to vote. Against the claims of creditors of the first package approved last week, were 39 representatives of the Party. Tsipras said he would carry out anti-crisis program, but does not consider it correct. He stressed that he would do everything possible to improve the final terms of the agreement.

The pound dropped significantly against the US dollar, which was caused by the publication of weak data on sales in Britain. According to the report of the Office of National Statistics, retail sales (including motor fuel) decreased by 0.2 percent compared to the previous month. Recall the end of May sales rose by 0.3 percent (revised from 0.2 percent). It was the first drop in sales for the three months. Experts expect that sales will increase by 0.3 percent. Also, the data showed that, except for the sale of motor fuel sales declined by 0.2 percent, while economists had forecast an increase of 0.4 percent, which would correspond to a change in May. On an annual basis, retail sales growth (including motor fuel) slowed to 4 percent from 4.7 percent in May. Economists had expected sales to rise 4.9 percent. It is worth emphasizing sales increase recorded for 27 consecutive month, which is the longest series since May 2008. Excluding automotive fuel, sales growth slowed to 4.2 percent from 4.5 percent. It expects sales to grow by 5.1 per cent. In the second quarter sales rose 0.7 percent compared with an increase of 0.9 percent in the three months to March. Last growth rate was the lowest since the third quarter of 2014. Without adjusting for falling prices, retail spending in the second quarter rose 1.3 percent, recording a minimum pace since the first quarter of 2013.

The yen was moderately higher against the dollar, updating yesterday's high. Traders noted that the dollar seems to be resumed decline, marked the beginning of the week. The decision of the Greek Parliament was the driver of demand for risky assets and a weaker dollar.

Little impact on the yen also provided data on the trade balance of Japan. As it became known, in May, Japan's trade deficit in June amounted to - ¥ 69 billion against a deficit of - ¥ 217,2 Bln. This figure was lower than the forecast of analysts ¥ 5.4 billion. Exports from Japan grew at the fastest pace in five months. It is a sign that foreign demand has supported the restoration of the Japanese economy. According to the Ministry of Finance of Japan, exports in June rose by 9.5% compared with the same period of the previous year due to demand for automobiles and semiconductors from abroad. In May, the annual growth of exports by 2.4%. Export growth was partly due to the weakening of the Japanese yen over the past 12 months. Exports to China grew by 5.9%, while exports to the US jumped by 17.6%. Imports declined by 2.9% in June, the decline observed the sixth consecutive month.

Market Focus

  • The Bank of Japan decided by a 7-2 majority vote to hold the interest rate at -0.10%
  • 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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