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06.01.2016 18:40

American focus: the US dollar rose

The US dollar rose against other currencies, as investors favored safe-haven against the backdrop of renewed concerns about the prospects for China's economy, the news about the likely bomb test by North Korea, as well as the fall in oil prices.

In the first trading days of 2016, investors preferred the dollar, given the new signs of weakness in China and the euro zone. On Wednesday, new data have been published that indicate that the Chinese authorities can not cope with a slowing economy. Indicators of activity in the service sector in China, which usually has a positive effect on economic growth, were weak. Partly China is responsible for the drop in oil prices, while the markets spread concerns about the economic situation in the country.

Investors are also faced with the problem of reducing the yuan. On Wednesday, China's central bank set the mid exchange rate at its lowest level in five years.

In addition, on Wednesday, North Korea announced the successful testing of a more perfect form of nuclear weapons, which was another reason why investors preferred safe-haven assets.

More positive-than-expected US data also helped strengthen the dollar.

Data provided by Automatic Data Processing (ADP), have shown that the growth rate of employment in the US private sector has significantly increased in December, despite the expectations of a moderate decline. According to a report last month, the number of employees increased by 257 thousand. People, compared with a revised downward indicator for November at 211 thousand. (Originally reported growth of 217 thousand.). We add, according to the average forecast value of this indicator was to reach 192 thousand.

In addition, the US Commerce Department reported that the trade deficit decreased markedly in November as imports and exports fell to their lowest level in recent years. Last Modified indicates that the volume of world trade is gradually slowing down due to low commodity prices and fluctuations in major currencies.

According to the report, the trade deficit decreased by 5% compared with October, while reaching $ 42.37 billion. Exports fell by 0.9%, while imports dropped even more - by 1.7%, to its lowest level from February 2011. The deficit for October was revised to $ 44.58 from $ 43.89 billion. Economists had expected a deficit of $ 44.0 billion.

The euro rose slightly against the dollar, the currency of support have data on business activity in Germany and the euro zone. It is learned that private sector activity in Germany increased at the end of December, registering with the fastest expansion in 17 months. This was reported in the final report, Markit Economics. The composite index of business activity, which covers the manufacturing sector and the service sector increased to 55.5 points in December against 55.2 in November. Recall previously reported a decline to 54.9 points. The final PMI index for the services sector rose to 56.0 compared with 55.6 in November and preliminary value of 55.4. The last reading was the highest since July 2014.

Meanwhile, the final data, provided by Markit Economics, showed that business activity in the euro zone's private sector grew in December, more than in the previous month, and faster than originally anticipated. The composite PMI index rose to 54.3 in December from 54.2 in November. In a preliminary report, it reported a decline in the index to 54.0. It is worth emphasizing, the index remains above the neutral mark of 50 points for 30 consecutive months and diamonds. PMI for the services sector remained at 54.2 points in December. Previously it reported 53.9 points. Analysts had forecast that the index was 53.9.

The pound fell against the dollar after the publication of weak statistics on Britain. The report CIPS and Markit Economics reported that the index of business activity in the services sector in Britain has decreased moderately in December, but remained above the neutral mark of 50, which indicates expansion. According to the data at the end of December, the PMI index for the services sector fell to 55.5 against 55.9 in November. Analysts had expected the index to fall to 55.6 points. The average value of the index for the 2nd half of 2015 amounted to 55.4 points, which is lower than the same period in 2013 (56.9 points) and 2014 (58.2 points). On average, in 2015 the index was 56.7 points. "The research results indicate that the UK economy grew by 0.5% in the 4th quarter. This means that at the end of 2015, GDP grew by 2.2%," - said Chris Williamson, economist at Markit.

The Canadian dollar has fallen more than 100 pips against the US dollar, reaching the psychological mark CAD1.4100 and updating the 12-year minimum. The main reason for such dynamics was a significant decline in oil prices because of concerns about oversupply of raw materials. Yesterday, the American Petroleum Institute issued its report, which showed a reduction in oil reserves by 5.6 million barrels from December 26 to January 1. According to the report, gasoline inventories rose by 7.1 million barrels, while distillate stocks - by 5.6 million barrels per day. US Energy Information Administration on Wednesday reported on the fall of commercial oil stocks in the United States to 5.09 million barrels last week, while analysts had expected an increase of 300,000 barrels. However, at the same time it became aware of the strong increase in stocks of gasoline and distillates. Oil reserves in Cushing terminal reached a new record high.

Statistics Canada stated: In November, exports rose slightly have contributed to a reduction in the trade deficit to 1.99 billion. Canadian dollars against 2.49 billion. Canadian dollars in October (revised from 2.76 billion.). Analysts had forecast a deficit of 2.60 billion. Canadian dollars. It is worth emphasizing the deficit in trade in goods is fixed for the 15th consecutive month, reflecting the continuing economic difficulties of the low oil prices and a weak Canadian dollar.

Market Focus

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  • Earnings Season in U.S.: Major Reports of the Week
  • German private sector output growth slowed for the second month running in July
  • ECB's Mersch says as conditions normalise, it is unlikely that uncoventional policies will remain necessary
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