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08.07.2016 12:26

European session review: Gbp/Usd rose buy contained by the trading range

The following data was published:

(Time / country / index / period / previous value / forecast)

5:45 Switzerland's unemployment rate (not seasonally adjusted) in June 3.2% Revised from 3.3% 3.3% 3.1%

6:00 Germany Balance of payments, 28.4 billion in May from 28.8 17.5 Revised

6:00 Germany Trade balance (not seasonally adjusted), 25.7 billion in May from 25.6 Revision 21

6:45 France Industrial Production m / m in May 1.2% -0.5% -0.5%

8:30 UK Trade Balance Revised to May -1950 -3.294 -2.263

The US dollar fell against major currencies, as investors are waiting the release of the report on employment in non-farming sectors of the US later today.

Market participants have focused attention on the employment data in the US, after finding evidence of improvement in the US labor market after the publication of upbeat data on Thursday.

On Thursday, the US Labor Department said the number of initial applications for unemployment benefits for the week ending 2 July fell by 16,000 to 254,000 from 270,000 the previous week. Analysts had expected the number tol increase by 2,000 to 270,000 last week.

In addition, the ADP data showed that the number of people employed in the private sector rose by 172,000 last month, higher than the projected increase of 159,000.

The pound rose despite disappointing report of the Office of National Statistics, which showed that UK's trade deficit widened in May, against the background of weak exports.

The merchandise trade deficit increased to 9.9 billion pounds from 9.4 billion pounds in April. The expected deficit was 10.7 billion pounds.

This extension reflects a greater reduction in exports by 2.1 billion pounds, than the fall of 1.6 billion pounds of imports.

The deficit with EU countries increased to 7.3 billion euros from 6.9 billion pounds, while trade with non EU member states rose to 2.6 billion pounds from 2.5 billion pounds.

Meanwhile, the services surplus increased to 7.6 billion pounds from 7.5 billion pounds.

As a result, the overall trade deficit, including goods and services, increased to 2.3 billion pounds from 2 billion pounds. Exports fell by 2.0 billion pounds, while imports decreased by 1.7 billion pounds.

Meanwhile, the pound rallies might be sold hard, as Brexit reinforces the uncertainty regarding the country's economic prospects.

Intraday USD / JPY is approaching a break below the 100 level, and at the same time increases the probability of easing of monetary policy by the Bank of Japan at the meeting scheduled for the end of July. If the central bank will increase the asset purchase program or lower the rate even further deep into negative territory, it can shake the Japanese stock market.

"It is clear that the strengthening of the yen is negative for exporters, so if you can weaken the currency, their share will grow", - says Sunil Garg from J.P. Morgan.

However, lower interest rates may have a negative impact on the shares of financial companies, banks and insurance agencies. "Perhaps the weaker yen would help exporters, but the shares of companies whose rates depend on economic cycles, as well as financial institutions remain under pressure" - says Garg.

EUR / USD: during the European session, the pair fell to $ 1.1056

GBP / USD: during the European session, the pair has risen to $ 1.2997

USD / JPY: during the European session, the pair fell to Y100.24 and then rose to Y100.74

08.07.2016 12:00


Market Focus

  • The eurozone started the third quarter on a solid footing, according to PMI survey data
  • 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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