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12.07.2016 12:28

European session review: Yen fell on expectations of new economic stimulus

The following data was published:

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

6:00 Germany Consumer Price Index m / m (final data) June 0.3% 0.1% 0.1%

6:00 Germany CPI, y / y (final data) June 0.1% 0.3% 0.3%

9:30 UK Speech of the Bank of England Governor Mark Carney

The yen fell significantly against the dollar, updating the minimum of July, and the first time since June 24 approaching to the level of Y104.00. The reason for such dynamics is an indication about further stimulus in the Japanese economy. Yesterday, Prime Minister of Japan Shinzo Abe reiterated that his office will begin drawing up stimulus plan, with no specific data been specified.

It also became known that the Japanese government plans to lower the forecast for GDP growth in the fiscal year ending March 2017 to 0.9% from 1.7%. The new forecast will be published on Wednesday. Abe Administration is likely to present a forecast assuming GDP growth next year at 1.2%.

The pound has appreciated by more than 200 pips against the dollar, approaching to a maximum of 5 July, helped by confirmation that the next prime minister of Britain will be Theresa May. Earlier policies gained the support of more than half of the total number of representatives of the Conservative Party in the Parliament. Acting Prime Minister Cameron to resign on Wednesday. He stressed that the new prime minister is ready to provide full support.

Market participants are also waiting for tomorrow's meeting of the Bank of England. After the referendum, the head of the Central Bank Carney considering the possibility of easing monetary policy. It is likely that step will be taken at the upcoming meeting. It is expected that the Central Bank lowered interest rates for the first time since March 2009. Most likely, the Central Bank may consider a rate cut to 0.25%.

The dollar rose modestly against the euro before recovering most of the lost positions, and returning at the level of $ 1.1100. Experts point out, amid a lack of new catalysts that the euro is likely to follow the pound, which is the main topic of foreign exchange traders on the eve of the scheduled Bank of England meeting. Investors are also waiting for today's statements by Fed Tarullo and Bullard and US data to be released in the coming days.

Little impact on the price action had data from Germany. As it became known, the consumer price index rose 0.1% in June, in line with preliminary estimates and forecasts of experts. Recall that in May, the index increased by 0.3%. Annual inflation in Germany rose by 0.3% compared with an increase of 0.1% in May, but remained significantly below the ECB target level, which is located just below 2%. The harmonized index of consumer prices, calculated on the basis of statistical methodology, agreed between all EU countries increased by 0.1% compared to May and by 0.2% annually in June. These coincided with the preliminary estimates. Downward pressure on the inflation rate continued to be energy prices, which in June fell by 6.4% compared to June 2015. In May, energy prices fell by 7.9%. Food prices rose by 0.1% annually in June.

EUR / USD: during the European session, the pair has risen to $ 1.1125, but then went back to $ 1.1080.

GBP / USD: during the European session, the pair rose to $ 1.3186.

USD / JPY: during the European session, the pair rose to Y104.00.

12.07.2016 12:00


Market Focus

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  • German private sector output growth slowed for the second month running in July
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