Fundamental analysis 4 December 2012 | Inside Forex trading

New week began with optimism and the American currency turned out to be under the pressure against the European majors. Good mood on market more likely appeared after the publication of Chinese economic data with good results and the announcement about improvement of activity in the eurozone. It is also must be mentioned that Greece started to buy back some of its bond and propose prices which can be interesting for investors. As you know, bond buyback is an important element of the aid program for Greece, and its success depends on the fact whether Athenes will get financial aid in the middle of December or not. Risk seeking was also supported by the information about Spain, which appealed financial aid, but only for the banking sector, and Germany Parliament approved the aid program for Greece. At the same time information, which caused fear of the US budget cliff, didn?t influence the market. What is more, pessimism over the dollar was also caused by the US economic data published yesterday. The US Manufacturing sector activity decreased in November ?- the Manufacturing Purchasing Manager Index estimated by ISM fell to 49.5 after 51.7 in October. At the same time the indexes which usually allow to believe in good perspectives, demonstrated negative dynamics. The New orders index decreased to 50.3 from 54.2, and the employment index dropped to 48.4 from 52.1. This situation was smoothed over by the economic data of the construction index which increased by 1.4% m/m, when it was expected only +0.5% m/m. Today there will be no important economic news about the USA, the dollar trading will be influenced by external information, and it seems that it will remain under the pressure as the mood of previous session may be the same.

EUR

Demand in the euro was observed during the whole trading session on Monday, and the euro ended trading day strengthening against the dollar. Announcement about Spain government which appealed financial aid of 39.5 milliard euros was good for the euro and caused its trading in spite of the fact that the financial aid will be allowed only for the banking sector, not for the whole economy of the country, i.e. implementation of measures approved before. Risk seeking was also supported by Greece bond prices of over 30 cents, which corresponds to the market expectations, and it will help to cut Greece debt in amount of 30 milliard euros. Good mood was also supported by the eurozone economic data which demonstrated improved activity in manufacturing sector of the EU. The Manufacturing Purchasing manager Index is 46.2 in November after 45.4 in October. Though, the index is remaining under ?50.0, nevertheless its decreases was slowed down, when in Germany, France, Spain and Greece the decreases of this index was also slowed down. Today there will be also a few news anout Europe. The producer price index of the EU for October is expected to be published today. It is more likely that the index decreased, which is bad for the perspectives of inflation ? the PPI is expected to be at 0.0% m/m, +2.6% y/y after +0.2% m/m, +2.7% y/y before. Information about the meeting of the Ministers of Finance of the EU countries could be the factor of influence on the market.

GBP

The British pound strengthened against the dollar on the trading session on Monday. What is more, the pound sterling demonstrated more confident strengthening in comparison with the euro. It is obvious that it was? caused by good economic data of the islands published yesterday. According to the economic data published on the Asian trading session, the house price index increased per annum. The Hometrack announced that in November the index fixed -0.1% m/m,?-0.3% y/y after -0.1% m/m, -0.4% y/y in the previous period. And according to the information published later, the manufacturing activity index? for the same months was better in comparison with October and better-then-expected by forecast. The Manufacturing PMI of the Great Britain increased to 49.1 after 47.3 before, when it was expected 48.0.The pound might be also supported by announcement of former member of the Management Council of the Bank of England A. Posen, which told that he was going to refrain from the assets buying during some time, he also told that it is more likely that the British Central Bank would not widen its bond buying program in amount of 375 milliards. This announcement of professional expert which knows opinions in the Central Bank might be took into consideration by the market. Information about British economy published today may support good mood over the pound sterling ? it is expected that the Manufacturing PMI for November of the construction sector, which may be announced on the European trading session, will increase, although its increase will be slowed down to 50.7 from 50.9 before. And according to the published BRC report, the retail sales index increased by 0.4% y/y in November after -0.1% y/y before. Nevertheless, expectations of the next meeting of the Bank of England on the interest rate will more likely prevent activity on the market.

JPY

The USD/JPY currency pair was the least active on the last trading session, and according to the results of trading session it slightly decreased. As usual demand in the yen was caused by the US weak economic data. According to the information published today money supply suddenly reduced in November, and the index fixed 5.0% y/y after 10.8% y/y, when it was expected 11.4% y/y. Among positive news were changes of average salary in Japan, the index increased by 0,2% m/m after -0.5% m/m before. Concerning the perspectives of the yen, the call of leader of the Liberal Democrats Party for ?unlimited quantitative easing? will support the pound, but expectations of the elections will more likely prevent activity on the market, and the yen will more likely trade in narrow corridors.

Source: http://blog.forex4you.com/fundamental-analysis-4-december-2012/

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