09.06.2015 06:33
Summer Optimism or NFP is of no Authority to FRS
The results of G7 meeting begin to affect the market. On Monday, euro practically eliminated its Friday fall. It was triggered by Barak Obama's statement regarding strong dollar as the structural problem for the American economy, especially its present growth as the response to expectations of rate increase.
All last week movements were tied up to US dollar. Euro rally in the first half of the week ensured active growth of profitability of European bonds, although the unresolved Greek issue was the real cause of those mass sales. Hardly enough that someone expected for this issue to be really resolved in the nearest future, therefore the "power" of euro was quite unstable, and all those who secured their purchases before NFP were absolutely right.
Dollar was in active decline until Wednesday continuing the tendency caused by extremely weak GDP data; however, closer to the publication of NFP, the market began to realize that those data on employment had to be strong. The preliminary indicator - the number of employed in private sector provided by ADP turned out to be both higher than the previous value and much better than predicted. It was the case when statistics published could be trusted. Many expected positive data, but the result exceeded even optimistic predictions. Such tendency, most likely, will continue in the nearest 3-6 months, that is, the average value of jobs will be around 220±5 thousand. Excellent data on US employment mean that there are no more obstacles for rate increase as early as in June, although the negative GDP indicator in the first quarter still restrains movement. Now, FRS will concentrate on finances (fiscal issues), and the first of them is inflation, then come international market and treasuries turnover. This week will show if improvement of labor market statistics can trigger real growth of consumption.
The numbers that are significantly higher than expected will open the path for more aggressive measures taken by FRS. IMF's advice to the Federal Reserve to wait with rate increase until 2016 looks out of place today. Nevertheless, the chances for resolving the rates issue in June are minimal - it plays into the hands of the Federal Reserve now to keep the market ignorant. Although the closest FRS meeting is simply under the obligation to give more visible signals regarding rates, the Federal Reserve, theoretically, can conduct a special press-conference at any moment between June and September, which will force dollar to become stronger, and the market - to keep its eye on the ball.
The results of G7 meeting begin to affect the market. On Monday, euro practically eliminated its Friday fall. It was triggered by Barak Obama's statement regarding strong dollar as the structural problem for the American economy, especially its present growth as the response to expectations of rate increase. These are the first American revelations on this issue at the level of the President for the last several decades, although exactly such a tone of criticism this spring stopped the current growth of dollar. Previously, officials of lower ranks, also including Janet Yellen took the liberty to make the same statements. Also, the main currency was supported by the information on industrial production in Germany - the growth was stipulated by both high domestic demand and gradual recovery of Eurozone indicators.
There is almost no European news this week, so Greece will be the main theme. Another set of consultations held by creditors and Greek representatives over the last week-end, again, did not even produce any positive hints. The current offers made by the European Commission were formulated in the following style: "take it or leave it", and it was clearly stated at the summit that Greece had provided no real plan of economic reforms. Jean-Claude will have a meeting with Tsipras in Brussels on Wednesday; however, Greeks are going to discuss only the restructuring of debts, to which IMF along with Germany opposes strongly. Greece has often used all types of IMF loop-holes in order to delay payments; however, they have used this tactic for the last time. The time redeemed by Greece due to unification of all possible payments into one will run out at the end of the month. In any case, default on IMF loans will be scheduled for July 1; however, while the very mechanism of its operation is not quite clear, Greece will hang in limbo for several more months.
A technically large interest to sales of euro at levels 1.1130/35 has been eliminated already. On the morning of Tuesday, EUR/USD pair continues trading with bullish sentiment. As of today, the area of 1.1400 is responsible for resistance, which has stayed there for almost whole year. The penetration of the level is kept by the offer at 1.1330/40 and larger sale orders in the area of 1.1380/85. Stop hunting of those that are above can produce a push to 1.1450/55. The strongest interest to sales is at the level of 1.1280/70 (1.1250 - stops) now; however, the price is not planning to move there.
Dollar was in active decline until Wednesday continuing the tendency caused by extremely weak GDP data; however, closer to the publication of NFP, the market began to realize that those data on employment had to be strong. The preliminary indicator - the number of employed in private sector provided by ADP turned out to be both higher than the previous value and much better than predicted. It was the case when statistics published could be trusted. Many expected positive data, but the result exceeded even optimistic predictions. Such tendency, most likely, will continue in the nearest 3-6 months, that is, the average value of jobs will be around 220±5 thousand. Excellent data on US employment mean that there are no more obstacles for rate increase as early as in June, although the negative GDP indicator in the first quarter still restrains movement. Now, FRS will concentrate on finances (fiscal issues), and the first of them is inflation, then come international market and treasuries turnover. This week will show if improvement of labor market statistics can trigger real growth of consumption.
The numbers that are significantly higher than expected will open the path for more aggressive measures taken by FRS. IMF's advice to the Federal Reserve to wait with rate increase until 2016 looks out of place today. Nevertheless, the chances for resolving the rates issue in June are minimal - it plays into the hands of the Federal Reserve now to keep the market ignorant. Although the closest FRS meeting is simply under the obligation to give more visible signals regarding rates, the Federal Reserve, theoretically, can conduct a special press-conference at any moment between June and September, which will force dollar to become stronger, and the market - to keep its eye on the ball.
The results of G7 meeting begin to affect the market. On Monday, euro practically eliminated its Friday fall. It was triggered by Barak Obama's statement regarding strong dollar as the structural problem for the American economy, especially its present growth as the response to expectations of rate increase. These are the first American revelations on this issue at the level of the President for the last several decades, although exactly such a tone of criticism this spring stopped the current growth of dollar. Previously, officials of lower ranks, also including Janet Yellen took the liberty to make the same statements. Also, the main currency was supported by the information on industrial production in Germany - the growth was stipulated by both high domestic demand and gradual recovery of Eurozone indicators.
There is almost no European news this week, so Greece will be the main theme. Another set of consultations held by creditors and Greek representatives over the last week-end, again, did not even produce any positive hints. The current offers made by the European Commission were formulated in the following style: "take it or leave it", and it was clearly stated at the summit that Greece had provided no real plan of economic reforms. Jean-Claude will have a meeting with Tsipras in Brussels on Wednesday; however, Greeks are going to discuss only the restructuring of debts, to which IMF along with Germany opposes strongly. Greece has often used all types of IMF loop-holes in order to delay payments; however, they have used this tactic for the last time. The time redeemed by Greece due to unification of all possible payments into one will run out at the end of the month. In any case, default on IMF loans will be scheduled for July 1; however, while the very mechanism of its operation is not quite clear, Greece will hang in limbo for several more months.
A technically large interest to sales of euro at levels 1.1130/35 has been eliminated already. On the morning of Tuesday, EUR/USD pair continues trading with bullish sentiment. As of today, the area of 1.1400 is responsible for resistance, which has stayed there for almost whole year. The penetration of the level is kept by the offer at 1.1330/40 and larger sale orders in the area of 1.1380/85. Stop hunting of those that are above can produce a push to 1.1450/55. The strongest interest to sales is at the level of 1.1280/70 (1.1250 - stops) now; however, the price is not planning to move there.
