The U.S. Market – a Weekly Review
Economic news last week was limited but the only two ‘market moving’ indicators that were published: the U.S. trade balance and jobless claims were positive. The U.S. stock markets rebounded moderately in the course of last week; the Dow Jones gained 0.1%, the S&P500 increased by 0.5% and the NASDAQ by 0.4%. The U.S. dollar gained approximately 1% against major currencies.
International trade balance improved in July much more than expectedas imports fell and exports surged to its highest level in nearly two years. Exports rebounded by 1.8% gaining $2.8 billion from June to July after declining by 1.3% in the month before, while Imports plunged by 2.1% reducing July’s trade deficit significantly to $42.8 billion from $49.8 billion in June. The trade gap improvement was clearly seen in both the non-petroleum and petroleum goods.
Initial jobless claims continued to fall as number of people filling up applications for unemployment benefits came in at 451,000 in the September 4 week - the lowest level since July, down from the revised 478,000 claims in the prior week. The four weeks average – a more accurate gauge for employment trends edged down by 9,250 to a level slightly higher than a month ago.
The latest Federal Reserve’s ‘Beige book’ released last week, which is published nearly two weeks prior monetary policy meeting, suggesting the recovery continues but at a slower pace. Five of twelve regions reported moderate economic growth while two reported of “positive developments or net improvements”, there was no mention of a ‘double dip’ recession, but an overall ‘moderate pace of growth’.
U.S. financial Market at a Glance
EUR/USD – Industrial Production in France Rebounded in July
In France, Industrial production rebounded in July and firm’s investments rose in Q2 for the first time in two years. Trade balance widened in July due to a strong rise in Imports. In Germany, industrial production slightly increased in July making a 7.3% year-on-year gain. Retail sales in the Euro-zone rose in July for the third consecutive month and in Switzerland inflation continued to slow rising concern that in the short-term the strong Swiss Franc will lead to deflationary pressures. Investor confidence in Europe declined in September but remained well above the zero-point-level indicating investors still optimistic.
USD/JPY – Japanese Second Quarter GDP Growth was Revised up to 1.5% Annually
The Japanese Cabinet Office revised up it estimation for the second quarter GDP growth, according to which the economy expanded by a real 0.4% from April to June and not by 0.1% as primarily was estimated, as the business sector investment was much stronger than estimated and the private sector inventory, that usually have a negative impact on GDP growth, drawdown less than initially estimated. The annual real GDP growth for second quarter is therefore approximately 1.5%, much above the 0.4% that was estimated before but still lower than the 5% growth in the previous quarter and the 3.4% in the last quarter of 2009.
GBP/USD – The BOE Kept Interest Rate and its Bond-Buying Plan Unchanged
The BOE decided last week to keep the official bank rate unchanged at 0.5% and also to maintain the stock assets purchases issued by the central bank unchanged at GBP200 billion. The trade balance deteriorated as goods trade balanced widened reaching in July the highest level recorded of GBP8.7 billion from GBP7.5 billion in June, due to a sharp rise in imports of goods. Index of manufacturing production showed a year-on-year 4.9% gain in July which is the strongest annual growth since December 1994. Over the month, manufacturing output edged up 0.3% from June to July.
AUD/USD – The Reserve Bank of Australia Decided to Keep the Cash Rate at 4.5%
The Reserve Bank of Australia decided last week to keep the cash rate unchanged at 4.5% for the fourth consecutive month, as the central bank expects business investment to increase strongly over the year ahead. Constructors’ business condition continued to deter for the third straight month in August, mostly due to poor market demand and weaker buyer’s confidence. Meanwhile, building permits unexpectedly rebounded in July for the first time in four months and mortgage approvals rose by monthly 1.7% in July following 3.2% fall in June, after a sharp decline in new home sales was reported in the same month.
USD/CAD – Canadian Trade Balance Widened & Unemployment Rose to 8.1%
Building permits in Canada fell by 3.3% from June to July due to declines in both residential and non-residential sectors. Housing starts in August fell by 3% monthly, reflecting decreases in single and multiple starts. The trade balance deficit unexpectedly widened from revised C$1.8 billion in June to C$2.7 billion in July – the largest gap recorded since the early 1970s, mostly due to decline in exports to the U.S. Unemployment rate edged up 0.1 percentage point to 8.1% as 36,000 new people entered the labor force. The Bank of Canada decided last week to raise the overnight rate from 0.75% to 1%.
Gold prices fell by nearly 0.4% over last week making the first weekly lose since late July. Year-to-date prices gained 13.7%. Gold futures contract for December delivery closed down $4.40 (0.4%) on Friday at $1,246.50 per ounce on the Comex in New York, after was traded as low as $1237.90 and as high as $1253.00. Silver futures for December delivery fell 1 cent to settle at $19.845 per ounce, dropping 0.5% in the course of last week. Platinum futures for October delivery declined $10.80 (0.7%) to $1,542.50 per ounce falling 1.2% last week.
Major Currencies Cross Rates:
Galit LeviHead of ResearchGlobal Markets Galitl@iforex.com Disclaimer & Company Profile:This analysis is neither a recommendation nor investment advice. Currency rates may fluctuate according to market conditions.iFOREX offers its clients 24 hrs Forex, metals, commodities and index trading. It is committed to ease of accessibility with credit card or bank transfer, online registration, tight spread and no commission. It prides itself of excellent customer service with dedicated contact person for all your trading requirements. Please feel free to contact us should you have any question (firstname.lastname@example.org). Or call us 24 hrs a day on +30-210-374-2599.The risk of losses involved in the transaction or speculation in the foreign currency market or other financial markets can be considerable. Please think carefully, taking into consideration all the relevant circumstances, as well as your personal resources, whether such trading suits you. Speculate only with funds that you can afford to lose. For more information please refer to our Risk Disclosure located on our web site at www.iforex.com.This communication is to be treated as confidential and the information in it may not be used or disclosed except for the purpose for whose it has been sent. If you have reason to believe that you are not the intended recipient of this communication, please contact the sender immediately. No employee or agent is authorized to conclude any binding agreement on behalf of iFOREX and or their affiliates with another party by E-mail without express written confirmation by an officer of iFOREX.