Weekly Forex Currency Review

ADVFN III Weekly FOREX Currency REVIEW   Global Forex News from ADVFN Supplied by advfn.com   New Forex Platform Coming Soon From ADVFN ADVFN has been working behind the scenes on a new forex platform. It features a cutting edge user interface, probabilistic analysis and a new way of looking at forex trades. If you would like to help us develop the product further please click here Weekly Market analysis GBP/EUR GBP/USD GBP/JPY GBP/CHF Greece will continue to be a key short-term focus with further brinkmanship and last-minute meetings ahead of the June 30th deadline to reach agreement and make the bundled IMF payments. There will be further volatility whatever the outcome and especially if there are capital controls or a Greek default. The US data releases will also be important with a strong focus on the employment data as Fed interest rate expectations will remain very important during the third quarter.   Key events for the forthcoming week Date Time (GMT) Data release/event Tuesday June 30th  08.30 UK current account Wednesday July 1st  12.15 US ADP employment Thursday July 2nd  12.30 US employment report Friday July 3rd  08.30 UK PMI index (services) Dollar: The US data releases have continued to suggest a moderate overall improvement, especially in the housing sector while investment trends remain generally subdued. With some slight increase in reported inflation and a tightening labour market, the Federal Reserve will be looking for a limited tightening of monetary policy. There will be a strong suspicion that action has been delayed by Greek uncertainty and even a short-term Greek solution would increase the potential for a rate increase. Overall monetary-policy trends should provide dollar support and there will also be further capital inflows from emerging markets which will provide solid underlying US backing.     The dollar was able to make net gains during the week, primarily against the Euro, with the US currency gaining some support from stronger expectations of a Fed tightening. The Euro dipped to lows below 1.1200. US existing home sales data was stronger than expected with a rise to an annual rate of 5.35mn for May from a revised 5.09mn previously and this was the strongest reading since November 2009. As well as rising sales, there were strong increases in prices which will maintain unease surrounding inflationary pressures as well as boosting confidence in the overall housing sector. Headline durable goods orders data was weaker than expected with a 1.8% headline decline while the core data was in line with expectations and a key underlying capital-spending release advanced for the second successive month. The latest PMI manufacturing release was slightly weaker than expected at 53.4 for June from 54.0 previously, but there was a stronger than expected figure for new home sales at 546,000 for May which was the highest figure for seven years. The final reading for first-quarter GDP was in line with expectations at -0.2% from -0.7%. Jobless claims at 271,000 from a revised 268,000 previously have been below the 300,000 level throughout the past four months. A stronger than expected 0.9% gain in personal spending was offset by a slightly lower than expected income gain at 0.5%. Fed Governor Powell stated there had been a slowdown in the economy, but he also suggested that two interest-rate increases were realistic this year which provided significant underlying dollar support on expectations that this reflected the core Fed view. There were no major comments from other key Fed officials. 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The Euro pushed higher on hopes for Greek deal before retreating significantly later in the week with a move back to the 1.1200 area against the dollar and significant losses on the main crosses.   The German IFO business confidence index was weaker than expected at 107.4 for June from 108.5 previously which was something of a surprise given the very expansionary monetary policy. The institute did not suggest that Greek uncertainty was  having a significant negative impact while the Euro-zone PMI index strengthened to a four-year high. The overall mood turned more positive as the Greek government had made some concessions on the crucial stumbling blocks of VAT and pensions reforms with strong expectations of a deal this week. There were, however, concerns that there could be significant parliamentary opposition both within the Syriza party and outside given the dominance of tax increases with the deal not providing any longer-term relief for Greece. There were also increased expectations of the Euro being used as a funding currency if there is a resolution which tended to push the Euro weaker. Later in the week, there was a further series of confusing and contradictory headlines with Greek negotiators apparently given a deadline to accept the latest proposals or face a take-it-or-leave-it option at the Eurogroup meeting. There were then reports that there was a basis for agreement which, in turn were denied. ELA for Greek banks was left unchanged on Thursday after recent increases, but there were reports that Bundesbank head Weidmann and five other ECB officials had opposed the continued funding of Greek banks. Pressure for support to be withdrawn will continue to increase if there is no Greek deal with further fears of capital controls. The stream of rhetoric surrounding Greece continued during the Eurogroup meeting until talks were suspended with no agreement reached. With conflicting reports over the state of negotiations there was an increasing reluctance to trade given the high degree of uncertainty. There will  be another Eurogroup meeting on Saturday which has been described as the final chance for reaching a deal. Yen:    The Bank of Japan is likely to maintain its bond-buying programme over the next few months and this will tend to erode underlying yen support even if there is no increase in quantitative easing. There are likely to be further net capital flows overseas which would also undermine the Japanese currency. The Bank of Japan and government will remain wary over excessive yen depreciation, especially as it would risk trade retaliation and verbal intervention is likely to counter excessive depreciation. The yen will also gain some support when risk appetite deteriorates, but net losses are likely. The US currency was boosted by an increase in US bond yields to around 2.40% as well as the stronger than expected US housing data, but it was unable to hold above the 124.00 level and the Euro dipped below 138.0 with the yen generally resilient. There was further volatility on the Chinese equity market which may create caution over selling the yen aggressively. The latest Bank of Japan minutes had little impact. Japanese inflation data was marginally stronger than expected with a national core annual rate of 0.1% for May while the household spending data was also stronger than expected with a 4.8% annual increase. The data provided some limited yen support with the Japanese currency also supported by fragile risk conditions as equity markets were generally weaker while Greek unease continued and provided net yen support Barclays, Lloyds, HSBC & RBS- Is It Time To Sell UK Banks? 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Further fiscal tightening will also tend to limit the scope for monetary tightening, limiting support.   Sterling held a firm tone during the week with gains to near 0.7100 against the Euro and held comfortably above 1.55 against the dollar with the trade-weighted index at a seven-year high with some defensive support from Greek stresses. The CBI retail sales index was slightly below expectations at 29 for June from an exceptionally strong 51 for May, but still indicated robust underlying demand There were hawkish comments from Bank of England MPC member Weale who stated that wages now appeared to be rising faster than he expected and that the central bank should be ready to raise borrowing costs as early as August. There was a modest shift in Bank of England policy expectations with higher gilt yields as markets again speculated over an earlier than expected increase in rates and a steeper path of increases during 2016. MPC member Shafik commented that inflation was likely to rise given that the recent drop had been due to one-off factors, but there were no specific references to monetary policy. There were still underlying concerns surrounding the longer-term Brexit risks, particularly given the substantial current account deficit burden. Swiss franc: Greek developments will continue to be extremely important in the short-term. A collapse of talks and Greek default would risk a flood of defensive flows into the Swiss currency. The National Bank will remain on high alert with the possibility of intervention or an inter-meeting move to cut interest rates. A Greek deal would be likely to weaken the franc, although the overall evidence suggests losses will be limited given underlying franc demand. The franc hit resistance close to 1.0400 against the Euro and was generally resilient as the dollar held a firm tone, but was unable to hold above 0.9400. National Bank President Jordan continued to state that the franc was overvalued and there were also comments that the bank stood ready to take action if there was a surge in franc buying in the event of any Greek exit from the Euro-zone. The comments increased speculation over potential aggressive intervention which deterred long franc positions despite underlying franc demand on defensive grounds. Join over 1000 Top Finance professionals in the forex industry's most important event. Forex Magnates London Summit 2014, Nov 18-19, Reserve your seat today! Click Here Australian dollar The Australian dollar proved resilient at lower levels, but was unable to hold above the 0.7850 level against the US dollar. Interest related to carry trades was offset by continuing unease over the outlook for commodity prices and the Chinese economy. There were no major data releases during the week with house prices slightly weaker than expected for the first quarter. There were underlying doubts whether there domestic economy would be able to respond to lower interest rates and offset the impact of declining mining-sector investment. The Reserve Bank still wants the currency to weaken and there will be further important concerns surrounding the Chinese outlook with rallies fading quickly. Canadian dollar: The Canadian dollar briefly strengthened through 1.2200 against the US dollar, but was unable to sustain the gains and dipped to lows near 1.2400. The currency was undermined by slightly more hawkish rhetoric from US Fed officials as markets looked for higher US rates which curbed Canadian demand and there were also doubts whether the recovery in oil prices was sustainable. Yield trends are likely to remain slightly negative for the Canadian currency and the net outlook for commodity prices will tend to push the currency slightly weaker. Indian rupee: The rupee was able to maintain a generally firmer tone during the week and consolidated stronger than the 64.00 level against the US currency. There was further strength in the equity market which led to increased capital inflows and greater confidence in the currency. In regional terms, there were expectations that India could out-perform. There were still important reservations surrounding overall risk appetite and domestic concerns surrounding the monsoon season were also a feature. Confidence in the domestic economy has improved slightly, but with limited gains. International trends are likely to dominate with net rupee losses on Fed expectations. FCA regulated advice in FX, Gold and Silver Beta 2 is proud to offer personalised FCA regulated advice, completely tailored to your requirements. Attempting to yield returns in any climate, this is exclusive to ADVFN users! Click here to learn more! Hong Kong dollar The Hong Kong dollar maintained a firm tone during the week and moved to highs around 7.7510 against the US currency before edging slightly weaker. The main focus was on very high volatility in the Chinese equity markets which had some spill-over impact on the Hang Seng index as the Shanghai index fell sharply on Friday.   Trends in the local equity market will continue to have a significant impact and lead to further volatility in the local currency with the HKMA again a stabilising influence.   Chinese yuan: The yuan maintained a firm tone during the week and maintained its position close to the 6.20 area against the US currency. The HSBC PMI index was slightly stronger than expected at 49.6 for June from 49.2 previously, although there were still important doubts surrounding the overall outlook. There was further high volatility in equity markets. There were underlying expectations of a looser monetary policy, although the PBOC dampened expectations of action with a reverse-repo operation. Politically, there were pledges of cooperation between US and Chinese officials at the annual summit which dampened expectations that there would be strong US pressure for a weaker Chinese currency. Given fundamental developments, conflicting yuan pressures are liable to intensify Domestic and international pressures are likely to push the currency weaker.   New ADVFN Service - FREE Reports Get your free report on Isa's, Investment Trusts, Funds, Sipps Travel and Cars - FREE and Easy service CLICK HERE     To unsubscribe from this news bulletin or edit your mailing list settings click here. Registered Office/Accounts Dept: Suite 27, Essex Technology Centre, The Gable, Fyfield Road, Ongar, CM5 0GA. Customer Support +44 (0) 207 0700 961. Company registered in England and Wales: Number 2374988 VAT No. GB 549 2130 49