Fundamental analysis 25 October 2012 | Inside Forex trading

Total combination of the main and technical factors led to the different attitude of the market to the position of the main currency pairs. The euro was weakening during the most part of a session as a result of weak statistics of Eurozone, and British currency was strengthening on the contrary, supported a little bit by the announcement of the head of it Central Bank. It cut a probability of the next stage of quantitative relaxation in the nearest future.The dollar couldn?t strengthen against the euro. ?Nevertheless, by the end of the day the unified currency managed to return the most part of its losses. As a result the dollar strengthened a little bit against the euro in the end of a session, but much weakened against the pound and neutral against the yen. ?The next meeting of the FRS didn?t bring new references for investors as expected ?-? monetary policy didn?t changed, and the memorandum showed that the managers of the FRS left their economy estimation without changes and confirmed the expenses growth of households and improvement of home buying market. At the same time it was announced about the intentions to follow the programs of? bond buying and about plans to hold short-term stakes on minimums till the middle of 2015. This information didn?t influence market?s events. The US economic statistics, published yesterday,? supported the dollar for a short time ?? there were information about 5,7% growth of home buying in the primary home market in September in comparison with august. It is the biggest growth during more than two years, and it confirmed the sector growth. ?Today there will be some new information about activity of the home buying market ? information about unfinished purchase and sale in September is expected with 2,4% m/m index growth against ?-2.6% m/m in the previous period. Beside this, the market takes interest in the information about the orders on long use products in September, which are expected to grow ?+7.8% m/m after the fall by ?-13.2% m/m in August, ?and unemployment allowance appeal statistics on the previous week, which is expected to decrease by 20/25 thousands.

EUR

Fear of the weak results of Eurozone economy in the fourth quarter pressed the dollar on Wednesday trading. Such escalation was the result of the business activity statistics in October, which was presented in the yesterday?s session. According to the preliminary estimation of the activity index (PMI), machinery sector and service sphere continue to decrease. Indexes fixed the results worse than expected ?-? 45.3 after 46.1 earlier. And it was expected to see? 46.6 in the production and ?46.2 against 46.1 according to the forecast 46.5 in service sphere. The indexes of leading economies of Germany and France showed the same result. Germany institute report Ifo was not better ?- mood index in the business circles of Germany in October decreased five month in succession ? the index decreased by 100.0 against 101.4 In September. Current conditions index decreased by ?110.3 in September, business expectations index was at the same level ?93.2. Nevertheless, by the end of the previous session the euro managed to return the most part of its losses and ended the trading with a small minus against the dollar. The European currency was supported by M. Drag?s announcement, which spoke before German government. The ECB said that the buying of bonds of weak Eurozone countries will not lead to the inflation growth or to the hidden financing of government and arguments which were given during the speech were positively taken by German parliamentarians. ?Besides this, positive mood of the market could be brought by the information about Greece, that the country will get 2 years more to achieve tax and budget targets. It was stated in the preliminary version of the memorandum about the agreement of Athens and the EU three. Today there will a little of information about Eurozone economy and investor?s attention will be kept by the index which characterize money supple dynamics. It is expected that monetary aggregate M3 fixed the +3.1% y/y increase in September after +2.9%y?/y in August. It can be taken positively , but will not influence the market positively. If talking about perspectives it can be suggested that the optimism appeared in the end of previous session may support the euro in today?s trading. As there are no information about Italy, in the questions about Greece some signs of consensus were observed, and fear of the FRS relaxation policy was not confirmed.

GBP

British pound was the leader in the trading on Wednesday and strengthened against its all opponents. It is more likely that first it was supported by the appearance of the Head of Bank of England M. Kipling which announced that Britain is thinking about the necessity of one more portion of stimulus. His speech could decrease a market?s confidence in the meeting of monetary policy BoE committee in November which will decide to increase a volume of quantitative relaxation program. The Head of British CB doubts can be explained by the signs of unemployment and inflation decrease, which were? demonstrated by the indexes lately. Besides this, investors could take these announcements as hints on the economy growth in the third quarter after the decrease in three previous quarters with better results as it was forecasted, according to the publication of the gross domestic product of Britain, which is expected to come out today.? Economic statistics demonstrated yesterday showed different results. British Confederation of Manufacturers report (CBI) announced about the growth of manufacturing industry index to ?+12 against +7 earlier and industry orders decrease by -23 after -8, when a little growth was expected to? -6. Today there are a little information about the economy but it is? very important . The preliminary estimation of the gross domestic product during the third quarter? will be demonstrated. ?It is expected that the most important index will show increase +0.6% q/q , -0.4% y/y against ?-0.4% q/q, -0.5% y/y in the second quarter of this year. If expectations don?t coincide with forecasts, reaction will be identical ?? more weak results will lead to the pressure on the pound?????.

JPY

Japanese currency trading against dollar was in a narrow corridor and finishes a session of Wednesday on the same prices as at the beginning of the session. It is obviously that expectation of the main event of the day ? the FRS decision about monetary policy ? and neutrality of its results brought out the investor?s passiveness in the USD/JPY trading. Statistics of Japanese corporation prices published today announced about preceding deflation in Japanese economy and its strengthening in September, the index is -0.5% y/y after -0.3% y/y in the previous month. May be it resulted the yen trading in today?s session as a result of ?increased probability of the relaxation in policy BoJ and expectations that supposed measures will be more sharp in comparison with the ones earlier. May be such mood will influence today?s session and the yen will remain under the pressure.

Source: http://blog.forex4you.com/fundamental-analysis-25-october-2012/

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