Strong data on exports may force the Australian Central Bank to wait with the increase in interest rates

The strong recovery of Australian exports in the previous quarter, helped fill the gap resulting from the reduction of industrial investments and becoming yet another argument in favor of maintaining the unchanged policy of the central bank at a meeting next week.
Net exports are likely added 1.1 percentage points to GDP growth in Australia worth $1.2 trillion. GDP data for the first quarter will be published on Wednesday.
The data from the Australian Bureau of Statistics on Tuesday showed that exports jumped by 4.4 percent, while imports decreased by 0.8 percent. Analysts forecast was for growth in exports by 0.7 percent.
Strong data shook the market's expectations of a new cuts in interest rate this year and pushed the Australian dollar to a peak of A$ 0,7240.
The data for a steady growth give the Reserve Bank of Australia time to wait and see if inflation is restored before deciding whether another reduction in rates is necessary.

Scotiabank: EUR/USD remains in the grip of bears

European Central Bank meeting in terms of monetary policy is expected to preserve the status quo, but forecasts for the economy and inflation could be adjusted slightly in the direction of improvement, according to the bank.

However, soon is expected to raise rates by the FED, as the bank question the steady rise in EUR/USD.

Currently the single currency is trying to correct, but prospects remain less important, taking into account the bear market last four consecutive weeks, formed after the pair failed to break above 1.16 dollars, specify experts.

The loss of support in 1.12 - 1.13 dollars has prompted the couple to enter the bearish channel in the region with a peak of 1.1175 dollars. Thus, in the near future any attempts to growth will likely be limited to the area 1.12, say analysts from the bank.

Dollar fears Yellen's pessimism

The dollar has decided to take a break and is trading lower against its major rivals. Judging by the current dynamics of the American currency, at this stage the market played a recent "hawk" messages from Fed's and switched to upcoming events. Tomorrow the US will publish a report on GDP in the first quarter, and later will be the speech of the Fed's governor Janet Yellen. To some extent, today's dollar sales are related to the expectations of these events, and with particular caution players are preparing for the speech of the head of the American regulator.

J. Yellen, renowned for her caution and commitment to the "pigeon" rhetoric, can partially reverse the recently resurgent optimism of market participants in relation to the imminent rate hike. If the head of the bank will continue to adhere to such a tone, the dollar could make a downward correction against other major currencies. In anticipation of Yellen's speach, the dollar can demonstrate a consolidation with a downward bias.

Dollar bulls waiting for the USD/JPY rally

The dollar fizzled out, and USD/JPY mysteriously yanked up in the previous session. Nerves of the USD traders will be on edge until the end of next week,  before the release of important economic statistics that can affect the Fed's decision. So, the current situation:
- USD/JPY has returned to below 110 by mysterious and unfounded movement;
- Discrepancy between the market dynamics and the fundamental factors concern USD bulls;
- Traders are nervous before going out for an important decision on rates on US data next week.
Dollar plays out on a sudden sharp rise in the USD/JPY, which was so mysterious that even the agency Bloomberg published an article in which jokingly called it an attempt to create catalysts on flat ground. In short, it is no reason for the movement, let's call it "order flow", scratch our heads and move on.

Yesterday changed the mood in the currency market

Yesterday, the markets took a turn key, because, judging by the desperate growth of risky assets, investors are trying to assert themselves. And time plays a key role here, as has just passed us by a cavalcade of officials from the Fed to the decisive comments hinted at an accelerated rate increase this year. This commitment has led to a sharp rise in short-term rates in the US and lower risk appetite, which allowed the dollar to strengthen its position considerably, especially against the risk currencies. However, judging by the dynamics of the yesterday, the market says that it was not afraid of the aggressive attitude of the Fed.
Of course, this movement is one day old, so perhaps it is too early to draw any conclusions; and yet, such is our first conclusion, and we will wait for confirmation in the dynamics of the next sessions.
How it will look like? Interest risk will remain on the background of stable or rising expectations for Fed rates will lead to a strengthening of the dollar against the low-yielding currencies and currencies of countries with quantitative easing, such as JPY, EUR and CHF. Perhaps even the weakest currency will be able to strengthen slightly against the dollar in the near future, or at least slow its decline (these include AUD, CAD and currencies of developing countries). Something like we saw yesterday in the pair USD/TRY, which hit a powerful wave of sales, despite the fact that short-term rates in Turkey declined slightly after the meeting of the central bank, which left interest rates unchanged, in line with expectations.

Citigroup predict 1.0450 for EUR/USD

During the last big bearish trend of the EUR/USD an upward correction is observed for the period from August 1997 to October 1998, when prices jumped from 1.0433 to 1.2161. This period took 14 months. It must also be noted that one of the most important events in 1998 was made at that time historic high on the bond market of the United States, according to the Citigroup.

This time we had upward correction from 1.0458 to 1.1714. A few weeks ago the bank had been of the opinion that we are still waiting to move up, and it will be an attempt to test 1.2000, but the pair failed to hold above 1.1500 and seems, that we have a change in the trend. A minimum of 1.0458 was reached in March 2015 and since then passed 14 months. At the same time the government bond market in the US also occur conversion.

There are clear similarities between this movement now and 1998. The correction of EUR/USD and market behavior of bonds in the United States then and now look the same, said from the bank.

Speculators slowly return to dollar

Last week was very quiet in terms of changing the mood of speculators and ended on the eve of the publication of the minutes of the last FOMC meeting on 18 May, report analysts at Scotiabank.
The position of the euro and the yen barely changed, long positions in AUD fell slightly, while short positions in the pound rose slightly, they say.
The main favorites of the bulls and the bears remain respectively yen and pounds. The volume of net short positions in dollars fell.
We have to note that speculators reduced their net long positions in the Canadian dollar for the first time since late January, closing both long and short positions, which suggests uncertainty, remind analysts.
Long positions in AUD decline for the third consecutive week.
In the third week of the last four long positions in the yen have reduced and this is happening against the closure of both long and short positions.
Speculative positions in the Japanese currency continued to be in the zone of very high historical value, concluded from Scotiabank.

Bloomberg called the ruble best currency in the world for carry trade

Over the past three months the ruble has become a leader among the world currencies due to the recovery in oil prices. Because of this, the Russian currency has brought a 19-percent income to traders which make so-called "carry trade" transactions, in which investors borrow in countries with low interest rates and investing in the assets of the country, where interest rates are high (for example, borrow dollars to buy ruble assets). It is reported by Bloomberg.
Investors who are not afraid of the volatility of the Russian currency, have a great chance of getting the world's highest rate of return. Sergey Strigo, head of department of bonds of developing countries' from company Amundi, considers as a good investment Russian assets and stays to a "constructive" view on the ruble, reported Bloomberg. "To borrow in dollars to buy Russian bonds is a very attractive strategy," - said the investor.

Fed's protocols pushed the dollar to a three-week peak

The dollar rose to its highest level in three weeks against the euro after the protocols of the last meeting of the Federal Reserve were released. Against the yen the dollar rose also to a three-week peak, reaching 110 yen.

The Fed will probably raise interest rates in June if economic data show steady growth in the second quarter, while inflation and employment continue to improve. Futures on federal funds, based on FedWatch determined that the likelihood of an increase in interest rates in June was 34%. Prior to the publication of protocols probability was 19%. The possibility of raising interest rates in September rose from 57% to 68% and for December - from 74 to 80%.

The euro lost 0.8 percent to 1.1220 - the lowest level since April 25. It was the strongest decrease of the single currency in percentage over the past five weeks. The US currency rose against the yen by about one percent, reaching 110.23.

The Swiss franc fell 0.66 percent to 0.9866.

The dollar index, which measures the change in the dollar against six major currencies reached a 5-week high, rising to 95.198.

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The pair USD/CAD has grown up after the release of US and Canadian data

On Tuesday, the US dollar registered growth against the Canadian supported by the upbeat US reports, while disappointing data on manufacturing sales in Canada put pressure on the local currency.
Pair USD/CAD reached 1.2950 during early US trade, the session high, and subsequently consolidated at 1.2946, gaining 0.42%.
The pair was likely to find support at 1.2768, the low of May 12 and resistance at 1.3014, the high of May 9th.
The dollar found support after the US Commerce Department said that housing starts rose in April by 6.6% to 1.172 million units, compared with expectations of increase to 1.127 million units.

The pound has reduced the rise in the slowing UK inflation

On Tuesday, the pound reduced gains against the dollar after data showed that inflation in the UK slowed in April for the first time since September 2015.
GBP/USD is trading at 1.4458 after approximately 1.4494 in anticipation of the report output.
The office of the National Statistics reported that the Consumer Price Index (CPI) in the UK rose in April to an annualized rate of 0.3%, slowing from 0.5% in March.
Economists expected inflation to remain stable at 0.5%.
Consumer prices rose in monthly basis by only 0.1% in April, slowing sharply from 0.4% in March, lower than expected growth of 0.3%.
Core CPI, which excludes food costs, energy, alcohol and tobacco, rose 1.2% last month, less than the forecast, which predicted growth of the index by 1.4%.
Weak data indicated that the Bank of England will not rush to increase the interest rate from its record low of 0.5%, where it remains for almost seven years.
In a separate report, the ONS reported that the house price index jumped in March by 9% on an annualized basis, the fastest pace in the past year.
Sterling strengthened against the euro, with EUR/GBP shedding 0.47% to 0.7824.

Top 5 important events next week

Next week, on Wednesday, market participants will focus their attention on the publication of the Protocols of the April meeting of the Fed's monetary policy, determined to find fresh guidance on the timing of the next increase in US interest rates.
Also in focus will be inflation data in the US, as investors try to assess whether the world's largest economy will cope with the increase in interest rates in 2016.
Market participants are waiting for release of key statistical data of Great Britain in search of guidance on the state of the economy against the backdrop of increased uncertainty about the outcome of the upcoming in June referendum on the country's membership in the European Union.
Preliminary data on the economic growth of Japan in the first quarter also will be in the spotlight amid concerns over the recent strengthening of the yen and its impact on economic growth prospects.
In addition to the summit of "Big Seven" countries (G7), traders will monitor the publication of the Protocols of the May meeting of the Reserve Bank of Australia, in which the central bank unexpectedly lowered its main interest rate to a record low.
So, what be the list of the five events in the economic calendar, which is likely to affect the markets? Check this out:
1. Minutes of the meeting of the Federal Committee;
2. Data on inflation in the US;
3. The UK is to release the consumer price index, as well as data on employment and retail trade;
4. Preliminary report on changes in the volume of Japan's GDP in the first quarter;
5. Minutes of the meeting to determine the monetary policy of the RBA.

The dollar has renewed it's two-weeks maximum due to data from the US

The dollar reached a two-week peak against a basket of major currencies on Friday as US statistics strengthened the belief that the Fed could raise rates this year more than once.
The US currency showed the best two-week trend since the end of February. The "lizard" has grown a second consecutive session against the yen, reached a two-week high against the euro.
The data showed that retail sales in the US in April, made the biggest jump in a year - it suggests that the US economy is gaining momentum again after almost a complete stop of growth in the first quarter. Except for the scope of vehicles, fuel, building materials and catering, retail sales rose 0.9 percent in April after rising 0.2 percent in March, revised upward.
During morning trading the dollar index rose 0.7 percent to 94.768 points. The US currency strengthened even more after the growth of the University of Michigan's index of consumer sentiment to 95.8 this month - a record high value since June 2015 against the April's 89 evaluation points.
After the release of data on consumer sentiment, the euro fell 0.8 percent to $1.1291. However, the euro has ignored data showing the eurozone GDP growth of 0.5 percent in the first quarter - the statistics were revised downward.
Against the yen the dollar gained 0.17 percent to 109.20 yen, significantly moving away from a minimum of 18 months to 105.55 yen, braked last week after the Bank of Japan did not change its monetary policy.

The euro with a decline in anticipation of data on Friday

On Thursday, EUR/USD decreased, erasing gains from the previous day. The currency pair was traded between 1.1369 and 1.1429 before settling at 1.1376, registering a decline of 0.42%.
The British pound ended almost unchanged against the US dollar, though it was traded in a wide range between 1.4528 and 1.4405, ending the day at 1.4448. BoE did not brought surprises and left its main interest rate unchanged at 0.5%.
The pair USD/JPY rised to 109.01. Purchases of dollars against the yen resumed amid readiness of the Japanese Central Bank to intervene in financial markets.
The Australian dollar finished lower against the US money and AUD/USD closed at 0.7324 while NZD/USD closed unchanged at 0.6812.
On Thursday, gold futures fell, ending the session at $1263,29 per ounce.

Jobless claims in the US jumped

The number of Americans who have submitted requests for unemployment benefits in early May rose for the third consecutive week to 294,000, reaching a fourteen months peak and adding new evidence that the labor market in the US might weaken.
General jobless claims were at a rate of 274,000 in the previous week.
The average value of new orders in the last four weeks also rose by 10,250 to 268,250, said the Labor Department on Thursday. Data are seasonally adjusted.
Only a month earlier, initial claims for unemployment benefits have fallen to 43-year lows. But lowering corporate profits, exports decreased.
In April in the US were created only 160,000 new jobs, noting his youngest progress since last autumn. Other indicators of the labor market also suggest delaying hiring.

Bank of England strengthens warning for Brexit referendum on 23 June

Bank of England alerted on Thursday that the vote on the referendum on 23 June Britain to leave the European Union, would hurt the economy and send the pound sharply lower.
The central bank said that there is "significant risk" to its economic forecasts for the referendum out of the country by the EU on June 23rd.
If the vote is to leave the EU, it could materially alter the outlook for output and inflation in the country and therefore setting monetary policy the bank.
Households may postpone consumption and businesses to delay investment, labor demand may decrease, causing higher unemployment, said politicians in a statement accompanying the decision on interest rates.
Bank maintained its key interest rate at a record low of 0.5 percent, as expected.

Zimbabwe will produce bank notes equal to US dollar

Zimbabwean authorities decided to issue banknotes, which will be equal to the US dollar at a ratio of 1:1, according to the British BBC Radio and Television.
This decision is due to a shortage of cash in the country of US dollars, which since 2009 in Zimbabwe are legal tender along with South African rand.
It is planned to print Zimbabwean own banknotes in denominations of two, five, 10 and 20 dollars, which will be equal to USD. Financial support for this idea of ​​the Zimbabwean authorities in the amount of $240 million came from the African Export-Import Bank.
Until 2009, the currency of Zimbabwe have been the Zimbabwean dollar, but due to the huge inflation, it was decided to abandon the national currency, to stop its release and move to settlements in US dollars and South African rands.

ECB: the issue of 500 euro bills will be discontinued by the end of 2018

The European Central Bank (ECB) has decided to stop production of 500 euro banknotes by the end of 2018, noting that their use can "contribute to illegal operations".
According to the report of the ECB, all of the outstanding bills of 500 euros will retain their value and can still be used as a means of payment and may be exchanged at the central bank of the Eurozone members for any period.
The European Central Bank will begin production of 100 euro and 200 euro banknotes in the series "Europe" with the termination of the release of 500 euro notes, says the report.
Banknotes with the highest nominal value is believed to be widely used for payments in the criminal business, such as drug trafficking or money laundering.
At the end of 2015, 500 bills were 3% of the total number of banknotes in circulation, representing at the same time 28% of their total cost. According to the monthly statistics published by the ECB on the circulation of euro banknotes, the number of banknotes of 500 euros was nearly 613.56 million units, down to 594.417 million units by the completion of the 1st quarter.

The yen was losing ground against the US dollar, the Australian dollar is growing

Yen is showing signs of fatigue on Thursday, retreating from recent highs, while the dollar is supported by optimistic expectations that the US economy could bounce back after losing pace in the first quarter.
By 7.00 GMT the dollar gained 0.01 percent against the yen to 107.02 yen, moving away from a minimum of 18 months to 105.55 yen reached on Tuesday. Euro grew to 122.90 yen from Friday's figure of 121.665 yen - a minimum of three years.
The Australian dollar rose against the US dollar, gaining 0.5 percent to $0.7499 due to strong economic data, in particular, retail sales in March.
The euro rose against the dollar by 0.01 percent to $1.1486, while continuing to strengthen after reaching a peak of eight months at $1.1616 earlier this week.

Gold prices continue to rise amid the decline of the US dollar

Gold prices last week rose to their highest level in 15 months, received support from the weakening US dollar. The gold futures for June rose by 1.9 percent to 1290.50 dollars an ounce, and the price increase was observed for the fifth consecutive day. Gold prices in Friday's session reached 1299 dollars, which is the highest value since January 2015.
In addition, the rise in prices last week was the most significant of 17 March, when prices rose by 2.9%. The dollar fell to its lowest level since May 2015.
The weakening of the dollar generally increases the price of gold, as the precious metal becomes more affordable for holders of other currencies. Last week the dollar fell by 2%, as the Federal Reserve in the country predicted that the pace of interest rate increases will slow this year.
The Bank of Japan on Thursday left its monetary policy unchanged, which led to a sharp rise in the yen against the dollar. So she created a kind of chaos in financial markets, said the analyst, as according to him, these conditions will surely support gold.

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