Shock sale for US indices - Dow loses more than 660 points

Yesterday was extremely heavy for investors on US stock markets. The blue-chip index Dow Jones Industrial Average lost the devilish 666 points in its largest decline since June 2016.
The broad S&P 500 Index fell 2.1 percent to 2 761.91 points, or its lowest level since January 10. The European Stoxx Europe 600 reduced its value by 1.4%, bringing its weekly loss to 3.1%.
The rise in interest rates on US bonds, owing to expectations of further interest rates in the world's largest economy, largely predetermined the decline.
Investors had no place to hide in the stock market, as the 11 major sectors of the S&P 500 index declined. The five-day fall in the broad index took 3.9% of its value, the first such drop from a record 404 days. Energy companies lost 4.1% after the results of companies in the sector continue to disappoint, the price of oil has fallen.
Sales of technology companies declined, with the Nasdaq 100 Index down 2.1%. For the week, the index fell by 3.7%, or the most since February of 2006. Even the record price appreciation of Amazon.com Inc. could not soften the indicator's cut. It's at its lowest levels since October.

Shares are cheaper, the dollar and gold are rising after Trump's threats

Global stocks fell and gold rose after US President Donald Trump said in connection with North Korea's provocations that they would be welcomed with fire.
The dollar appreciated against other major currencies as a result of increased uncertainty.
The S&P 500 index ended with minimum daily values ​​yesterday, following Trump's comments.
Trump's comments came after earlier yesterday from the capital of North Korea said they were ready to give Washington a cruel lesson of available strategic nuclear power in any US military action.
Serious increase also registered the volatility index. After the previous day VIX ended at a level below 10 points, it grew heavily yesterday, ending at its highest levels for a month.
The dollar rose by 0.5% against the euro to 1.1730 dollars for one euro.
Gold added about 1% to its value, following increased geopolitical tension, rising at trading levels of more than $1,273.

The dollar with the worst quarter for years

The president Donald Trump goes firmly to his goal - the US dollar has finished its worst quarter for years.
According to Trump, any weakness of the dollar is a major goal of his administration. The president's logic is that the weak US currency will stimulate companies and, accordingly, the country's economy.
Green money rose to a peak of 14 years in December, but since then it has become cheaper as a result of expectations for measures by the new administration.
In the second quarter, the dollar index, measuring the performance of the US currency against other major currencies, fell by 4.6%. This was its worst quarter since the third quarter of 2010.
The disappointing data on the US economy, coupled with good European data, helped to guide the dollar in the direction desired by Trump.
In addition, central banks around the world have expressed the view that it is time to change the course of their current stimulus policies. Including in Europe. This gave an extra boost to the euro.
The only weak link, at this stage, remains Japan. There the incentives are expected to last longer than in the rest of the world.

The euro rose, the dollar was down in the last trading session of 2016

The euro jumped to a maximum of three weeks on weak trading on Friday, but is preparing to drop on expectations that the policy of the United States President-elect Donald Trump would fuel inflation and accelerate the increase in Fed rates.
By by the end of the last day of trading in 2016, the dollar index slowed by 0.3 percent to 102.380, below the peak of this year of 103.65, reached on December 20 - the maximum value since January 2003. However, at year-end it added 3.8 percent.
The euro rose by 0.4 percent to $1.0518 after a brief recovery to $1.0700 - the highest value since December 8. During the year the euro fell against the dollar by 3 percent.

Optimism on the stock markets in Europe and the US the day before Fed's decision

European markets led by Italian shares ended with raise and overseas indexes are on their way to new highs in anticipation of the Fed's decision on interest rates in the US.
   
European shares rose to 11-month high on Tuesday as a major factor for this was the Italian shares and more accurate - UniCredit, which present a plan for restructuring and reform. European Stoxx 600 index added 1.06 percent and reached 357.50, making it the best price from January this year. This occurs after the beginning of the week the index lost 0.5%.
Italian banking sector added 5.83%, while shares of UniCredit achieved a growth of 15.92 percent, after it became clear that the bank would cut 6500 employees by 2019 and that they will start selling stocks and bonds. This was welcomed by the markets in anticipation of stabilizing the bank. The market capitalization of the bank is worth 15 billion euros.
In the UK, FTSE 100 climbed by 1.13% to 6968, which is the highest level for six weeks. The main reason for growth also was the banking sector, which managed to prevail over the loss of the energy sector.
Overseas investors are about to find out whether Dow Jones will overcome the psychological level of 20 000. On Tuesday the index added new 114 points and climbed to 19,911 after reaching a peak for the day of 19 953. SP500 added 15 points to 2272, as 9 of the 11 sectors finished at plus. The tech Nasdaq added 59 points to 5471.

By the end of the year ECB may extend the program of quantitative easing

Thursday was very eventful for the major currency pair. Immediately after the September meeting of the European Central Bank, the euro/dollar rose sharply and touched a two-week high at 1.1316, but quickly came back under the 1.13.
ECB left the interest rate at zero, the deposit rate at -0.4% and the monthly purchase of assets amount to 80 billion euro. In his comments after the meeting, Mario Draghi said that QE will continue until the designated period (March of the following year) or longer, if adjustments of inflation are required. The consumer price index, on the assessment of the ECB, is steadily improving. Eurozone GDP in the third quarter will be equal to growth in April-June this year, and in general, the ECB expected growth of the region's GDP by 1.7% by the end of 2016.
Investors appear to be reasoned as follows: while the statistics for the euro area at most part is positive, the European regulator will not increase or extend QE. However, such a possibility is present for further meetings. March 2017 is not so far away as it seems. For half a year significant improvement in the European economic system could not happen, and the ECB is not one of those, who would make desperate attempts to align the boat at the last minute. Typically, Mario Draghi warnes markets in advance about the bank's readiness to act. It is possible that in November and December, the ECB would inform the capital markets of the intention to expand or extend the QE. In the meantime, let the euro fans rejoice.

Euro/dollar slipped below 1.12

At the trading session in Europe, the US dollar is trading in the positive zone. The euro/dollar is losing 23 points compared to Friday's close at 1.1193. GBP/USD fell 60 pips to 1.3068. UK markets are closed for a bank holiday in the country, which leads the cable to low volumes and high volatility.
The US dollar continues to get support from Friday's speech by Janet Yellen and the next increase in US interest rates. The British pound fall against the dollar is stronger than the euro, as the cross-pair EUR/GBP is trading higher.
In the evening US are about to publish reports of expenditures on personal consumption and the index of personal income and costs. These can have an impact on the dynamics of the dollar, if they are significantly higher/lower than the predicted values. If they match with the expectations, there will be no reaction to the news.

The dollar strengthened after the speech of Yellen

Dollar strengthend its position in the course of trading on Friday after the governor of the Federal Reserve Janet Yellen said, that the likelihood of interest rates hike has increased, though not pointed at the approaching of tightening of monetary policy.
The US currency rose after the speech of Yellen, but then turned down, as investors analyzed some of the details of a more peaceful character.
Speaking at a conference of representatives of the world's central bankers in Jackson Hole, Wyoming, Yellen said, that the probability of a Fed rate hike has increased in recent months in connection with improvements in the labor market and the prospects for accelerated economic growth.
The US Commerce Department reported on Friday, that the country's economy in the second quarter of 2016 expanded at a slower pace than previously thought. US GDP grew by 1.1 percent over the same period of 2015, according to revised data. Meanwhile, consumer spending, which make up more than two-thirds of the index of economic activity, showed the strongest growth since the fourth quarter of 2014.

Jobless claims in the US fell to 261,000, the cuts are scarce

The number of Americans who have filed claims for unemployment benefits last week fell by 1,000 to 261,000, and remained near lows after the recession, indicating that the labor market is healthy and less people lose their jobs.
Economists had forecast jobless claims to total 264,000 in the week from August 14 to August 20.
The average number of new claims for unemployment fell last month by 1250 to 264,000, said the Labor Department on Thursday. Less reluctant average value for four weeks is seen as a more accurate measure of trends in the labor market.
The number of people, filing for benefits in weekly basis, reached 27 year high of 665,000 at the end of the Great Recession in 2009, before starting their long descent. Benefits fell below the key level of 300,000 in early 2015 and stayed there for 77 consecutive weeks, the longest run since 1970.
Continuing jobless claims, meanwhile, fell by 30,000 to 2.15 million in the week, ended August 13. These clims have been reported with a lag of one week and they reflect people, who already are receiving unemployment checks.

USD/CAD rising in anticipation of Yellen speech

On Wednesday, the US dollar was higher against the Canadian dollar, as investors are waiting for the speech of Federal Reserve Chairman Janet Yellen on Friday.
At the beginning of the US trade, the pair USD/CAD reached 1.2953, the session high; the pair subsequently consolidated at 1.2932, adding 0.16%.
The pair was likely to find support at 1.2854, Tuesday's low, and resistance at 1.2997, the high of August 12.
Market participants are waiting for the outlook of Yellen's on US economy, after the hawkish comments of other Fed officials in recent weeks and release of protocols of the July meeting of the Federal Committee, which showed that its members still disagree on the need to raise rates this year.
The US dollar was supported after data on Tuesday showed, that the volume of new home sales jumped by 12.4% to 654,000 last month, although the forecasts were for decline by 2.0%.
Investors remain cautious on the eve of speech of the Chairman of the Federal Reserve Janet Yellen on Friday.
At the same time the Canadian dollar remaind under pressure from falling of oil prices on Wednesday.
Canadian dollar rose against the euro, EUR/CAD fell by 0.18% to 1.4572.

Westpac recommends selling of pounds around $1.32 to $1.28 and $1.25

Westpac strategists recommend selling GBP at 1.32. They note, that there is a risk a risk of profiting from short positions. However, they say, that the correction of the GBP will likely be short term as the Bank of England took a very flexible position. Regular auctions should emphasize the intention of the Bank of England to cut rates again, which will support the bearish pressure on GBP, analysts say.
The level of economic activity and the housing market in August, which will be published at the end of the month, will likely cause more interest, than the GDP data for the second quarter, as signs of deterioration of the data can trigger further action by the bank of England, say analysts.
The closure of short positions on GBP/USD should allow sales to 1.3200, with the initial target 1.2800, as the more distant target is the psychological 1.2500 level, analysts conclude.

Danske Bank: EUR/USD can reach 1.20

Economic growth in the US is lower in the second quarter of 2016, but in recent months the labor market in the country pleasantly surprised market participants. Private consumption should remain strong in the coming months, although the weakness in retail sales in July, say analysts. European data was stronger than expected, they added. Brexit likely have a negative impact on the economy of the Eurozone later, they say, adding that we will see some weakness in European economic data in the coming months.
According to them, FED's boss Janet Yellen should clarify the outlook for US monetary policy in her speech on August 26. They believe, that the Fed will wait until the first half of 2017 before raising interest rates. At the same time the ECB is unlikely to cut interest rates. However, analysts expect the bank's quantitative easing program to be extended beyond March 2017.
According to forecasts of the bank, the exchange rate of EUR/USD should be in the area around 1,20. Thus prices are currently too low.
Political risks from the US elections could have a negative impact in the coming months as their impact can be negative for both dollar and euro, experts say.
Bank analysts maintain the view, that EUR/USD will reach 1.20 level.

The dollar is growing, but may show weekly decline

The dollar strengthened on Friday, but may show weekly decline against other major competitors, as investors doubt the possibility of raising the Fed rate in the current year.
Major currencies traded in narrow ranges, except for the Australian dollar, which dipped 0.9 percent as ratings agency Moody's downgraded the ratings of Australian banks.
Market's attention this week has been mostly focused on the mixed signals by the US Federal Reserve. Minutes of the last meeting of the regulator showed on Wednesday that the Fed heads view on the imminent rate hike has divided.
"The market generally believes, that the Fed will not raise rates in the near future, therefore the dollar in the short term remains vulnerable." - Said Lee Hardman of Bank of Tokyo-Mitsubishi.
The dollar index, which tracks the currency's value against a basket of six major currencies, to 12.28 UTR rose by 0.38 percent to 94.517, but shows weekly decline. Thursday's index slipped to 94.077, the lowest level since June 23.
Euro fell by 0.29 percent to $ 1.1320, for the week strengthened against the US currency, the yen fell by 0.41 percent to 100.28 on Tuesday after reaching a maximum of eight weeks at 99.55 yen.

CAD - daily note for August 11

The best results after the US dollar today showed the Canadian dollar, unexpectedly and significantly raised in the conditions of strengthening USD. This very remarkable fact is fully explained by the increase in oil prices by 4.5%. Discussions on possible measures to stabilize oil prices caused the increase in commodities, although the talks will take place only at the informal meeting at the end of next month. The probability of changes in production volume is small, but today there weren't no major factors, so even a minimum chance was enough for USD/CAD to fall to its lowest level for the month.

Dollar strengthens

Today was a good day for the dollar. He rose against most major currencies, with USD/JPY fell back to 102. The data from the US has been relatively good. The reports had little impact on the dollar, which rose after the yield of US government bonds and the overall demand for US assets. Dow Jones Industrial Average reached a record high, while the yield on 10-year US government bonds jumped by 0.7%. Despite the fact that there were no news that would explain today's motion, it is clear that further policy easing in other countries make US assets more attractive.
Yesterday the Reserve Bank of New Zealand cut interest rates by 0.25% and stated that they will fall even further. In the US, the situation is reversed - Federal Reserve officials say the rise in interest rates in 2016 is still possible. The latest about this said the president of the Federal Reserve Bank of San Francisco John Williams. Supporters of tight policy even claimed that the rates can be increased in the next month, but I highly doubt it. Also, demand for the dollar can be attributed to tomorrow's release of data on retail sales in the US. As wages rose, while sales of cars fell back, in July it is expected to increase consumer spending. However, I fear that the figure may be disappointing, because gas prices have fallen, and, according to the Johnson Redbook, spending last month decreased. If I'm right, USD/JPY will end the week close to the 101. If I'm wrong, and the index will still be high, it will serve as an argument in support of the policy tightening this year and may return the USD/JPY to the August peak.

Fed's rates raising back on the agenda

In response to the unexpectedly strong data on US labor market, dollar strengthened against most of its competitors. The release can be called truly impressive. In July, the employment rate for payrolls, excluding the agricultural sector, increased by 255 thousand, against the expected growth by 180 thousand. At the same time the previous two indicators were revised upward, bringing the average for the last three months amounted to an impressive 190 thousand.
No less noteworthy was the component of the average hourly and weekly earnings, which J. Yellen gives great importance. The indicator rose to 2.7% y/y, reaching a maximum of more than one year level. The increase in earnings gives hope for acceleration of inflation in the country, which is the second reference point for the Fed in determining the course of monetary policy. Thus, Friday's statistics unit immediately gives two arguments in favor of the fact that this year the regulator can still decide to raise borrowing costs.
As expected, the pair EUR/USD, which was trading near 1.1150, has responded to the report, falling under the mark of 1.11. Reaching the 8-day low at 1.1050, the euro has lost more than one figure. To improve the technical picture EUR/USD is now required to return above the mark of 1.11.

The Bank of England is preparing for the worst

During the last meeting of the Bank of England, the regulator did not disappoint those who counted on the generous incentives. The regulator has reduced the expected rate by 0.25%, while enhancing the program of buying assets to 375 billion up to 435 billion pounds. Surprisingly, it was the decision to buy not only the state, but also corporate bonds. The program will be applied within 6 and 18 months, respectively.
GBP/USD naturally weakened in response to the verdict of the monetary authorities, having lost the level of 1.32. The pair found support on the way to the level of 1.31, and is still under pressure.
In the aspect of longer-term prospects for the British currency, we should pay attention to the attitude of the Central Bank.
Firstly, the Central Bank sharply lowered its economic growth forecast for 2017 to 0.8%, while in May, GDP was expected at 2.3%. Such a grim assessment, combined with the increasing talk about a technical recession, create unfavorable conditions for the pound. Secondly, M. Carney made it clear that he is ready to further easing of policy in the future. It raises the issue of divergence rates of monetary policy of the Bank of England and the Federal Reserve. And although the issue of the next rate hike in the United States is still shrouded in fog, it is important to remember that in the United States we are talking about the normalization of monetary policy, but the British regulator after today's "warm-up" paves the way for further action in this direction.
The closest factor that may affect the expectations of the Fed's rates will manifest itself tomorrow and will have an impact on the dynamics of the GBP/USD and the dollar as a whole. Strong key report on the US labor market will strengthen the position of the US currency across the board. In this scenario, the pressure on the pound will continue and may worsen. Otherwise, we expect a restoration of the pair above the level of 1.32.

ADP and Non-farm payrolls - what to expect on Friday?

Today in the United States came out data on the number of employees by ADP, which have purely prognostic value. According to these statistics, you can more accurately predict the next data on Non-farm payrolls, which will be released on Friday, and most often they exceed the ADP data by 30-40 percent. Forecast for ADP was 170 thousand, while the Non-farm are only 175 thousand. The real statistics exceeded expected - 179 thousand. It is easy to calculate, that according to the forecast by ADP, Non-farm will be released in the area of ​​220-250 thousand. And with this in mind, we can expect a significant excess of forecasts and, consequently, the volatility in the region of 100-150 points in pairs with the US dollar. Moreover, this volatility will be one-way, which is very convenient for trade "by hand", or with a slight indentation in the trade with pending orders.

Fiscal stimulus in Japan disappointed

In Japan Prime Minister's Shinzo Abe long expected fiscal stimulus was finally disclosed. The cabinet approved on Tuesday a package of spending and loans totaling 28 trillion yen (about 275 billion dollars). The government announced their plans days after the central bank adopted a modest increase of their incentives.
IMF determine the increased costs as slightly improving the prospects. The Fund welcomes the decision of BoJ expansion of the incentives.
The government may issue 40 year government bonds worth 100 trillion yen to finance the budget.
Dollar/yen fell because of fiscal incentives and dealers continued to close long dollar positions. Short-term resistance is at 101.50 and the major support is 100.

The dollar fell, the yen rose after data on the US economy and the Bank of Japan decision

The dollar fell, the yen rose after data on the US economy and the Bank of Japan decision

The dollar fell on Friday after the release of US GDP, which growth is at a slower pace than expected in the second quarter, further weakened the expectations of the new US Federal Reserve raising rates in September.
At the same time, the Japanese yen strengthened after the Bank of Japan expanded its stimulus measures by the end of the two-day meeting, but disappointed investors who expected a more ambitious action in support of growth and inflation.
The yen jumped by 3.08% to 102.03.
The Bank of Japan expanded its stimulus measures on Friday, doubling the volume of purchases of securities exchange-traded funds (ETF) because of pressure from the government and financial markets, but disappointed investors who were waiting for more decisive action.
However, the central bank said that will conduct a thorough assessment of the impact of negative interest rates and large-scale program of buying assets that can point to a large-scale revision of the incentive measures.