Daily Market Review - 07/18/2014

EUR/USD

The Euro continues to decline, though recent pattern on the chart suggests slowing of the trend. Current consolidation might be just a pause before resumption of bearish trend.

USD/JPY

The asset has rebounded from 101.12. It is rapidly approaching the middle of the range between the boundaries. Consequently the upper one is the upside resistance.

GBP/USD

Looks like the pattern is repeating itself. Upper resistance is still an obstacle and a challenge for the Pound. Nevertheless the Pound remains strong and in the long run analysts expect a continuation of an ascent.

Market Overview

Yellen sent the Euro to the minimum levels of the current year. Coming statistics only heat bearish sentiments: the amount of jobless claims continues to decline. Data on past week have dropped to 302K, and this is the minimum figure from the beginning of May. Macroeconomic picture has been spoilt by the fall of issued construction permits, which have dropped below yearly level of 1 million.

The percentage of the figure has drooped right by 9.3%, what has become the second negative figure in a row. It is worth mentioning, that the reason for that was the state of things in the South of the US, while the other parts of the US have shown growth. Earlier, performing on the bank committee of the Senate, Yellen had mentioned, that the weakness of the market of Real Estate was one of the main risks for economic recovery.

At that following end of QE3 doesn’t mean that the Fed will start pumping out liquidity from economy. Further on regulator is playing to continue reinvesting of treasury and mortgage obligations; consequently money will still remain in financial system. Here there is an additional risk, if FRS announces approaching reduction of balance, there will be a downfall on the markets.

Recently Yellen responded on the questions in the House of Representatives, where she confirmed again that any math rules for managing rates are unacceptable. Republicans are demanding to toughen control over the FRS referring to the so called Taylor rule, devised within Stanford University; it shows optimal level of the rate based on certain economic data.

Besides there were data on European inflation, which confirmed the rate in June at 0.5%. If one takes a look at current statistics from the fall of manufacturing production to continuing decline of manufacturer’s prices, then it is quite difficult to expect an abrupt growth of inflation in coming months. Maximum what we can expect is a correction to further levels.

Economic Calendar

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