The US Dollar started the week on a negative tone, as Federal Reserve Bank President Bullard said that the US economic performance could be characterise by slow but steady growth, improving labor markets and a surprisingly low inflation rate. He said that the “Labour market conditions have improved since last summer, suggesting the Committee could slow the pace of purchases, but surprisingly low inflation readings may mean the Committee can maintain its aggressive program over a longer time frame”. The US Dollar consequently fell against most of major currencies waiting for the decision of the next week’s FOMC meeting. The speculations on Fed pairing the QE are the focus weighting on the financial markets for the moment. In spite of, the supportive economic data released in US, the confusion is growing on whether Fed will reduce the asset purchases by the end of 2013 or not, a fact investors are hoping the chairman of the Fed will address in the coming week.
The USD Index had a negative week as it opened at 81.83 then dropped sharply reaching a 17 week-low of 80.50. The Index closed the week near the low at 80.618
In currencies, the Euro rallied against the greenback throughout a volatile week, as better than expected EU Industrial production data came out. Also helping support the Euro, were comments from the ECB president Draghi indicating there is no need for negative interest rates for now. The Euro opened the week at 1.3176 where it found support and rallied to reach a 15 week high of 1.3390. The Euro closed for the week at 1.3346.
The Sterling Pound continued its rally against the US Dollar, supported by better unemployment and industrial output data from the UK. The Sterling opened the week at 1.5523, then rallied and against the greenback to reach a 17-week high of 1.5734. The currency closed near it weeks high 1.5703.
The Japanese Yen opened the week at 97.50 then reached a high of 99.28. In the middle of the week, we had a dramatic change in sentiment after the bank of Japan refrained from additional measures to calm volatility in Japanese Government Bonds.
The Australian Dollar rallied against the greenback on the back of better than expected consumer confidence and jobless data. The currency opened the week at 0.9430 and climbed to a high of 0.9664, the currency closed the week at 0.9566.
US Retail Sales improved last month, indicating that job gains and lowering borrowing costs are encouraging consumers to spend more. Retail sales rose 0.6 percent after edging up 0.1 percent in April, the Commerce Department said. Eight out of the thirteen retail sales categories showed gains last month, led a 1.8 percent increase in auto purchases followed by a 0.9 percent gain in home building materials.
The US Commerce Department said on last week that Business Inventories increased 0.3 percent following a 0.1 percent drop in March. The rise was in line with economists’ expectations. Inventories are a key component of GDP as it has added 0.5 percent a percentage point on the US First quarter GDP that advance 2.5 percent.
University of Michigan June preliminary index of consumer sentiment fell to 82.7 from a final reading of 84.5 the prior month. The index averaged 64.2 during the recession that ended in June 2009 and 89 in the five years prior.
Last week, the European Union rescue scheme was challenged in Germany’s constitutional court, causing a clash between Germany’s top economic policymakers, setting out very divergent views on the legality of measures to handle the Eurozone financial crisis. At the constitutional court, the Bundesbank‘s chief opposed the ECB’s buying of bonds to ease the pressure on Eurozone countries while Germany’s finance minister and ECB board member strongly defended the policy.
Consumer Prices in the Euro area expanded 1.4 percent in a year to May, matching previous estimates and up from April’s 1.2 percent a year earlier, the rate was 2.4 percent.
United Kingdoms’ jobless rate held steady at 7.8 percent, as expected, while benefits claims dropped to its lowest level in two years. In the latest sign that the British economy is shrugging off two years of stagnation, the number of people claiming jobless benefit dropped by 8,600 last month, its seventh consecutive fall. The Bank of England policymaker Paul Fisher said the economy still needed nursing back to health.
Australian consumer confidence recovered in June after two months of sharp falls, as households became less gloomy on the outlook for both their own finances and the economy. The consumer sentiment rose 4.7 percent in June, recovering from a 7.0 percent drop in May, the low interest rate environments supported the sentiment as consumers see this as a good time to make major purchases or enter the housing market. Australian jobless rate fell 5.5 percent according to the Australian Bureau of Statistics. The Australian economy added 1,100 jobs in May, following a 45,000 job increase the month earlier. The data underscores the resilience of the Australian economy, which has been driving by investment in resources to meet Chinas demand.
The World Bank lowered its growth rate on China to 7.7 percent in 2013, from, a previously projected 8.4 percent, amid concerns of slower growth in the coming months. In addition, the World Bank cut its global growth outlook for 2013, the bank forecasts the world GDP will grow at 2.2 percent this year, slightly lower than its previous projection of at 2.3 percent growth.
The Bank of Japan refrained from allowing longer fixed-rate loans to smooth bond market volatility. The Japanese central bank left the maximum length of such loans at as much as one year, and maintained its pledge to increase the monetary base by 60 to 70trn yen per year. This move came despite most analyst predictions that BOJ would approve two-year or longer loan operations.
The Peninsula
