EUR/usd
More often than not the semiannual reports of the Fed's chairman look like one and the same text repeated twice, first before the Senate Committee, then – before the Congress. However, yesterday the markets found something new and positive in the commentary of Bernanke. He preserved the cautious tone, but added that no new recession was expected in the country in the near future. This proved to be enough for the rally. As we know from the experience of Tuesday, if the incentive had been much weaker, it would have still happened, as the markets are now drawing the positive from the corporate reports. Yesterday the process engineering sector served as a driver – its bonds were growing on the favourable reports and perspectives of Intel. Actually, the company prospects for the third quarter have become worse, but not as bad as expected. Yet, this news was not the only driving force yesterday. In the morning hours the markets on the whole and the euro in particular were much affected by the comments of China's Ven Tsyabao. In the interview for the official economic magazine he called on the local government to create new jobs to maintain the social stability. The reaction to this news put the euro under pressure at the European session, again pulling the pair back to the area above 1.22. The daily minimum made 1.2216. However, then purchases in the euro were resumed and now trading is held near 1.23. The pair is clutched in the narrow corridor, but the daily minimums are forming an ascending succession. The dollar is moving away from its highs. The maximum in the dollar index was reached last week. The correction wave may lead to a 1% decline of the index (this is approx 1.2380-1.24 in EUR/USD), but we may well see a more serious 3% decrease within the uptrend, which will drive the pair up to 1.2640. Nevertheless, the general weakness of the single currency is likely to persist, so in the long run we expect to see the renewed growth in the dollar after a short correction.
GBP/USD
The inflation slowdown was not the only good news from Britain. The data on the labour market weren't bad either. On the one hand, the claimant count has been growing for 2 months in a row (6.1K in June after 6.9K in May), but on the other hand the employment volume has increased by 181K over three months to May. A month before that indicator went up by 166K, i.e. job creation slightly accelerated over the month, when the markets were rough. Despite the inflation slowdown the earnings keep growing at the same rate, albeit slightly lagging behind the price growth. Over three months to May the annual earnings growth with bonuses included made 1.5% against 1,4% a month earlier. Weekly earnings excluding bonus remained stable at 1.8%. The sterling still demonstrates a better performance than the euro as the former has managed to recoup almost all of its losses since the beginning of July. EUR/GBP hit a fresh 3 ½ low yesterday.
USD/JPY
The weakness of the dollar these days has been showing up even against the yen. It is a very unusual run of things, especially against the background of the across-the-board growth. As a rule, the growing demand for risky assets makes the yen an attractive funding currency, but now traders tend towards reconsideration the perspectives of the dollar on the expectations of further QE by the Fed and less tough policy of the ECB rather than towards buying of risky assets. Everything looks as though the markets wanted the intervention of Japan's Finance Ministry. Officials in their turn are required to keep their promises and proceed from threats to actions.
AUD/USD
The aussie hasn't stayed in the team of lame ducks for long. Already at the beginning of the week it overcame this month's high of 1.033 and is now trading at the consolidation levels of April. The May downfall is gone with the wind. For comparison the euro fell against the dollar by 8% over the same period and the pound depreciated by 4%. The fact that China is speaking more about the need to stimulate its local economy plays right in the Aussie's hands.
