Outlook calm markets after the important decisions in the past week

Ben Bernanke was the first man par excellence in the last week when he made the remarks during the day Wednesday and Thursday before Congress and the Senate in the United States

Fundamental analysis

Ben Bernanke was the first man par excellence in the last week when he made the remarks during the day Wednesday and Thursday before Congress and the Senate in the United States

All the lights are on the statements made by Fed Chairman Ben Bernanke, which was filled with caution, it is known that Ben Bernanke's remarks are based on two main points of the first tightening of monetary policy and the second asset purchases. Ben Bernanke said the day before Congress Wednesday that the decision to postpone the process of reducing its asset purchase program (QE) until half of next year not Balhtmi that reduction depends entirely on the upcoming economic data. Then returned and peered Fed Chairman on Thursday before the Senate to come back and confirms what he said in the previous day that reducing the quantitative easing program is not Palmakd

In relation to pound sterling there was a first meeting of the Bank of England for the month of July after receiving Mark Carney helm, monitoring traders closely to his statements about expanding or reducing quantitative easing, but the result was a stop quantitative easing exactly which stop buying assets of $ 375 billion per year, which means that the British central bank will stop pumping money into the market, which may lead to reduced liquidity and supply at the same time and thus to higher Pound Alstrlena. He also confirmed that the rate of interest will not be less than 0.5 percent

Japanese Yen was also in the spotlight after the results of the Japanese Senate elections that took place over the weekend which resulted in the superiority of the Japanese yen against its major counterparts

This week sees quieter in the decisions and statistics, as waiting for the day Wednesday, the interest rate decision of the Reserve Bank of New Zealand, which is expected to remain 2.5% to support growth, the New Zealand central bank's policy has not changed

Also waiting for the day Thursday gross domestic product (GDP) is British output is expected to be 1.4% versus 0.3% in the previous This significant increase can be reflected positively on the pound sterling, which may lead to the rise, all of this accompanied by the British central bank's decision to reconcile quantitative easing program

Witnessing the same day the U.S. durable goods orders are goods that are expected to live for more than three years, these products often require large investments and usually reflect optimism on the part of the buyer, especially for high expenditures,

It is expected to be a census 1.1% versus 3.6% in the previous

Commodities: It is likely to submit contracts for crude oil and gold in the event of U.S. data came disappointing

Likely to submit contracts for crude oil and gold in the event undermined the weak U.S. economic data reduced bets the Fed's stimulus efforts.
Highlighted key points:

    Technical portend sites for crude oil contracts of the consequences of the emergence of a reflection on the horizon
    Likely to receive support in the case of goods undermined the weak U.S. data reduced bets the Fed quantitative easing
Free table-poor U.S. economic data to traders awaited the release of house price index for the month of May and the manufacturing index published by the Federal Reserve Bank of Richmond in the state, with the expectation that the emergence of a slight improvement on both levels. However, as we pointed out earlier, the U.S. economic results returned to test some weakness compared with economists' expectations. Keep that area available in front of the emergence of disappointing results undermine speculation the Fed reduced the size of asset purchases. It is possible to enhance this scenario risk appetite and provides support for crude oil, copper and fueling demands for gold and silver contracts. Needless to say, he would have the results strong adverse effects.
Technical analysis for crude oil - Hot prices just as had been expected after testing constitute the evening star pattern in the candlestick. Main support lines up at 105.06, which aims to break down the existing level of 38.2% at 102.70. Near-term resistance at 108.89, the peak of the nineteenth of July

Technical Analysis for gold

Gold entered into the upward channel since almost a month, up to 1347 U.S. dollars, the highest level within the channel, and fall back to below 1314 $ to the nearest support line

RSI gives a sell signal, after breaking the upward trend line indicator line level session as shown, and in addition to that there Trend landing began forming since the beginning of the week. Is also an indicator, bearish divergence between him and the price of gold, which gives additional sell signal for gold

It possible to see gold drop to the level of $ 1,300, this price level is a line of technical support, moral and traders, which is meant that the refractive price of this line will be a strong signal to them, and, if broken, will be the first target price is the minimum font of the channel any 1284 $. And otherwise the price can rebound towards the main resistance line any 1347 USD

Support lines ($): 1300, 1267.1240

Resistance lines ($): 1347, 1358

The opening of European markets: the potential to advance the pound sterling and the euro after UK GDP and German IFO data

Likely to hit the pound sterling and the euro bounced back after the losses Minya yesterday, as strengthen the supporting data for GDP British and German IFO expectations the European Central Bank's policy and the Bank of England.
Highlights

    Is likely to rise the euro and the pound sterling amid strengthening economic data outlook for monetary policy
    Of the dollar is likely to decline after fading reduced bets the Fed quantitative easing if U.S. data came disappointing
Chapter II figures headline GDP British economic calendar in European trading hours. Projections indicate output to rise by 0.6%, the best performance since the three months to September 2012. Likely to coincide recovery with significant improvement that occurs on the economic data in the United Kingdom during the period between April and June, which would provide support for the pound center as traders return to growth to normal levels as a guide limits the opportunities for expanding the Bank of England the Department of incentives .
In the meantime, it is likely to show the German IFO business confidence provided the main measure of the business climate to 106.1, the highest reading in four months. In this regard, according to data released by Citigroup, excels numbers issued by the monetary mass Square speculation in recent times, which probably provides some support to the expectations of the European Central Bank's policy. In the meantime, the euro continues to track the underlying difference between the proceeds, which indicates that any bullish surprise will be channeled for the benefit of the single currency and the prospects for rates.
Later in the day, turn attention towards the U.S. economic calendar. Report will be durable goods orders for the month of June and weekly jobless claims, amid estimates the emergence of a slight deterioration on both levels. In general, the results returned to the U.S. economic tested some weakness compared to the expectations of economists in recent weeks. Keep that area available in front of the emergence of disappointing results put the U.S. dollar under downward pressure and dissipate intensive hopes to reduce the size of the Fed quantitative easing.

U.S. Housing Starts

Current Reading: 0.914 M (Starts), 0.974 M (Permits)

Next Release: Wednesday, July 17, 12:30 GMT (Released monthly, about 17 days after the review month ends)

Economists Expect: 0.970 M (Starts), 0.990 M (Permits)

Source of report: The Census Bureau at the U.S. Department of Commerce.

Upcoming Release Commentary:

Housing starts rebounded in May by 6.8 percent after plunging 14.8 percent the month before. The May housing starts annualized level of 0.914 million units was a 28.6 percent rise on a year-ago basis. The jump in starts was led by a monthly 21.6 percent gain in the multi-family component. Single-family component increased 0.3 percent in May, following a 4.2 percent decline in April. Building Permits dipped 3.1 percent in May after jumping 12.9 percent in April. May’s annualized pace of 0.974 million units was a 20.8 percent gain on a year-ago basis.

Analysts expect housing starts to rise 6.4 percent in June to a 0.970 million pace. US Building permits are likely to rise to 1 million last month. Recent data suggests that home-builders are more confident about exercising their inventory of building permits, and have increased their construction activity to cater to current and expected future demand.

US Housing Starts Historical Chart:

Historically, from 1959 until 2013, the U.S. Housing Index averaged 1463.19 thousand, reaching a record high of 2494.00 thousand in January 1972, and a low of 478.00 thousand April 2009.

- See more at: http://www.forexnews.com/blog/2013/07/16/u-s-housing-starts/#sthash.9vpQ6rrK.dpuf

The yen may rally to its strongest level in almost five

The yen may rally to its strongest level in almost five months versus the dollar after breaking a key level of resistance, according to Bank of America Corp.

The Japanese currency will face a test in the 98.30-to-98.76 area after breaching initial resistance at 99.58 today, according to MacNeil Curry, chief rates and currencies technical strategist in New York at Bank of America Merrill Lynch. If the yen increases past that resistance level, it may target 90.91, Curry said. That would be its strongest level since February.

“As dollar-yen traded up towards 103, we started to see signs of topping out, with an advance in stocks starting to look a bit exhausted,” Curry said in a telephone interview. “The upside for dollar-yen is limited. We could see a run down to the 93, potentially the 91 area.”

The yen increased 1.1 percent to 99.55 per dollar in New York, after rising as much as 1.4 percent, the most since July 11.

Japan’s currency has declined 10.2 percent this year, the most among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar and the euro each advanced 4.6 percent.

“We’re still bullish dollar,” Curry said. “But we’re in a medium-term range-bound trading environment before the larger yen-bear trend resumes.”

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index. Resistance refers to an area on a chart where sell orders may be clustered, and support is an area where there may be buy orders.

To contact the reporter on this story: Joseph Ciolli in New York at jciolli@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

The dollar weakened against most major currencies

By simongray on Jul 19, 2013 06:58:22 GMT

The dollar weakened against most major currencies in a quiet days trading on Friday as traders reacted to Fed Chairman Ben Bernanke’s comments that the Fed has no imminent plans to scale back the level of its bond buying program.

The Fed’s monthly $85 billion bond-buying program is seen to weaken the dollar, so any news regarding the possible scaling back of bond purchases has the opposite effect.

Whilst the dollar has strengthened in the last couple of sessions as traders bet that such monetary stimulus programs would be scaled back, possibly in a matter of weeks. The greenback weakened today after Bernanke’s told congress that the Fed will take its time unwinding such policies and may even delay the decision should economic data disappoint.

In U.S. trading on Friday, EUR/USD was up 0.17% at 1.3132, down from a high of 1.3152 and up from a low of 1.3088.

The pound was up on the back of better than expected lending data out of the U.K. GBP/USD was up 0.21% at 1.5256, down from a high of 1.5284 and up from a low of 1.5196.

Whilst the yen was up in late trading as investors adjusted positions before Japan’s upper house elections on Sunday, which could add momentum to Prime Minister Shinzo Abe’s aggressive push for monetary easing to lift growth and fight deflation.

Chinese GDP Sets Table for Improved Risk amid CPI Data from EZ, UK, US

While the economic calendar this week is more saturated than that of the past week, the diversity among major data prints is nonexistent. Of the events ranked as “high” by the DailyFX Economic Calendar, nearly half of major data this week is inflation related, with Canada (Friday), the Euro-Zone (Tuesday), the United Kingdom (Tuesday), and the United States (Tuesday) releasing their June updates.

Certainly, the week started on a positive note thanks to the…relief…surrounding the 2Q’13 Chinese GDP print. Although the headline annualized print of +7.5% came short of the +7.7% consensus forecast (and +7.7% model estimate), there had been growing chatter the past week or two that a print near +7.0% should be expected; needless to say, the report can be viewed as somewhat positive in that regard.

In light of these events, it is possible that in the face of soft inflation figures and relief around China, that the commodity currencies retake some of their recent sharp losses against the European and North American currencies, with risks weighted for excess volatility given the fact that the important data this week is directly related to central bank policy. Speaking of which, Federal Reserve Chairman Bernanke takes to Capitol Hill on Wednesday and Thursday for his semiannual (and perhaps last) testimony in front of Congress – this very well may be the most important event all week.

Rate Hike Probabilities / Basis-Points Expectations

See the DailyFX Calendar for a full list, timetable, and consensus forecasts for upcoming economic indicators.

07/15 Monday // 12:30 GMT: USD Advance Retail Sales (JUN)

Consumption is the cornerstone of the world’s largest economy and the Advance Retail Sales report is the best proxy for consumption in the United States. Accordingly, with jobs growth starting to pick up, market watchers are intently watching to see if gains in the labor market translate into broader economic growth as the increase in disposable income circulates through the economy. As such, June sales were expected to have increased at a faster rate than in May, as well as over the three month average of +0.1% m/m. Accordingly, a beat here would imply a revision higher on the June NFP figure once the next labor report is released.

CONSENSUS: +0.7% m/m

PRIOR: +0.6% m/m

The key pairs to watch are EURUSD and USDJPY.

07/16 Tuesday // 08:30 GMT: GBP Consumer Price Index (JUN)

The Bank of England has kept its monetary policy unchanged for a year now, and its main interest rate has been pinned at 0.50% since March 2009 in an effort to jumpstart the economy. However, loose monetary policy has paved the way for higher price pressures ahead of strong growth, with the UK running the highest rate of inflation among the countries/currencies covered by DailyFX Research. Higher inflation has hurt the UK, as it not only has sapped consumers’ purchasing power (consumption accounts for 62% of headline GDP), but it has prevented the BoE from introducing further stimulus. With Governor Mark Carney now in the driver’s seat, it is likely that the only issue standing between him and more stimulus is higher price pressures; and the expected +3.0% y/y print would present an obstacle. The British Pound could benefit on such data.

CONSENSUS: +3.0% y/y

PRIOR: +2.7% y/y

The key pairs to watch are EURGBP and GBPUSD.

07/16 Tuesday // 09:00 GMT: EUR Euro-Zone Consumer Price Index (JUN)

Inflation tends to be an indicator of growth (albeit a lagging one) which is part of the reason calls for a continued recession in the Euro-Zone linger. Indeed, the +1.6% y/y forecast, in line with the prior month, is hardly a sign of strong growth, and fits in with the European Central Bank’s baseline scenario of “broadly balanced” and “anchored” inflation expectations over the medium-term policy horizon. With the ECB having just introduced forward guidance less than two weeks ago, the Euro retains proximal sensitivity on issues that might affect policy decisions; further weak inflation data stands to serve as a bearish catalyst.

CONSENSUS: +1.6% y/y

PRIOR: +1.6% y/y

The key pairs to watch are EURGBP and EURUSD.

07/16 Tuesday // 12:30 GMT: USD Consumer Price Index (JUN)

The stronger US Dollar in the 2Q’13 helped insulate the US economy from higher rates of inflation, which is a major reason why consumers have stayed resilient despite the government’s austerity measures. But with aggregate demand increasing amid a steadily improving labor market, an uptick in inflation would be a welcomed confirmation that growth is starting to hit its stride. Accordingly, the recent bout of disinflation is likely to have ended according to forecasts compiled by Bloomberg News, with a slight two-tenths of percent uptick expected. Given the Fed’s insistence that recent softer inflation figures are transitory, a miss here could set back the US Dollar.

CONSENSUS: +1.6% y/y

PRIOR: +1.4% y/y

The key pairs to watch are EURGBP and EURUSD.

07/17Wednesday // 14:00 GMT: USD Fed Chairman Bernanke Testifies at Congress

Fed Chairman Bernanke will take to Capitol Hill on Wednesday and Thursday for his semiannual Congressional testimony on the state of the US economy and monetary policy. In what could very-well be his last testimony as Fed overseer (his term expires in January), Chairman Bernanke will retain his recent bias as exhibited from the June 19 policy meeting to last Wednesday’s comments at a conference in Boston: the US economy is doing good, not great; the labor market has improved but isn’t where it should be; and US monetary policy needs to remain accommodative in the face of restrictive fiscal policy. Considering that the US Dollar took a dive when Chairman Bernanke made these comments to highlight the Fed’s intention to merely slow its pace of easing, not cut it off completely (taper versus tightening), it is very likely that the US Dollar trade nervously ahead of the Congressional fireworks midweek.

The key pairs to watch are EURUSD and USDJPY.

--- Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

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GBP/USD- Trading the U.K. Retail Sales Report

Trading the News: U.K. Retail Sales

What’s Expected:

Time of release: 07/18/2013 8:30 GMT, 4:30 EDT

Primary Pair Impact: GBPUSD

Expected: 0.2%

Previous: 2.1%

DailyFX Forecast: 0.0% to 0.6%

Why Is This Event Important:

U.K. Retail Sales are projected to increase another 0.2% in June and the ongoing improvement in private sector consumption should help to produce a more meaningful rebound in the British Pound as it dampens the Bank of England’s (BoE) scope to further embark on its easing cycle. As the BoE now votes unanimously to retain its current policy, it seems as though the central bank is slowly moving away from its easing cycle, and we may see the Monetary Policy Committee start to lay out a more detailed exit strategy over the coming months as the outlook for growth and inflation improves.

Recent Economic Developments

The Upside

Release	Expected	Actual
Jobless Claims Change (JUN)	-8.0K	-21.2K
Average Weekly Earnings inc Bonus (MAY)	1.4%	1.7%
Net Consumer Credit (MAY)	0.6B	0.7B

The Downside

Release	Expected	Actual
Consumer Price Index Core (YoY) (JUN)	2.3%	2.3%
Producer Price Index- Output n.s.a. (YoY) (JUN)	1.9%	2.0%
GfK Consumer Confidence Survey (JUN)	-21	-21

The ongoing improvement in the labor market paired with the uptick in wage growth may encourage U.K. households to increase their rate of consumption, and a positive print may further the case for the BoE to keep its asset-purchase program capped at GBP 375B as they see a slow but sustainable recovery in Britain. However, sticky inflation along with the weakness in consumer confidence may drag on retail sales, and a dismal print may dampen the appeal of the sterling as the central bank looks to implement a ‘mixed strategy’ in addressing the risks surrounding the region.

Gold, Crude Oil Remain Focused on Bernanke Commentary

Talking Points

• Bernanke Unlikely to Break New Ground in Second Day of Testimony
• Gold, Oil Volatility Risk Tilted to the Upside on Dovish Fed Rhetoric

Commodity prices are trading water ahead of the opening bell on Wall Street as traders await the second half of the semi-annual Congressional testimony from Fed Chairman Ben Bernanke. The central bank chief spoke before the House of Representatives first and is due to face the Senate today. Bernanke was careful to stick closely to a familiar script yesterday, reiterating that the decision to taper asset purchases is dependent on incoming economic data and highlighting the difference between reducing QE and tightening monetary policy.

This time around, the prepared text ought to be effectively the samebut the Q&A session might generate some market-moving headlines. Anything that is perceived as advancing the case for a reduction in QE is likely to weigh on risk-sensitive crude oil and copper prices as well as eroding anti-fiat demand for gold and silver. Bernanke has seemingly gone out of his way to push back against the “taper”-driven volatility generated in the aftermath of June’s FOMC meeting however, suggesting that any discernible lean to be found in his remarks is more likely to be dovish than otherwise. Such a scenario is likely to bode well for sentiment-geared assets and precious metals alike. On balance, the baseline scenario is still for a neutral outing that fails to generate clear-cut directional cues in the immediate term.

Capitalize on Shifts in Market Mood with the DailyFX Speculative Sentiment Index.

Crude Oil Technical Analysis (WTI) - Prices put in a bearish Dark Cloud Cover candlestick pattern, hinting a move lower is ahead. Near-term support is at 103.93, the 23.6% Fibonacci retracement, with a break beneath that targeting the 38.2% level at 101.78. The bearish candle setup would be invalidated on a close above 107.41, the July 11 high.

Dollar Strength Continues as Aussie and Yen Tumble; Bernanke Testifies To Senate

THE TAKEAWAY: UK June Retail Sales beat expectations > US Initial Jobless Claims are 334K for week of July 13, better than the 345K expected > Bernanke reiterates yesterday’s statements in today’s testimony to Senate

Several positive economic data releases helped fuel optimistic global sentiment today. First in Europe, the UK released retail sales numbers that largely beat expectations: +2.1% June y/y actual; +1.6% Bloomberg News survey expected; +2.3% prior (revised up from +2.1%). This marks a second consecutive month of above +2.0% retail sales growth. Note that these retail sales numbers were aided by department store discounts.

On the US side, there were multiple positive data releases. The first was the weekly Initial Jobless Claims data, which came in at +334K, well below the +345K Bloomberg News survey expected. The next piece of data was the Philadelphia Fed survey: 19.8 July actual; 8.0 Bloomberg News survey expected. This marks the highest Philadelphia Fed reading since March 2011.

Additionally in the US, Bernanke delivered his policy report to the Senate. Many of his comments were reiterations of his statements yesterday to the House. Bernanke did interestingly say that the jobless rate may be too optimistic a gauge for the economy.

Equities continue to lead the way as most markets trade bullish. The S&P is notably reaching record highs, currently at 1690.56 at the time of writing. Market fears are also mostly dissipating as the implied volatility in the market, measured by the CBOE Volatility Index (VIX), drops -1.02% to 13.64 at the time of writing – significantly below its 20+ levels during mid-June. Developed and emerging markets both share the gains today with China lagging: S&P +0.57%; Euro Stoxx +1.35%; FTSE +0.95%; Nikkei +1.32%; Hang Seng -0.12%; Bovespa +0.64%; Sensex +0.90% at the time of writing.

Bond markets are also trading mostly stronger, most noticeably in the Eurozone and in EM. 10YR government bond yields trade as follows: US +3.2bps (+1.28%) to 2.521%; Singapore -8.9bps (-3.56%) to 2.405%; Brazil -6.9bps (-1.72%) to 3.929%; Germany -2.4bps (-1.55%) to 1.517%; Portugal -18.5bps (-2.64%) to 6.817% at the time of writing.

Commodities continue to trade the most mixed with WTI rallying and base metals mostly falling: WTI +1.32%; Brent -0.04%; LME Copper -1.54%; COMEX Copper -0.03%; Shanghai Copper -1.43% at the time of writing. The Brent-WTI spread continues to narrow and is at $0.86 at the time of writing.

In FX markets, dollar strength continues. The Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) gains +55 (+0.50%) to $108862 at the time of writing.

S. Korean Cries for G-20 Focus on Yen Belied by Pick-Up: Economy

South Korea’s forecasts for faster growth and evidence of strength in sales from shipbuilders to carmakers are undercutting the nation’s warnings that neighboring Japan’s weakening yen poses a threat to its economy.

Finance Minister Hyun Oh Seok reiterated his country’s call this week that there should be international discussion on Japan’s policies, ahead of his departure to attend a meeting of Group of 20 finance chiefs in Moscow. The Bank of Korea’s own forecasts indicate little sign of danger from the yen’s drop, as it sees 4 percent growth in 2014, from 2.8 percent in 2013.

Dollar Strengthens as Data Fuel Bets on Fed Tapering; Yen Slides

The dollar gained versus most major peers as better-than-forecast reports on U.S. jobless claims and regional manufacturing added to speculation the Federal Reserve will reduce monetary stimulus as the economy improves.
The yen fell for a second day versus the dollar on bets Group-of-20 finance ministers and central bankers meeting this week will endorse Bank of Japan monetary easing designed to stoke inflation to 2 percent. The euro pared its loss versus the greenback after a censure move against Portugal’s government was defeated in parliament. Fed Chairman Ben S. Bernanke said the central bank’s bond buying may be halted around mid-2014.
Enlarge image Yen Declines on Bets G-20 to Endorse BOJ Stimulus
The yen weakened 0.6 percent to 100.18 per dollar as of 7:55 a.m. London time after depreciating 0.5 percent yesterday. Photographer: Akio Kon/Bloomberg
Japan's Deputy Economy Minister on Growth, Policies6:49
July 18 (Bloomberg) -- Japan's Deputy Economy Minister Yasutoshi Nishimura talks about the nation's growth outlook, government policies known as Abenomics, and the yen. He speaks from Singapore with John Dawson on Bloomberg Television's "First Up." (Source: Bloomberg)
CIBC Sees `Stronger' Dollar on Fed Tapering, Data4:21
July 18 (Bloomberg) -- Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce, talks about Federal Reserve monetary policy and the dollar. He speaks with Guy Johnson on Bloomberg Television's "The Pulse." (Source: Bloomberg)
Bernanke: Japan Not Manipulating Yen With Policy3:48
July 17 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke says Japan doesn’t manipulate the yen to gain an edge for the nation’s exports, calling its recent monetary policy part of a wider strategy aimed at boosting the world’s third-largest economy. Bernanke speaks in response to questions from Representative Gary Peters, a Michigan Democrat, during his semiannual testimony before the House Financial Services Committee in Washington. (This is an excerpt. Source: Bloomberg)
Yen Likely to Weaken to 105 Per Dollar by Year End4:12
July 9 (Bloomberg) -- Sacha Tihanyi, a currency strategist at Scotiabank in Hong Kong, talks about the outlook for Asian currencies. Tihanyi also discusses Federal Reserve monetary policy and its implications for global financial markets. He speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
Bernanke Testimony Highlights on QE, U.S. Economy2:56
July 17 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke comments on the central bank's asset purchases and the U.S. economy in testimony before the House Financial Services Committee in Washington. (Excerpts. Source: Bloomberg)
Attachment: Bloomberg Ranking: Major Currency Forecasters
“The market is still bullish the dollar,” Marc Chandler, chief currency strategist at Brown Brothers Harriman & Co. in New York, said in a telephone interview. “But people may still price in greater doubt about the timing of Fed tapering. There might still be an adjustment of expectations around Fed policy.”
The dollar advanced 0.9 percent to 100.44 yen at 3:42 p.m. New York time and touched 100.66, the highest since July 10. It appreciated as much as 0.4 percent to $1.3067 per euro in a second daily advance before trading at $1.3109, up 0.1 percent. The 17-nation currency gained 0.8 percent to 131.70 yen and reached 131.89, the highest level since May 31.
JPMorgan Chase & Co.’s Global FX Volatility Index, a measure of currency fluctuations, touched 9.96 percent, the lowest on an intraday basis since June 5. It reached a one-year high of 11.96 percent on June 24.
Aussie Drops
Australia’s dollar declined versus most major counterparts after the nation’s business-confidence index for the next three months dropped to negative 1 in the second quarter, from 2 in the previous period. The data added to the case for an interest-rate cut next month by the central bank. The currency weakened 0.8 percent to 91.66 U.S. cents after earlier falling 1.1 percent, the most in almost a week.
The Brazilian real rose against most emerging-market peers as risk appetite increased and global stocks advanced. It appreciated 0.1 percent to 2.2236 to the greenback.
The Standard & Poor’s 500 Index (SPX) increased 0.5 percent, while the MSCI World Index added 0.6 percent.
The greenback extended its gain versus the yen after the Philadelphia Fed’s general economic index increased to 19.8 in July, more than double the forecast of 8 in a Bloomberg survey, from 12.5 the prior month. Readings greater than zero signal expansion in the region.
Claims for jobless benefits in the U.S. dropped last week by 24,000 to 334,000, the fewest since early May, from a revised 358,000 the prior week, Labor Department data showed today. A Bloomberg survey projected 345,000. The number of people continuing to receive jobless benefits climbed by 91,000 to 3.11 million in the week ended July 6, the most in five months.
Fed Purchases
The Fed buys $85 billion of Treasuries and mortgage debt each month as part of its third round of quantitative-easing stimulus to cap borrowing costs, a program that tends to debase the currency. Bernanke said last month the purchases may slow this year and stop in the middle of next year if economic growth meets policy makers’ projections.
Bernanke told the Senate Banking Committee today it was “way too early to make any judgment” as to whether tapering will start in September. He delivered his semi-annual report on monetary policy to the panel after telling the House Financial Services Committee yesterday he’ll take a wait-and-see stance on stimulus. The Federal Open Market Committee wants to assure the U.S. economy and labor markets have sufficient momentum before reducing asset purchases.
View Unchanged
“People haven’t really changed their view of when tapering is going to occur,” Dan Dorrow, head of research at Faros Trading LLC in Stamford, Connecticut, said in a telephone interview. “The Fed has said we really need to have cumulative data. We’re in Bernanke mode right now.”
The Bloomberg Dollar Index, which tracks the greenback against 10 other major currencies, rose 0.2 percent to 1,034.81 after increasing 0.2 percent yesterday.
The yen weakened for the fourth time in five days against the greenback after Russian Deputy Finance Minister Sergei Storchak said the G-20 probably won’t call for a tapering of stimulus in nations including Japan.
BOJ Purchases
The BOJ doubled monthly bond purchases to more than 7 trillion yen ($70 billion) in April after Prime Minister Shinzo Abe urged the central bank to take steps to overcome deflation.
The yen fell 23 percent in the past year, the biggest loser among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro gained 8.8 percent in the best performance, and the dollar rose 1.5 percent.
The euro touched a seven-week high versus the yen as Greek lawmakers passed a bill that puts thousands of state workers on notice for possible dismissal, clearing the way for the country’s next bailout installment.
The shared currency trimmed its loss versus the dollar after a censure motion by the Green Party against the government was rejected by lawmakers. Portugal’s political parties held a fifth day of talks to hammer out a deal on how to meet the austerity terms demanded in a European Union-led bailout.
Trading in over-the-counter foreign-exchange options totaled $28 billion, compared with $31 billion yesterday, according to data reported by U.S. banks to the Depository Trust Clearing Corp. and tracked by Bloomberg. Volume in options on the dollar-yen exchange rate amounted to $6 billion, the largest share of trades at 23 percent. Euro-dollar options totaled $2 billion, or 7 percent.
Dollar-yen options trading was 22 percent below the average for the past five Thursdays at a similar time in the day, according to Bloomberg analysis. Euro-dollar options trading was 44 percent lower than average.
To contact the reporter on this story: Joseph Ciolli in New York at jciolli@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

GLOBAL MARKETS-Stocks hit record highs on Bernanke, yen drops

By Ryan Vlastelica

NEW YORK, July 18 (Reuters) - Stock markets worldwide extended their rally on Thursday as investors felt assured the Federal Reserve would unwind its accommodative stimulus measures with care.

Fed Chairman Ben Bernanke testified before Congress for a second day on Thursday, this time to the U.S. Senate Banking Committee. On Wednesday, he had reiterated that the Fed would only start phasing out its stimulus once it is sure the economy is strong enough to stand on its own feet.

The comments lured investors to equities, pushed major bourses to fresh highs and put the benchmark S&P 500 index on track for its tenth positive session out of the past 11. The euro fell and the dollar rose against a basket of currencies.

"Bernanke has made equities the only place for most people to go, and the rally has been entirely on him," said Mark Grant, managing director at Southwest Securities in Fort Lauderdale.

The Dow Jones industrial average was up 89.25 points, or 0.58 percent, at 15,559.77. The Standard & Poor's 500 Index was up 10.11 points, or 0.60 percent, at 1,691.02. The Nasdaq Composite Index was up 6.33 points, or 0.18 percent, at 3,616.33.

U.S. stocks were also supported by strong quarterly earnings reports from IBM and Morgan Stanley, though Intel Corp sank following its results. A jump in regional factory activity boosted sentiment as well.

The MSCI International ACWI Price Index rose 0.5 percent.

European equities ended 0.9 percent higher, outperforming U.S. markets, as the broad STOXX Europe 600 broke above a resistance level.

The dollar rose 0.15 percent against a basket of currencies while the euro was down 0.17 percent. The U.S. benchmark 10-year Treasury note was down 13/32, with the yield at 2.5378 percent.

Market participants awaited a meeting of Group of 20 finance ministers for signs of an orchestrated approach to the end of U.S. money-printing, which could help defuse volatility in global markets.

The G20, which meets in Moscow Friday and Saturday, includes many of the emerging economies that have been at the sharp end of the dollar's surge since Bernanke first signalled in May the Fed would roll back its bond-buying program.

YEN DROOPS

With no surprises from Bernanke during his congressional testimony, currency markets were starting to focus on Sunday's Upper House elections in Japan, which are expected to strengthen Prime Minister Shinzo Abe and his radical stimulus strategy.

'Abenomics', as Abe's $1.4-trillion plan is known, has caused a 14-percent drop in the yen this year.

Ian Stannard, head of European FX strategy at Morgan Stanley in London, said he expected a further retreat once the Fed firms up a plan to withdraw its supportive measures.

"The market is of the view the Abe administration will come out of this very well, so post-election it will be an interesting time because we could see the rhetoric around the reform plans picking up," Stannard said. "If this is the case, we will start to see the yen coming under pressure again."

Japan's Nikkei share index earlier surged 1.3 percent to an eight-week high while the U.S. dollar gained 1 percent against the yen to 100.51 yen.

PERIPHERAL VISION

In debt markets, benchmark German Bunds edged 0.1 percent higher, hovering around a five-week high.

An impending no-confidence vote against Portugal's ruling coalition has turned the focus to peripheral euro zone debt.

The motion proposed by a minor party is seen as likely to fail but markets will be on the lookout for any signals sent by the three main parties, which are holding talks on a broad deal to keep the country's bailout program on track.

Spain and France both saw smooth bond auctions on Thursday despite a tougher backdrop, with Spain's prime minister fighting a corruption scandal and France having just lost its last triple-A sovereign credit rating from a major ratings agency.

Commodities, meanwhile, were mixed, with Brent oil flat but U.S. crude futures jumping 1.4 percent as U.S. stockpiles fell for a third straight week. Copper rose 0.3 percent and gold rose 0.8 percent