USD/JPY Daily Fundamental Analysis
The USD/JPY pair traded in a narrow range with the beginning of the week on Monday, where both currencies gained against other majors as concerns about the global economy drove investors to invest in low yielding currencies like the dollar and the Japanese yen.
On the other hand, the greenback was able to bounce against the yen after Machine orders in Japan unexpectedly declined in April, indicating that companies remain concerned about the strength of the recovery.
Machine orders dropped 3.3% in April compared with a previous incline of 1.0% in March. Moreover the annual reading also fell to its lowest level since December 2010 at –0.2%.
The Japanese data fueled expectations that the Bank of Japan is on the his way to introduce more support to the economy, including new stimulus programs which drove the yen down to its lowest level in a week versus the greenback.
Bank of Japan will hold its regular policy meeting for the month of June, where it's anticipated that the central bank will hold its benchmark rate steady at 0.10%. The main focus will be on the bank’s statement, where investors are waiting for the BOJ to take further steps to support the Japanese economy to exit the recession.
The final reading for the Japanese industrial production for April is due 04:30 GMT, where the prior reading was 1.0%, while on the year it was down by 14.0% in March.
Moving to the U.S. economy, at 12:30 GMT the producer price index for May will be released, where the previous reading was 0.8% and it's expected to retreat to 0.1%. The annual producer price index is anticipated to come at 6.6% from the previous 6.8%.
The U.S. economy will release its advanced retail sales index for May at 12:30 GMT, and it's expected to come at –0.3% from the previous of 0.5%.
EUR/USD Daily Fundamental Analysis
The EUR/USD pair continues to trade with high volatility and started the week on Monday with choppy thin trading volumes with the absence of many European markets on Whit Monday, where the euro attempted to compensate some of the losses amid a rather gloomy start for the week.
A slight correctional move was the start for the week amid a general state of caution in the market and anticipation for the rest of the week and the heavy data in store. The holiday also limited the comments from officials and central banks as speculation remains the dominant factor for the euro nowadays with the uncertainty surrounding the next step for the Greek aid.
On Tuesday, we expect the pair to return to the volatility and downside pressure as the rift in views over the involvement of investors in the second bailout for Greece and the amount of the package remains the biggest downside pressure on the euro. The market is working on expectations and speculation with the lack of transparency when it comes to the new aid and it will remain the matter of debate this week ahead of next week’s expected decision and endorsement by the EU summit.
The euro area does not have data queued for release on Tuesday as the focus remains on the debt crisis and any comments. Meanwhile, from the United States will start the week with the Producer Price index for May at 12:30 GMT. Prices at factory gates might have slowed and remained flat from 0.8% and to 6.6% on the year from 6.8%. Excluding Food and Energy the index might maintained the annual 2.1% increase.
Also retail sales are due the same time for May, where less autos sales might have slowed to 0.3% from 0.6% and excluding autos and gas might have added 0.3% from 0.2%.
At 14:00 GMT Business Inventories for April are due and expected steady as the previous month’s gain of 1.0%.
GBP/USD Daily Fundamental Analysis
The GBP/USD started the week with choppy trading amid the mixed sentiment as sterling started the week with gains correcting the losses seen last week and ahead of more volatility expected for the week.
The correctional movements covered the market on Monday with the beginning of the week, yet the sentiment remains fragile and fears over slowing global growth.
This week we expect the volatility to persist with the focus on the outlook for the recovery and inflation, where the pair will be affected on Tuesday by inflationary figures from both nations.
Inflation in the United Kingdom remains a critical problem where in the BoE’s Quarterly Bulletin the bank said that their inability to contain inflation did undermine Britons faith in their policy markets, yet still see that Britons outlook for inflation remains “reasonably well-anchored”.
The BoE voted last Thursday to maintain rates and APF steady as they try to find the balance between slowing growth and rising inflation, which still threatens to rise towards 5.0% according to the BoE.
Therefore, the focus on Tuesday will be predominantly on the outlook for inflation and the downside pressures on growth from rising price pressures. At 08:30 GMT the Consumer Price index is expected to have eased to 0.2% in May compared to April’s 1.0% and to 4.4% on the year from 4.5%.
Meanwhile, the United States will start the week with the Producer Price index for May at 12:30 GMT. Prices at factory gates might have slowed and remained flat from 0.8% and to 6.6% on the year from 6.8%. Excluding Food and Energy the index might maintained the annual 2.1% increase.
Also retail sales are due the same time for May, where less autos sales might have slowed to 0.3% from 0.6% and excluding autos and gas might have added 0.3% from 0.2%.
At 14:00 GMT Business Inventories for April are due and expected steady as the previous month’s gain of 1.0%.
USD/CHF Daily Fundamental Analysis
Swissy mainly started the week on Monday mainly holding its grounds. The USD/CHF continued to trade within a tight range yet generally biased to the downside on haven demand.
The Swiss Franc continued to trade higher on the back of rising haven demand amid thin and choppy trading with holidays across Europe on Whit Monday. The fear over the outlook for the global recovery, the lack of fundamentals, and no new comments on the Greek crisis, left investors jittery and trading cautiously in light of the heavy bearishness seen by the end of the previous week.
Also, losses in Asian equities and the new series of earthquakes in New Zealand coast extended the jitters amid a soft start for the week.
The gloomy outlook is likely to remain the sentiment for the week and accordingly keep swissy biased for gains and volatility ahead of the rate decision later this week.
On Tuesday, investors are back in the market and the focus will be on comments from finance chiefs on the Greek crisis, which is keeping the bias to the upside for swissy, especially as they need to stem the gap over the steps needed to shore up Greek finance.
Switzerland has no data queued for release, while The United States will start the week with the Producer Price index for May at 12:30 GMT. Prices at factory gates might have slowed and remained flat from 0.8% and to 6.6% on the year from 6.8%. Excluding Food and Energy the index might maintained the annual 2.1% increase.
Also retail sales are due the same time for May, where less autos sales might have slowed to 0.3% from 0.6% and excluding autos and gas might have added 0.3% from 0.2%.
At 14:00 GMT Business Inventories for April are due and expected steady as the previous month’s gain of 1.0%.
