The PMIs for EZ and Germany turned out much better than expected

January 24, 2014

The Euro (EURUSD) and the Swiss franc (USDCHF) strengthened yesterday vs. the U.S. Dollar by more than 1%. The PMI’s in the EZ and Germany were much better than expected and reached a maximum of two and a half years. The current account surplus significantly increased in the EU for November. After such a good data, some investors have even decided that the EU GDP in Q1 may increase by 0.3-0.4 %, not by 0.2%, as previously expected. Additional positive factor for the Swiss Franc (fall on the chart) was the government decision to increase the reserve requirements while giving mortgages. Investors believe that it could be a signal of possible monetary policy tightening in Switzerland. Due to strengthening of the European currencies the British Pound (GBPUSD) continued rising on the chart (reinforcement) and updated its three-years high. Today at 9-30 GMT (0), we expect the data on mortgage loans in the UK to come out. The preliminary forecasts are positive for the Pound and it strengthened (growth on the chart) in the first half of the day. At 13-30 GMT (0) we expect the economic data regarding Canada to be released. The forecasts are slightly negative for the Canadian Dollar, as inflation is expected to increase. In this regard Loonie keeps weakening in the first half of the day (growth on the chart).

The Japanese Yen (USDJPY) strengthened (fall on the chart). Investors consider it as save heaven in the case of a further slowdown in the Chinese economy. The Chinese PMI for January was worse than the preliminary forecasts. The same information has drop (weakening) the Australian Dollar (AUDUSD) that updated its 4-y minimum. An additional negative factor for the currency was the statement by the representative of the Reserve Bank of Australia that the national currency has not fallen low enough yet. The desired level for the government could make 0.8.

As a result of yesterday's events, the daily Dollar Index (USDIDX) decline was the highest in the last four months. Meanwhile, the U.S. economic data were generally moderate. Sales in the secondary market in December increased by 1%, after three months of decline. Most of economists expect reductions in the program of government bonds purchasing by $ 10 billion by the end of the Fed meeting on Wednesday next week. This can help strengthen the U.S. Dollar.

USDIDX, Daily
As it was expected, the wheat (WHEAT) price has been going up for the second day in a row. The rise in prices this week may be highest in the last two months. Investors fear that the extremely cold weather may hurt the future harvest. According to the MDA forecasts, the Midwest may lose 25% wheat and 10 %may be lost in the Great Plains. An additional factor was the increase in demand. Saudi Arabia announced the purchase of 660 thousand tons of wheat in the world market, Iraq - 350 tons , Japan - 99 tons and Taiwan - 74 tons.

WHEAT, Weekly
 

OIL, Weekly
American crude oil WTI (OIL) gets expensive for a fifth day in a row, due to increased demand as a consequence of the cold weather and reduction in reserves of petroleum products in the U.S.. According to the EIA agency, distillate reserves, including heating oil and diesel fuel fell last week by 3.2 million barrels. Loading refining capacity has declined to its lowest level since October and amounted to 86.5%. However, investors expect that the prices on oil and petroleum products in the U.S. will increase next week. This could cause the correction. The inventory data will be released on January 29th.

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