Forecast for the week of June 23-27

23 June, 2014

On Monday, June 23 we will receive the June statistics for business activity indices in China, the Eurozone, and the United States. It is expected that the business activity index from HSBC for China's manufacturing sector in the reporting period will come right up against the critical mark of 50.0 points, at 49.7 points, which will probably help support the "Aussie" and "Kiwi" commodity currencies. Over the course of the week the AUD/USD pair may test its April high of 0.9450, while NZD/USD may test its May high of 0.8775.

In the middle of the week the final estimate of US GDP for Q1 2014 will be published. In this period the US economy may have contracted by 1.7% (QoQ), which, in the view of the IMF, would be caused by an unusually cold winter, reduced reserves in the country, and weak external demand for American products. We note that the IMF estimates the annual growth rate of US GDP in 2014 at 2.0%, while the US Federal Reserve puts the figure at 2.1-2.3%, lower than previous forecasts of 2.8-3.0%. The US dollar's weakness on the forex market may allow the EUR/USD pair to climb to 1.3650.

This week the Bank of England will release reports on the state of the nation's credit market and financial stability. These reports will shed light on inflationary expectations for the British economy. It is expected that on Friday the final estimate of Great Britain's GDP for Q1 2014 will remain unchanged at +0.8% (QoQ). Moreover, the decrease of the deficit in the nation's balance of payments in the same period from 22.4 billion to 17.1 billion will probably give the pound an additional impetus to grow. Over the course of the week the GBP/USD pair may test 1.7050-1.7100.

On June 27 a large block of macroeconomic statistics on Japan will be released. In particular, in May Japan's basic consumer price index is expected to increase from 3.2% (YoY) to 3.4% (YoY), which is consistent with the ultrasoft monetary and credit policy currently being implemented by the nation's Central Bank. The USD/JPY pair will likely continue to meet near 102.30.

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