Market news

29 October 2015

American focus: the US dollar fell

The dollar fell against the world's currencies after disappointing reports in the US to dispel the optimism about the strength of the US economy.

US economic growth slowed considerably in the third quarter, which was associated with a reduction in inventories among firms, as well as a slower increase in consumer spending, business, and government. This was discussed in the report of the Ministry of Commerce.

According to the data, gross domestic product, the broadest measure of goods and services produced in the economy increased by 1.5% in the third quarter after rising 3.9% in the second quarter. Experts expect that the economy will expand by 1.6%. In annual terms, the economy grew by 2%, recording the slowest growth since the 1st quarter of 2014.

Many economists believe that a strong dollar and a slowdown in China will have a significant pressure on the growth of US GDP. However, the sector of international trade had only a very small impact on economic growth and the volume of business spending on equipment. Instead, the change in private inventories were the biggest deterrent to strong growth - this has led to a decrease in GDP by 1.44 percentage points. Decrease in inventories could indicate that companies are not sure about future demand and avoid excessive production. But this change can also say that the fall in oil prices and other commodity prices caused a decline in the value of stocks in US dollar terms. Add real final sales, a measure of economic output, which excludes changes in inventories, increased by 3% in the 3rd quarter against 3.9% in the second quarter.

In addition, the US Labor Department reported that the number of Americans who first applied for unemployment benefits, increased slightly last week but remained near historically low levels. According to the report, in the week ended Oct. 24, the number of initial applications for unemployment benefits increased by 1,000 (seasonally adjusted) and reached 260 000. Economists had expected 263,000 new claims. The figure for the previous week has not been revised. It is worth emphasizing the number of calls remained below the psychological threshold of 300,000 already the 34th week in a row, which is the longest series in more than 40 years.

Also today, the National Association of Realtors (NAR) reported that the number of pending home sales fell sharply at the end of September, against forecasts for a moderate increase.

According to data seasonally adjusted index of pending home sales - the gauge of expected sales - fell in September by 2.3 percent to 106.8 points (the second lowest value in that year). Economists had expected the index to rise by 1.0 percent after falling 1.4 percent in August. Recall index reflects the change in sales for which the contract has been signed but the transaction has not yet closed. Typically, at its closing it takes between four to six weeks. In calculating the index does not take into account sales of new homes.

In annual terms, the index rose by 3.0 percent, recording the 13th consecutive monthly increase, fueled by low mortgage rates and a stable situation in the labor market.

Previously, support for the euro was that the federal labor agency said that German unemployment fell in October, exceeding the expectations of experts, and leveling the September increase. According to the data, the seasonally adjusted number of unemployed decreased by 5,000, reaching 2.788 million at the same time. People. Economists had expected the index to fall in 4000. Meanwhile, the unemployment rate remained at 6.4 percent, which is the lowest value since the time of German reunification. The latter value is in line with expectations of economists. The report also stated that the number of people out of work fell by about 2,000 people in West Germany and declined by about 3,000 people in the eastern part.

Meanwhile, the results of a monthly survey conducted by the European Commission, have shown that the confidence of businesses and households across the euro zone has improved again in October, registering with the fourth monthly increase in a row, due to the expectations of the launch of additional measures to stimulate the European Central Bank. The data showed that economic sentiment index rose to 105.9 in October against 105.6 in September. Economists had expected the index to fall to 105.2 points. Confidence index for industry rose to -2.0 from -2.2 in the previous month. At the same time, the consumer confidence indicator was -7.7 in October from -7.1 in September. Last modified in line with expectations. Meanwhile, the index of business sentiment improved to 0.44 from 0.34 last month. It was expected that the rate will fall to 0.32.

The pound rose against the dollar after an early decline, when in the course of trade affected data on lending in Britain, as well as the expectations of the US statistics. Recall, the Bank of England said today that the number of approved applications for mortgage loans in Britain fell in September, registering the first decline in four months, but the volume of mortgage and consumer loans grew at the fastest pace since 2009. According to the report, the number of approved applications for mortgage loans amounted to 68,874 thousand. In September against 70,664 thousand. In August (revised from 71.03 thousand). Analysts had expected the index to rise to 72.45 thousand. Net mortgage lending rose in September to 3.595 bln. Pounds showing the biggest gain since April 2008. In annual terms, the figure rose by 2.2 percent, registering the maximum growth since January 2009. Meanwhile, consumer credit increased by 8.2 percent, which is the highest increase since February 2006. In August, lending increased by 7.8 per cent. Meanwhile, earlier today, data from mortgage lender Nationwide showed that house prices rose 0.6 percent in October, which was slightly more than expected (0.5 per cent).

Market Focus
  • Fed's Powell signals resumption of balance sheet growth
  • European Commission spokesman: EU position has not changed, we want a deal with UK
  • Canada’s building permits unexpectedly surge in August
  • Producer prices in the U.S. unexpectedly decreased in September

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