Rus News Journal

Forex: stagflation signs in the USA press for dollar

On Tuesday, on June, 17th, the dollar bargained raznonapravlenno against the basic currencies. The macroeconomic information which has arrived in this day across the USA testifies to stagflation approach in the largest economy of the world.

insignificant support to the American currency was rendered by the data on rates of increase of the prices of manufacturers in the United States. The industrial prices (index PPI) in May have grown in relation to the last month on 1,4 % and on 7,2 % - in comparison with May 2007. The industrial prices without the prices for foodstuff and energy carriers (PPI excluding food and energy) in May have raised on 0,2 % in comparison with last month and on 3 % - in annual calculation.

nevertheless other macroeconomic news from the USA have contained dollar growth. So, industrial output in May in comparison with April has decreased on 0,2 %. In annual calculation industrial output has fallen to 0,1 %. The operating ratio of industrial capacities in May has decreased on 0,2 items of the item and has made 79,4 %. The volume of building of new houses in the country in May has fallen to 3,3 % in comparison with the last month - to 1 million units. An indicator for May 2008. In comparison with an indicator for May 2007. Has decreased on 32,1 %. Thus number of the permissions which have been given out on building of new houses, in May 2008. Has fallen to 1,3 % in comparison with the last month - to 969 thousand units. Number of building licences of new houses for May 2008. In annual calculation. Has decreased on 36,3 %. Deficiency of the current account of the USA in I quarter has increased to 176,4 mlrd dollars

the Situation in a building segment worsens from - for decreasing costs of habitation, increase in stocks of not sold houses, increases of mortgage rates and falling of consumer trust. As a result situation deterioration in the industry and in the market of real estate of the country have lowered probability of fast increase of the rate on federal funds FRS. Futures for the interest rate specify that the probability of its increase in August has decreased with 70 to 60 %. At present investors hope for increase in cost of the credit in September more.

pressure upon dollar was rendered during the day also by publications in the western press according to which the Federal reserve will not toughen at all the monetary policy in the near future. Many western analysts consider that the regulator has too aggressively lowered interest rates. It is necessary for Central Bank to give out enough great volume of credits to the suffered financial institutions to prevent regular risks in the financial markets. However to avoid the further acceleration of inflation, interest rates should be high. Hence, as many experts mark, the faster FOMC will raise credit cost, the better for the American economy and dollar. The majority of the western experts is assured that fiscal stimulus and other measures taken by the authorities will help economy of the United States to be restored. Discount rate decrease can aggravate a situation only.

the European currency did not manage to develop ascending movement on Tuesday. Pressure upon euro was rendered by results of research of institute ZEW. An index of business expectations in Germany in June in comparison with May 2008. Has decreased on 11 points and has made - 52,4 points. Besides, according to preliminary data, proficiency of trading balance of a zone of the reference of uniform currency in April of current year has made 2,3 mlrd euro, whereas in April 2007. The positive balance of trading balance at a rate of 2 mlrd euro has been fixed.

it is necessary to notice that the most considerable falling was observed on June, 17th on steam pound/ dollar, despite the strong inflationary reports which have left this day. So, consumer prices in Great Britain in May have grown on 0,6 % in comparison with the last month and on 3,3 % - in comparison with previous year. Retail prices have increased by 1,5 and 4,3 % accordingly. As rates of increase of the prices have exceeded level of 3 %, the head of Bank of England Mervin King has been compelled to write the letter to the Minister of Finance of Great Britain. In the letter he has explained that the main reason of growth of consumer inflation are the prices for foodstuff and oil. As a whole the letter tonality has appeared not such rigid as players expected. Head BOE has not specified, what is concrete actions the monetary authorities are going to undertake to reduce price pressure. Uncertainty has disappointed participants of the financial markets therefore the British currency has undergone to sales.

in the morning on Wednesday, on June, 18th, the European currencies weaken against dollar. The euro pair/ dollar bargains about level 1,5485. The British pound costs about 1,9515 dollars The pair dollar/ yen is quoted near to a mark 108.

on June, 18th interest for investors will be represented only by news from Great Britain, among which - reports of last session of Committee on the monetary policy and the report on a condition of industrial sector. In a zone of euro and the USA the macroeconomic calendar is empty. Apparently, depending on moods of players the auctions on Forex on Wednesday can pass volatilno, but within the limits of the developed range.

Natalia ShCherbakova
Department of the analytical information