Daily Forex Fundamental Overview

Fundamental Analysis

“The tie-up with Eurobank is the optimum combination. It adds to the value of Eurobank in the HFSF's portfolio in view of its reprivatization,”

- The Eurobank executive

Greece government agreed with its Eurozone and International Monetary Fund backers to sell two nation’s banks- Postbank and Proton Bank by July 15, as a part of the deal to secure more funds from the 240-billion euro rescue package, which keeps Greece afloat. The country has pledged to recapitalize its major lenders to be able to provide stable funding within the economy, hence both banks will be sold to Eurobank, which is the nation’s fourth largest lender. Greece's bank rescue vehicle Hellenic Financial Stability Fund currently owns 100% of Postbank and Proton, while also holding 93.6% of the Eurobank shares, after the recapitalization with 5.84 billion euros last month. The deal is the latest move in a consolidation of the struggling banking sectors that is trying to form stronger and well-capitalized banks to help the economy to emerge from its six-year slump.

Last week, the international creditors said they will offer a helping hand for struggling Greece once again, as the nation's government reached a deal with the troika over a staff-reduction plan, which is a key aspect of the country securing funding. The troika had concluded their latest review of the Greek economic programme, citing important progress, referring to reforms implemented in the tax system as well as the recapitalization of Greek banks. Greece will receive another tranche of 6.8 billion euros.

USD

“The economic backdrop remains very challenging for our customer,”

- Family Dollar President Mike Bloom

The U.S. shoppers spent less than expected last month, holding off on spending at restaurants and stores, as increased gas prices weighed on their pockets, the Commerce Department said Monday. Sales at American retailers gained 0.4% during June, to a seasonally adjusted $422.79 billion, after a downwardly revised 0.5% increase recorded in May. Economist had expected shops would report a 0.85% gain. Retail and food-services sales were 5.7% higher from a year ago, while sales of cars jumped 1.8%, continuing a strong pattern of sales so far in 2013. However, when excluding sales in auto sector, retail sales were flat. The main drag on growth were gasoline prices, as turnover at pumps increased 0.7% in June, up from a 0.4% growth in May. Report also showed that families tightened their belts, as purchases at restaurants and bars dropped 1.2%, the fastest pace in over five years.

The country’s retail sales have demonstrated a stable growth since the depths of the economic crisis, however figures stalled in spring, with sales being flat in first two months of spring and rising only 0.5% in May. As consumer spending accounts around two-thirds of total demand within the U.S., recent data may reflect people’s unwillingness to increase spending after they were hit by recent tax hikes and budget cuts.

GBP

“The market is currently benefiting from the ‘aggregation of marginal gains’ where incremental improvements across a range of key market drivers compound to slowly but surely build momentum”

- Miles Shipside, Rightmove director and housing market analyst

Britain’s home sellers increased asking prices for a seventh consecutive month in July, pushing them to a record high, cementing expectations the housing market is experiencing strong recovery. Data from the Rightmove Plc. showed that prices soared 0.3% to a median of 253,658 pounds, from a 1.2% gain a month earlier. In addition to that prices jumped 4.8% annually, while prices in London surged 12% to an average of 515,379 pounds. The company now projects a 4% increase in prices over this year, double the figure expected previously. This data follows similarly upbeat readings from Halifax, Hometrack and Nationwide Building Society, which all showed a solid gain in home prices. The improvement is adding to signs that measures taken by the BoE and the government to ease the supply of credit are working and making demand for property stronger with each month, and reflecting a broader-based recovery in the housing market.

Also Monday the Ernst & Young Item Club pointed out that the U.K. economy will expand faster than expected this year, as consumer cut into savings to keep spending. The gross domestic product is now expected to grow 1.1% this year, up from a 0.6% growth estimated in April. Moreover, growth will strengthen to 2.2% in 2014 and reach 2.6% in 2015.

JPY

“We must resolve the split in parliament through this upper house election. By doing so, Prime Minister Abe can finally get his revenge from the defeat of six years ago”

- Abe’s close ally Chief Cabinet Secretary Yoshihide Suga

The world’s third largest economy appears to have developed a fondness for its Prime Minister Shinzo Abe, as more people supporting his recovery plan and is feeling confident about the economic outlook. Almost a third of the nation’s population thinks the economy is running well, citing a significant improvement in sentiment, as 27% of the country believes that the economy is gaining momentum, up from a mere 7% a year ago, a report from Pew Research showed. Data also showed that 40% of Japanese citizens are seeing further improvement in the economy in the next 12 months, figure more than double than that of the 16% a year ago. The boost in consumers’ sentiment also would have to be credited to Abe’s three-arrowed strategy, also known as “Abenomics”, aimed at reviving economic growth from its 15-year bout of deflation and weak capital inflows.

Supported by improved sentiment and overall economic performance, Abe’s ruling bloc remains on track for a big win in Sunday’s upper house election. In case of victory it would help to end six years of parliamentary deadlock. According to the latest survey, from 37% and up to 43% of voters wanted to vote for the LDP, meaning that together with coalition partner the New Komeito, Abe should win a majority in the upper house.

CHF

“Evidently, the situation for industry has stabilised, although it is too soon to talk about a sustainable recovery”

- Swiss SVME purchasing managers' association and Credit Suisse

Producer and imports prices in Switzerland rose less than expected in June from a month earlier, reflecting that manufacturers are more worried about future economic performance of the country, and raising concerns over weak growth in the second quarter. According to the Federal Statistics, the prices of domestically produced and imported goods advanced 0.1% last month, reversing May’s 0.3% fall, and slightly below analysts' expectations of a 0.3% rise. On a yearly basis, prices edged higher 0.2% in May, confronting expectations for a 0.3% rise, however, higher from a 0.2% decrease in May. The report also showed producer and import prices jumped 0.1% in June from a month earlier, while on annual basis producer prices increased 0.5% and costs of imported goods dipped 0.3%.

It is known that producer prices is a key indicator of consumer inflation, and latest data is showing muted price pressure, suggesting additional measures from SNB will be needed to boost the economy and manufacturing sector in particular. Analysts are expecting the nation's manufacturing sector to expand further; however, companies still appear to be sceptical, as they are still showing a little willingness to increase their spending. Last week the SNB said the cap on a Franc is still vital, and as long as they maintain it, the economy is less likely to be affected by the global slowdown and the financial and debt crisis in the neighbouring Eurozone.