Daily Forex Fundamental Overview

Fundamental Analysis

EUR

“With incomes rising and job security high, consumption growth should remain one of the pillars for German economic growth in the coming years and also an important driver of demand for export goods from the rest of the Eurozone.”

- Berenberg

Retail sales in the largest economy of the Eurozone surged 2.5% in August of this year, while economists expected a slight improvement of 0.6%. Indicator for July, in turn, was revised to the positive side, as then sales declined 1.1% on a monthly basis. It has been the biggest increase of the indicator since June 2011. Analysts point on stable consumer and business sentiment despite Russian sanctions, as well as rising wages and high job security. Unemployment level in Germany remains at all-time lowest level. Alongside, consumer spending in France, the second-largest country of the single currency bloc, added 0.7% in August, while experts were waiting for a 0.2% decrease, meaning that French economy is on its way to recovery after a long period of stagnation.

Annual consumer price index in the Euro area remained at a record-low level of 0.3% in September, down from upwards revised 0.4% inflation a month before. As during recent months, the vast part of pressure on prices in the region was provided by energy, as it became 2.4% cheaper on a yearly basis. Food prices went down 0.9%. Meanwhile, unemployment level in the Eurozone remained at 11.5% in August, even though some countries raised analysts’ optimism that situation is starting to improve.

USD

“Swings in the Chicago PMI in the short term are heavily influenced by the flow of Boeing aircraft orders, with a lag of a few months.”

- Pantheon Macroeconomics

Business activity in the Midwest region of the U.S. remains very optimistic; however, pace of expansion decreased slightly in September. The benchmark Chicago purchasing managers’ index dropped to 60.5 points, down from 64.3 points in August. Economists estimated the indicator at 62 points’ mark. Still, reading above 50 indicates growth in economic activity of this region, while figure below it points on slump. Analysts confirm that strong labour market, rising orders and sales and sustainable economic recovery increase inventories, supporting advance of activity in the future. Some of them mention strong Boeing orders in recent months, which could raise volatility of the PMI as well, taking into account that the aircraft manufacturer has strong presence in the Midwest.

Alongside with that, consumer sentiment in the world’s biggest economy deteriorated to the lowest level since June, as people became more critical on assessment of current job market in the country. Respective index from the Conference Board plummeted to 86 points in September, losing ground from a 93.4 mark back in August. Experts, in turn, predicted only a slight decrease to 92.5 points. The indicator is calculated by surveying 5,000 households across the U.S. about present economic situation. It used to be the major indicator of consumer spending, which accounts for 70% of American economy.

GBP

“Price growth may soften further in the final quarter of the year, given the high base for comparison from the fourth quarter of 2013. The outlook remains uncertain.”

- Nationwide

According to Nationwide Building Society, property prices in the United Kingdom registered the first decline since May 2013, as they slipped 0.2% in September, calculated month-on-month. Therefore, the average house price in the country reached 188,374 pounds. On a yearly basis, the indicator added 9.4%, down from 11% growth back in August. Economists confirm the period of softening housing market in Britain, taking into account recent actions of the Bank of England in order to avoid bubble. Last week, data from Hometrack Ltd showed the first decrease of property prices in London in more than two years. At the same time, positive development on the labour market and low interest rates are likely to support demand for property in the foreseeable future.

Additionally, current account deficit in the U.K. deteriorated further in the Q2, as it dropped to 23.1 billion pounds, while data for previous three months used to be worse than estimated before at 20.5 billion pounds. At the same time, economic growth in the country was revised to 0.9% for the April-June time period, registering the highest quarterly advance since the third quarter of 2012. Annual growth was unchanged at 3.2%, the second-fastest GDP increase among G7 countries, being only behind the United States. Among GDP components, business investment climbed 3.3% against a previous prediction for a 0.9% rise.

CHF

“Regardless the barometer's decrease, with a reading close to its long-run average, perspectives for the Swiss economy remain relatively stable.”

- KOF Swiss Economic Institute

The economy of Switzerland is likely to advance further in the nearest future, even though sanctions from Russia and sluggish growth in the Eurozone, the main Swiss trade partner, are creating some negative pressure. According to the latest report from KOF Swiss Economic Institute, in the six-month period from now economy of the country will remain stable. The respective indicator from the Institute declined slightly to 99.1 points in September, down from 99.6 a month before, but it still underlines strong domestic economic development. The Index is received, based on 219 economic indicators in monetary policy, stock market, housing, consumer confidence and manufacturing. The data for current month posted a rise in construction and production sectors, while negative contribution was provided by consumer sentiment, as people are still worried about consequences from Russian sanctions. Moreover, slow growth in the single currency area is destabilising Swiss export industry, which delivers more than 50% of all goods to the currency bloc.

Along with that, the Swiss National Bank lowered its expectations on GDP growth in the Alpine country, down from 2% to just below 1.5% in 2014. KOF Institute, however, expects the Switzerland’s economy to perform a little better, as it may climb 1.8% this year, while earlier assumptions estimated a 2.1% annual growth.

CAD

“Durable-goods manufacturing rose 1.6%, as almost all industrial sub-groups recorded growth. Increases were notable in transportation equipment, computer and electronic products as well as furniture and related products manufacturing.”

- Statistics Canada

Economy of Canada continued to perform well in July of this year, helped by supportive monetary policy of the Bank of Canada, as well as manufacturing and public sector industries. Country’s GDP, however, was unchanged on a monthly basis, while year-on-year it grew 3%. Meanwhile, trade surplus of Canada reached its highest level in July since October 2008. Moreover, construction sector remains a strong provider of positive economic momentum in the 11th economy of world, as they also contributed positively to the gross domestic product in July. Among weakening factors, wholesale trade declined 0.6% during the reported time period. Additionally, negative contribution was provided by agriculture, mining and oil and gas extraction, utilities and transportation sectors of the economy.

Besides that, the Raw Materials Price Index dropped as much as 1.7% in August, following a decline of 1.4% in a preceding month. This indicator used to be a leading one for calculating consumer price index in Canada, as prices that manufacturers pay for raw materials are usually move on to the consumers. Therefore, it can pose some risk for price stability in Canada, even though annual inflation remained at 2.1% in September, above the Bank of Canada’s target level and compared to July’s reading of 2.4%.