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Dollar Wins Back Market Sympathies (18th 25th May Review)

It seems the period of weakness for the Yankee dollar has gone. Another week of May closing with a great deal of currencies down on the dollar. The euro cheapened by more than 3% over the 5 trading days, whilst the pound lost 1.5%.

There weren’t many important statistics either. The US published some data which stated that, taking seasonality into account, construction of housing in the States had grown by 20.2% throughout April and stood at 1.135 million. This is the highest percentage growth since 1991. This positive release contributed to a rapid strengthening of the US dollar.

Concurrently, sales of housing in the secondary market fell by 3.3% to 5.04 million. The average market forecast was predicting the results to be higher, at 5.24 million. The price of housing grew by 8.9% YOY.

Taking into account seasonal fluctuations, US inflation in April grew by 0.1% MOM. Without including volatile goods, the indicator grew by 0.3% and as such is the biggest monthly rise in 27 months. The YOY value showed a reduction by 0.2%. It’s believed that the US CPI is weakening due to the falling price of oil.

The Eurozone didn’t really publish any important macro-economic data. However, news and some comments gave reason for some to ponder. Last week, a member of the ECB supervisory board, Coeur, noted that the European Central Bank wouldn’t think twice about increasing their QE program throughout the summer period. Investors were worried by this: earlier no one had suspected that the bank may expand its bond purchasing program. However, there is some rationality in this: over the summer months market activity wanes and liquidity falls.

Greece is still on everyone’s lips. First, rumours were leaked onto the market that the Euro Commission could provide the Greeks with more financial aid. This was later refuted. Then the Riga summit didn’t provide any new answers, although investors were expecting an announcement about Athens’ future. In actual fact, Greece has time before the start of June to finish work on its reform program, something it plans to show to its creditors.

The UK released its inflation report, downing the pound. The April CPI in the country fell by 0.1% YOY against its 0 forecast; the figure for March. This is the first YOY deflationary pressure since 1996.

At the same time, April retail sales in the UK weren’t too bad. They increased by 1.2% MOM against 0.7% the previous month. The real figures slightly exceeded that of the forecasts.

Amongst the world news, it’s worth mentioning that Russia increased its investment in US Treasuries to $69.9 billion. The Stockholm stock market began trading Bitcoin. The Ukraine signed a new debt repayment law, allowing it to de facto default on its debts. China saw a record outflow of capital in the first quarter.

The euro/dollar currently has some technical chances to do return to its May maximums, but there’re no real fundamental reasons for it. A break in the resistance at 1.0950 could see a hastening of its fall.

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