Market is expecting decision upon the rates…Brief review of the market. by OpenForex.com

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Market is expecting decision upon the rates…Brief review of the market.

07:49 05/04/2004

Brief review of the market. Prior to tomorrow’s FRS meeting, market players continue closing their positions on the dollar. Investors wonder about the perspectives of changing the level of major interest rates on American dollar. The majority of American analysts think that the U.S. FRS discount rate will be raised but not as high, as in 1994. The last week showed that the market still could not adapt to the forthcoming rise. News, published on Friday, were of a mixed nature and did not significantly affect the trades dynamics. The rate of the dollar was negatively affected by the lower than expected consumer spending in the U.S. On Friday, the U.S> Department of Trade published data on March consumer income and spending. In March, consumer spending rose 0,4%, having demonstrated growth for the sixth straight month and having coincided with the revised February indicator. Consumer income rose 0,4% after 0,5% gain in February. Economists had looked for 0,7% gain in consumer spending in March after 0,2% gain in February (initial indicator); income growth was forecasted within 0,4%, whereas initial February estimations equaled 0,4%. Durable goods spending rose 0,3% in March, whereas February gain equaled 0,7%. The volume of everyday goods spending had not changed for the second straight month. Spending on services, making up 60% of the total volume of spending, rose 0,1% in March and 0,2% in February. Compared to the previous month, the level of earnings rose 0,2%, whereas February gain equaled 0,5%. Savings norm made up 1,9% in March, just as in February. Disposable income rose 0,4% in March after having risen 0,5% in February. Last week, the rate of the dollar dropped after the release of the U.S. GDP data for the first quarter. The U.S. Department of Trade said that, according to preliminary calculations, GDP rose 4,2% in annual estimation in the first quarter. That was much lower than forecasted by economists. The average forecast supposed that American economy rose 5% in the first quarter. Though GDP growth came out lower than expected, it still stayed on the high level of 0,1 interest bearing point, having exceeded the indicator of the IV quarter (4.1% in annual estimation). GDP deflator rose 2,5% in annual estimation, compared to 1,5% in the IV quarter. However, the dollar was once again supported by Michigan sentiment index and Chicago PMI. Michigan sentiment index dropped to 924,2 in April compared to 95,8 in March. The indicator rose a bit against its preliminary value that was published in the middle of April. Chicago Purchasing Managers Institute (Chicago PMI) reported that the regional index of business activity rose to 63.9 in April compared to 57.6 in March. The Received index value showed acceleration of business activity in production sector of Chicago and its region in April. The average forecast assumed April index to rise to 60.4. In Eurozone, PMI rose to 54.0 in April from 53.5 in March. Analysts had looked for moderate rise to 53.5. Index, showing production sector activity in the largest European economy, the German one, rose to 55.3 from 54.1. Construction orders, received by 50 largest building contractors of Japan, rose 1,5% y/y to 2.35 trillion yen. The given rise followed 5.3% February dip and 4.1% and 8.8% gains in January and February respectively. The give fact also proves activity growth in construction sector. March rise was due to domestic demand increase.

The forecast was created by trans1.