Brief review of the market. by OpenForex.com

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Brief review of the market.

08:17 06/15/2004

Brief review of the market. The dollar rise trend that started last week is still continuing. American currency strengthened its positions following the comments of Saint Louis Federal Reserve’s head. Those comments resulted in rumors about more active interest rate hike that is expected in the U.S. The head of Saint Louis Federal Reserve, William Poole, officially agreed with the earlier statements of Alan Greenspan about FRS readiness to raise discount rate higher than expected by investors, in case inflation got out of control. When talking about inflation and FRS policies, Poole said the following: “If we find out that inflationary signs really exist, than personally my position will be that it would be right for FRS to act quickly and at a full scale”. Analysts say that by the end of the year FRS should raise current 1% rate target, at least, two times more. Record low rate remained for a year and now market is expecting FOMC meeting due June 30 that is to make decision upon the rate. The U.S. Treasure reported on Thursday that the U.S. Federal budget made up 62,47 billion dollars in May. Deficit equaled 88,87 billion dollars the similar month of the previous year. May outcome turned out to be lower than forecasted by Congress Budget Office, CBO, that had looked for 65 billion dollars deficit. In its monthly comments to budget data, CBO pointed that significant reduction of budget deficit in May compared to the similar month of the previous year was due to calendar peculiarities that define budget receipts period and the period of implementation of budget expenditures. In the first eight months of the year 2004 that started October 1, 2003, budget deficit in the U.S. made up 344,3 billion dollars compared to 290,9 billion dollars in the similar period of the previous financial year. October-May expenditures made up 1,53 trillion dollars, which is 5,5% higher than in the similar period of the previous year. Budget receipts made up 1,19 trillion dollars, which is 2,3% higher than in the corresponding period of the previous year. Budget receipts from natural persons taxes made up 502 billion dollars in October-May, which is 3,1% less than in the corresponding period of the previous year. Budget receipts from corporate income taxes made up 96 billion dollars, which is 46,6% higher compared to the similar period of the previous year. Reduction in natural persons taxes’ sum is due to tax cuts laws that were passed according to President Bush’s initiative. That fact that corporate income taxes’ sum rose was due to corporate profit growth conditioned by economic advance in the U.S. In Eurozone, proficit of current operations account of payments balance dropped to 7.0 billion Euro in the first quarter from 8.4 billion Euro a year earlier. That is preliminary data that was published today by Eurostat statistical services. Services trading proficit reduced to 3.3 billion Euro in the first quarter from 6.1 billion Euro a year earlier. In the IV quarter of 2003, proficit of current operations account of payments balance equaled 15.0 billion Euro. Earlier, proficit was said to equal 18.5 billion Euro in the IV quarter. OECD data showed the best indicators of Eurozone’s processing industry in 3,5 years, as the weakening rate of the Euro stimulated exports rise and consumer demand growth in France. The similar index in the U.S. showed that processing industry development contributed to employment rate rise in the given sector, which in the end reached the record level in 31 years. Italy is still lagging behind Eurozone’s average indicators, as shown by GDP data this week. German Economic Research Institute, DIW, reported that it doubled the forecast on economic advance of the country in the second quarter to 0,6%, as great volume of exports gave hopes for recovery of German economy.

The forecast was created by trans1.