Forex Fundamental Analysis

Data just released from Japan show that the world’s second largest economy managed an anaemic 0.1% growth in the second quarter.

All of the world’s major stock markets closed lower, compared to how they stood last week. On the currency markets the Euro had the worst of trading.

As we reported yesterday, the Yen has been appreciating against the Dollar recently.

Following the same pattern as the Bank of England and the ECB, the Bank of Japan has announced that it will leave its interest rate unchanged at just 0.1%.

The Fed seems to be in a corner with no place to hide with a 2-year note yield at 0.5% arguably exposing failed policies from previous years that can only seemingly be paid for by a dilution in the Dollar’s external value, or quite simply a weaker currency, if asset purchases are to continue.

It is obviously too early to expect to see bank lending rates move back towards their traditional levels. Both the ECB and the Bank of England have decided to continue with their policies of historically low interest rates.

The Japanese economy is export driven and managed to grow at 5% in the first quarter of 2010. However, figures to be released for Q2 are expected to show that economic growth has slowed by about a quarter; mirroring a slowdown in Japan’s largest trading partner, America.

On the currency markets last week the Dollar was lower against Sterling, Euro and the Yen.

The British Pound Sterling touched a six months high against the US Dollar of $1.59.65 on Thursday.

It comes as a little of a shock to see pre-tax profits at HSBC, the UK’s biggest bank, at the $11 billion mark.

Rising inflation caused by higher food and energy costs and also the USD/JPY pair contributing to a weaker Dollar.

Preliminary indications, issued by the US Department of Commerce, suggest that the US economy is slowing down.

With a political standoff blocking the passage of a budget for more than a month and the funding to run the state drying up, the leader of the world’s eighth largest economy declared a fiscal emergency in a move to force passage of the budget.

Friday marked the last day’s trading in July. All of the markets ended the month higher than they were when it started.

Figures recently released suggest that the Russian GDP had grown to 5.4% in Q2, based on a year on year comparison. This performance was helped by a surge in demand from domestic consumers, according to its deputy economics minister, Andrei Klepach.