American focus: fears of the U.S. economy slowdown prevail on USD [E]

USD remains under pressure against basic currencies.

According to data of Treasure International Capital Systems (TICS) report about inflow of capital to the USA, international investors in April bought American shares and bonds amount $46.7 bln. Number appeared less at 34% than in prior month and became the smallest since March 2005.

As a result fears regained concerning capital inflow to the country will be insufficiently for covering of foreign trade deficit which in April was $63.4 bln. .

"it is observed the change of market sentiments now", - said Ian Stannard, the currency strategist of London representation BNP Paribas SA. "Investors start to focus on problem of economic growth."

Futures market considers probability at 100% that on June 29 Fed will raise the rate to 5.25%. On Tuesday the same possibility was 90%. Moreover, chances increase that inflation growth can become the reason of rate hike in August also. The probability of such succession of events is 67%, and one month ago was equaled to zero.

As a result conversations are more active that the future increase of Fed rates can become the reason of significant slowdown of economy growth that will certainly negatively affect on USD.

In this connection the data testifying about downturn of economic growth in the country should cause concern.

So on June, 13th the Commerce Department informed, that rates of retails growth appeared the lowest for last three months.

The last month index of Housing Starts fell. This index decreased to the minimal value for last 17 months and can testifies about reduction in demand for housing in connection with constantly increasing mortgage rates.

Decrease of Industrial Production’s rate in May at 0.1% after growth at 0.8% in the previous month didn’t get a base for optimism.

Main news of day, which can determine the nearest perspectives will be issue of July Philadelphia Fed index of industrial activity at 16:00 GMT. It is expected a slowdown of major index, nevertheless, necessary to note, that unexpected raise of NY Fed Empire State manufacturing index published earlier speaks about possible Philadelphia Fed index excess of forecasting values.

Allow for indexes’ components, estimating labor market, inflation and general level of economic activity (new orders, etc.). Considering, that Fed rate increase in the end of June practically does not cause doubts and is already considered by the market, confirmation of slowdown of economic growth can provoke additional pressure upon the U.S. currency. Otherwise, the dollar can get support.