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The week ending August 9th shed positive light on the state of the US economy, as the ISM Non-Manufacturing PMI increased from 52.2 in June to 56 in July, a much higher jump than the forecast 53.2, indicating that the manufacturing sector is experiencing growth and boosting the US dollar. Spurring the economy on further were the jobless claims released in the US, which remained close to the recent 5 year low at 333K despite a small rise from the previous week.

This figure is expected to remain relatively unchanged, forecast at a slightly higher 334K this week, as the US holds its breath for a number of other economic indicators which could be catalytic to the health of the US economy. These indicators include the Federal Budget Balance, due to be released Monday August 12th and forecast at -90.3B, the retail sales which are expected to rise to 0.3% on Tuesday August 13th and the US PPI m/m which will be released on Wednesday August 14th and is anticipated to rise to 0.4%

On the European front, retail sales fell by 0.5%, marking a steep decline and acting as a strong contrast from the positive figures seen in May, but the negative sentiment created on the back of this news was counteracted by the rise in German factory orders, which witnessed a higher than expected 3.8% increase and bolstered hopes that the European economy is recovering.

These hopes were further elevated when Germany’s trade balance rose to 15.7B, higher than the anticipated 15.2B, highlighting the significance of the country’s exports in acting as a buoy to the economy. Of utmost importance this week will be the release of the German ZEW Economic Sentiment on Tuesday August 13th, expected to rise to 40.3 and the Flash GDP q/q which is predicted at 0.2% on Wednesday August 14th; both these indicators are predicted to show that the eurozone is slowly recovering.

In Japan, the lower than expected current account surplus for June has seen the fastest drop in the past 6 months at 0.65T and now all eyes are on this week’s Monetary Policy Meeting Minutes. Just last month, the Bank of Japan asserted its confidence in the economy and confirmed that it will continue with its policy of quantitative easing for as long as it takes. The next resistance level for USD/JPY is expected at 99.95 and the next support level at 93.79.

The economic recovery in the United Kingdom seems to be continuing its gradual progress, with the Services PMI out at 60.2 in July, a climb from the June figure of 56.9 and the seventh consecutive monthly increase. Coupled with the higher than expected 1.9% Manufacturing Production m/m, these indicators act as evidence that the UK economy is healing.

The Bank of England’s inflation report also sparked positive sentiment as the BoE announced that interest rates will not be increased unless unemployment falls under the 7% mark. This week, the UK is anticipating numerous significant economic indicators such as the claimant count change which is expected at -14.3K on Wednesday August 14th and the UK retail sales which are forecast at 0.7% on Thursday August 15th.

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This article was first published on 12th August 2013

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