No changes have happened in the market traders’ mood; the optimism as for more rapid than expected recovery of the US economy together with the short positions’ closing as for the dollar against the before mentioned background and also due to the completion of the year further support the “bugs” which has already enforced itself against all majors at the initial session of the current week. The absence of the significant fundamental factors on Monday being able to specify direction to trading and also the low-rise trades’ capacity in the eve of the forthcoming holidays left the “bears” enterprise without distinct countercheck. The macro economic and political state of affairs in general stays on the side of the “greenback” – the apprehensions concerning the situation of the crediting ratings in the Euro zone and also the deflation threaten in Japan don’t inspire the investors to increase the risks level and encourage to the expectances of further enforcement of the American currency. Some supplement to the dollar’s favor came from Chicago FRB which has informed about the activity growth in November; this very indicator demonstrated a rapid growth to -0.32 after -1.02 in October. The news going to be represented this session can both add to the support of the dollar and change the investors’ attitude to it. The sales at the secondary housing market can also provide the improvement of the mood as they’re expected with growth to 6.25 Million i.e., for 3.3 per cent after the raise for 10.1 per cent in the previous month when it was fixed 6.10 Million. The validation of the anticipations either more hopeful results will mark extra features of the recovery. Meanwhile, the cause for disappointment can become the final estimation of GDP for 3rd quarter which appears today as well. If the data appear to be worse than expected the mood in favors of more rapid increase of the rates in the USA will be exposed to correction and the dollar may be under pressure.
EUR
The common European currency has continued its decrease against the dollar at the first session of the already begun week. However, the increased interest to the euro was mentioned at some moment, and the dollar appeared under the short-termed sales-outs. This situation can obviously be charged to account of the profit fixation by the participants of the market thereupon in the last day of the previous week the American currency grew up to its maximums whereat the “greenback” had already been in the spring. No fundamental data as for the Euro zone were published and exactly that caused the absence of probability of the support for the euro. The Report of the Ministry of Finance of Germany published on Monday appointed to a high probability of more restrained recovery. The cause for the expectances of this kind was acknowledged the troubles in the manufacturing and also weak consumer expenses amidst the negative pressure, the dull economy and also household incomes. Moreover, the shortage of the tax revenues was also noted as they decreased in November for 6.7 per cent y/y, and in October the downfall was for 4.5 per cent y/y. Furthermore, the anxieties as for before arranged scraping of the economic stimulation in Germany and other countries were noticed as it’ll favor the retardation of the economic recovery. The Euro Commission’s Economic Report of the Euro zone for the 3rd quarter hasn’t also become the matter for optimism concerning the euro. It was declared in this paper the Euro zone currency’s rate had been overstated for 7-8 per cent against other major currencies, and its further growth would become a cause for the “serious apprehensions” concerning the national economies of the Euro zone. Such information couldn’t certainly become a supporting factor for the common currency. No significant EU statistics is planned for today; the common currency will stay under the influence of the foreign factors especially the data from USA first of all.
GBP
The British pound’s enforcement amidst the investors’ willingness to fix the profit in the very beginning of the trading on Monday was quite succinct. Everything has resumed “its natural circle” very rapidly, and the GB pound was exposed to massive sales-outs having lost almost 100 points against the dollar and exercised the new local minimum. No statistics concerning the economy of the “Isles” was published at the last session; the Confederation of the British Industries (CBI) has represented its own viewing of the perspectives. This business group elevated the economic growth forecast of Great Britain in 2010; though it mentioned the recovery would be more sluggish in tempos than it was presumed by the Government due to recession. In the opinion of the representatives of this organization GDP will increase for 1.2 per cent in 2010; the before published forecast for next year spoke about the possibility of the economic wide broadening for 0.9 per cent. The state authorities suggest the growth for 1.5 per cent in 2010. The causes of slow tempos are watched in the necessity of the monetary policy’s stiffening and hard crediting terms which will be make a pressure upon the economic recovery. It’s supposed in CBI the Bank of England can cease the bond relief at its meeting in February already as it’ll start the preparation to the elevation of the rates. The forecast concerning the principal monetary instrument resolves it to the rates will be raised from 0.5 per cent to 2.0 per cent to the end of the next year. The presented state of affairs at the labor market was also less encouraging: as the CBI analysts suggest, the unemployment will further growing till the third quarter of 2010. The news being expected at the market today set the minds on the predictions of possible support to the sterling according to the forecasts. The final evaluation of GDP for the 3rd quarter is presumed with improvement to -0.1 per cent q/q, -4.9 per cent y/y after -0.3 per cent q/q, -5.1 per cent y/y represented before. The result of the payment balance for the same quarter is presupposed to be watched with the deficit curtailing to -8.3 Billion from -11.4 Billion of pound. Any hiccup especially as for the main economic indicator (GDP), will cause the adequate reaction of the market – the sterling’s sales being worse than the forecast together with the data being better than expectances or equal to them will become the reason for the sterling’s purchases.
JPY
The Japanese currency also appeared to be among the indemnitees having continued its decrease against the dollar and lost almost 100 points. However, it should be mentioned the weakness was observed concerning not only the American currency, after the announcement the BoJ Governor M. Sirakawa concerning the bank would follow its current policy of the rates saving about zero, but also the yen sales were observed "all over the front". The expectations of the policy stiffening from the side of FRS earlier than expected get back to the yen its status of the cheapest currency and agreeably the part the foundering active. The economic data publisized on Monday became better than forecasted, the October business activity index in manufacturing increased for 1.2 per cent m/m, after the sinking for 0.6 per cent m/m, and expectation of the growth for 1.0 per cent. But the trading balance surplus for November decreased though it had been higher than the forecast, 373.9 Billion of yen, at the expectances of 300.0 Billion as it had been 807.1 Billion of yen earlier. Another announcement of the Head of the Bank of Japan was planed for today; quite possibly, other announcements may follow which will weaken the yen even more; furthermore, as things stand now concerning the increased interest to the dollar, that can’t be difficult. Obviously, the yen has all prerequisites to its rate dropping; though the technical factors may instigate both the cease and the rollback – the pair of USD/JPY came closely to the long-term trend line of the descendant channel and that together with the prolonged growth of the dollar against the yen in the eve of Christmas may become the reason for the profit fixation.
Analysis prepared by:
Arkady Nagiev
Forex4you analyst
