Last week passed away under the sign of the pressure upon the American currency as the idea of the maintenance of the velvet monetary-crediting policy in the USA ringed the bell much. The FRS functionaries’ rhetoric showed the absence of the unanimity – the Heads of FRBs from New York, Saint Louis, and Chicago stood for the maintenance of the low rates for a long time still in their announcements. While their colleagues from Philadelphia and Dallas suppose the stiffening should be initiated at the very moment actually before the fact of complete for both the crisis and unemployment growth. As it generally happens most commonly the macro statistics was multidirectional. The deficit of the US foreign trade enforced itself, the consumer prices grew up for 0.1 per cent per month and for 2.7 per cent in the annual comparison in December; the core exponent, less of the energy resources and food products, increased for 1.8 per cent per annum. The principal indicators of the demand didn’t encourage the optimism. In December the retailing fell down for 0.3 per cent suddenly, and the annual decrease made 6.2 per cent; finally, in November the consumer crediting rushed down for 17.5 Billion of dollar. The budgeting deficit continues its growth as the negative dynamics uplifted this indicator in December to the level of almost twice higher than a year ago; moreover, the deficit amounted to 388.5 Billion of dollar during the first 3 months of the current fiscal year. The results of the manufacturing may be labeled as the asset of the US economy as the production release together with the capacity utilization both increased. Some raise was also observed concerning the consumer behavior. The University of Michigan consumer confidence index marked its improvement, though lower than forecasted, 72.8 after 72.5 and by forecasted at 74.0. The first corporative account statements for the 4th quarter demonstrated losses for the Alcoa, profit – both for the Intel and Morgan Chase. As a result the US dollar decreased against the GB pound and yen but enforced itself concerning the euro. The common currency couldn’t gain more popularity due to the difficult political situation concerning the budgets of the block’s countries and troubles as for its solving. Not much news as for the US economy is going to be during the present week thanks to it’s shortens. As known this Monday is a day-off by reason M. Luther King’s Day. During the weekly session the interest will be attracted to the data of the development sphere, where the growth is expected summarizing the December results, and also the production inflation’s data being presumed with growth. Besides, the market will put its attention to the US Securities’ purchases in November. Certainly, the currency market will also be under the influence of the US Corporations’ account statements for the 4th quarter as this week the “Business Aristocracy” will represent their statements – The Goldman Sachs, Citigroup, Bank of America, Morgan Stanley, Wells Fargo, together with the “Yahoo” of both the manufacturing and services – The General Electric, McDonald’s, IBM, AMD, and Google.
EUR
The currency of the Euro zone decreased against the US dollar last week. The main cause of the common currency’s weakness became the financial-political crisis that threatens to turn into the pure political turmoil if to remember the noise making possible the Greece’s exclusion out of the Euro zone. The Euro Commission has suspected the Hellas’ statisticians in the state budget data’s counterfeit. The European analysts considered the deficit curtailing plan to be not only non-encouraging the positive expectances but also dangerous. Another portion of less impressing mood amidst the Greece’s troubles can come from Portugal and Spain, where the budgets aren’t at the peak concerning the deficits’ mildness as well. Not much statistics from the Europe was published; it made no influence upon the market though. The German GDP fell down for 5.0 per cent in 2009, the export curtailed for 14.7 per cent and the import – for 8.9 per cent. The budgeting deficit made 3.2 per cent of GDP in this country. The Euro zone manufacturing increased in November though still stayed in minus in annual comparison – but more modest than before, -7.1 per cent y/y after -11.1 per cent y/y in October. The trading balance in the Euro zone has shortened the surplus in November. The most important weekly events were the ECB decision concerning the rates together with the press-conference of the Head of ECB and they brought no significant information. The EU economic news won’t also be numerous this week. The attention will mainly be focused on the ZEW report and the business behavior’s data in the manufacturing and services both in Germany and in the Euro zone totally. The forecasts predict that ZEW economic sentiment index will further decrease in January, and the provision managers’ advancing indexes both for the manufacturing and services will grew up compared to the previous months though with the significant retardation of tempos. The positive dynamics, at that essential enough is expected from the new orders’ data in the Euro zone’s manufacturing in November. It can obviously be presupposed that even if the EU macro news make support to the euro it will be short running. The general tunes concerning the common currency will be kept in the negative spring until the complete clarification of the situation concerning the budgets of the Euro zone’s countries and the publication of the information concerning their decision.
GBP
The British pound became a leader at the last week’s trades as it have fixed the significant preference against the dollar and euro resulting the session. Obviously, the impression from the announcement of the Deputy Head of Board of the Bank of England E. Sentance added to the disappointment as for the hopes for the rapid stiffening of the fiscal policy from the side of FRS; as in his interview for the British mass media this functionary has expressed his confidence in the necessity to rise the rates in Great Britain. Against this background the “cable” has added almost 200 points against the US dollar and 150 as for the euro. The economic data form the “Isles” contradicted to the investors’ complacency concerning the sterling – the trading balance deficit lowered down in November. The processing branch of the manufacturing maintained the output rate at the former level in November compared to the previous month. In general, the manufacturing increased for 0.4 per cent m/m. The National Institute of the Economic and Social Researches (NIESR) announced that according to its own estimation the British GDP grew up for 0.3 per cent in the 4th quarter. At the same time the British Retailing Consortium spoke about the annual increment of the sales for 4.2 per cent in December. The forecasting variant of the British statistics which appears this week presume the multi direction for the sterling. The consumer prices’ inflation is expected with growth in December and possibly it has already surmounted the rate of 2 per cent. That exactly can become a good enforcement as for the possibility of the rates’ decrease amidst the announcements of the Deputy Governor of the English CB, despite the comparative base with the situation in December 2008 when the consumer prices decreased greatly. However, later the macro data can become the cause of the pressure upon the British currency – the dynamics of the state finances’ process promises no improvements. The budgeting loans are likely to be kept at the former very high level of 19.0 Billion of pound, and the monetary supply will further curtail in the annual comparison. The data of the unemployment which are also going to be published are predicted with the maintenance of its level at 5.0 per cent in December according to the official statistics; though as for the ILO’s accounting method – with growth to 8.0 per cent from 7.9 per cent in November.
JPY
The yen has increased against all majors. The troubles of the European countries instigated great interest to the Japanese currency as to a shelter-currency. Likely the downfall of the US Treasury Securities’ profitability reasoned the Japanese investors’ resignation out of these assets together with the market participants from other countries – those that were using the yen, as a fundering currency. Besides, the payments of coupons and redemption of the state T-bond in the USA and Europe added some popularity to the currency from the “Land of Rising Sun’. The data published this week further appoint to the weakness and absence of serious positive changes in the Japanese economy. The orders for engineering tools and equipment fell down for 8.4 per cent m/m in December. In general the machine-building orders shortened for 11.3 per cent m/m, and annually for 20.5 per cent. The banking crediting shortened for 1.2 per cent y/y in December. That affords round to consider the efforts of BoJ as for the filling of the market with the liquidities by purpose of the borrowing delivery activation not to result in desired effect. The new Minister of Finances N. Khan greatly softened the rhetoric as for the strong yen and promised to concentrate the attention on the fiscal policy. Although the Moody's Agency declared the absence of threatens for the rating of Japan, but still reminded that the saving of the sovereign rating depended on the renewal of the economic growth and the budgeting deficit decrease. The news set of this week as for the Japanese economy will have much information enough. But the adjusted data of the manufacturing expected to be observed without changes can be considered significant and defiant particular interest of the market as the monthly growth and annual falling down, 2.6 per cent m/m, -3.9 per cent y/y is expected. Also the November indexes of the business behavior in the services and manufacturing are supposed to be attracting the attention. If in the first case a little decrease is expected, -0.2 per cent, after +0.5 per cent earlier, so in the second one the continuation of the growth, +0.2 per cent should be while the previous period was remarkable for the growth for 1.2 per cent.
Analysis prepared by:
Arkady Nagiev
Forex4you analyst
