The market is likely meeting the challenge with many unknowns. The US state authorities’ intents to stiffen the regulation rules in the banking sector, the uncertainty in the investiture of the Head of FRS B. Bernankey on the second term, the anxieties concerning the US economic recovery, and also the budgeting problems of the Euro zone countries – as Portugal, Spain, and possibly Italy will join Greece are among the arguments of this matter. The sluggish trading within very narrow ranges on Monday session encouraged to the suggestion of the exact kind. However, the US dollar’s controversy to the GB pound was the only exception. The support to the British currency was provided with the expectances of the British GDP Report’s publication taking its place tomorrow. The increase may be fixed in it, at that the first one starting from 2008. The US economic news hasn’t encouraged to optimism concerning the sales at the existing homes market; though they’ve gladdened from the point of view of the Dallas FRB Report. The sales at the secondary housing market fell down in December more significantly than forecasted. In accordance with the data represented by the National Association of Realtors (NAR) on Monday the sales decreased for 16.7 per cent till 5.45 Million of houses per annum against 6.54 Million of houses in November. The forecasts have predicted less impressive downfall, for 11.6 per cent till 5.78 Million of houses. Meanwhile, the Dallas FRB Report has noticed the increase of the business activity in the processing branch of industry in January. The manufacturing activity index rose up to 8.3 against 3.2 in December. The new orders index grew up to 26.8 from 4.3, by the way, it may be considered as the prospect’s indicator. However, the employment index decreased to some degree ad showed -4.5 after -4.0 in former month. This information has made no proper influence upon the market; though the extra doubts have most likely appeared with the investors concerning the steadiness of the recovery in the United States. The publication of the housing prices index in 20 US megacities for November and the consumer confidence index from the Conference Board for January are scheduled for publication today. The prices index from the Case-Shiller is predicted to be seen with the great retard of the residence prices decrease in November, -4.9 per cent y/y since in October it was -7.3 per cent y/y. The consumer confidence report is also predicted with growth to 53.6 after 52.9 previously. As it seems this news line won’t become a stimulus for any active steps at the market. The investors will obviously keep themselves in a brown study, and that will cause the continuation of the ranging trades.

EUR
   The common European currency spent the first day of the already started week within a very narrow range while being traded against the US dollar. Following it the result of the day that fixed the neutral total was quite logical. There was not much economic news from the Euro zone. The consumer confidence index for Germany was published according to the Gfk report. As the questionnaire proved the February index decreased to 3.2 against 3.4 in January. It was appointed in the commentaries to this information that the increasing unemployment was raising the greatest apprehensions among the consumers. Such aspect of the sentiment certainly instigates the expanses’ curtailing; and that in its turn affords no grounds for the optimism concerning the consumption’s enlargement in prospects and increases the doubts as for the EU rapid recovery respectively. Besides, such commentaries enforce the uncertainties in the data feasibility as for the decreasing unemployment level in the EU largest economy. As it’s known the recent employment reports in Germany have demonstrated the positive picture. Furthermore, the statistics agency in Germany has publicized the revised report as for the manufacturing orders: the data published on last Friday had been revised to the side of significant improvement. Following the corrected information the new manufacturing orders of the Euro zone grew up in November for 2.7 per cent m/m and decreased for 0.5 per cent y/y; as it had been informed about the growth for 1.6 per cent m/m and downfall for 1.5 per cent y/y before. This revision has provoked no response of the market; although it was probably noticed for long term. The report of the German Institute of Ifo will be the most essential within the EU news set for today. The January indexes calculated by this research organization are expected to demonstrate a little increase. The business behavior index is to grow up to 95.1 from 94.7, the current economic situation’s estimation – to 91.3 from 90.5; finally, the economic sentiment index will probably stay at the same level of 99.1. Besides, the payment balance’s dynamics for November will be published – the deficit curtail is expected to -2.3 Billion of euro from -4.6 Billion of euro concerning this indicator.

GBP
   The GB pound was only one among major currencies on Monday trading that met ready market sales among the investors and enforced itself against the US dollar. The result of the first session at the current week was on the British currency. The increase amounted to more than 130 points. Obviously, in anticipation of the report concerning the British GDP for the 4th quarter that may demonstrate the raise f the national economy and confirm with that the country’s going out of the recession the market players have demonstrated the special interest for the sterling. Against the foreseen positive as for the growth of the economic activity in the “Isles” the market is looking forward for the improvement of the indicators for prospects – for the first half of 2010. No economic news of Great Britain was published yesterday. Concerning today the very important information about GDP for the 4th quarter will be represented today as mentioned above. It’s predicted to see 0.4 per cent q/q, -3.0 per cent y/y after -0.2 per cent q/q, -5.1 per cent y/y in the 3rd quarter. Moreover, the public speaking of the Head of BoE M. King is planned; it’ll touch upon the financial institutions. The issue of the necessity of the reformations in the banking sector will be obviously touched again. That may add more thought-provoking information for the investors.

JPY
   The Japanese currency spent Monday within the narrow corridor against the US dollar and completed the trading day in the neutral positions. The controversial information has supported the investors’ uncertainty and favored the fluctuations of the pair of USD/JPY. The maintained apprehensions concerning the stiffening of the monetary-crediting policy in China were warmed up with the information about coming into effect of more elevated reserve requirements for some Chinese banks. That has naturally caused the purchases of the Japanese currency. Meanwhile, there were enough causes for the sales of the yen as well. The expectances concerning the Bank of Japan will adopt new stimulating measures in the sphere of the monetary-crediting policy targeting the deflation suppression aroused the negative attitude to the currency of Japan. The opinion of further softening of the BoJ positions strengthened with the fact of adopting by the lower chamber of the Japanese Parliament of the additional budget on Monday. That reasoned the feasibility of the new economic stimulating program’s fulfillment on amount of 7.2 Trillion of yen in its turn. The economic information published today already has represented the retard of the prices decrease for the corporative services till -1.5 per cent in December after -2.5 per cent before. Besides, the meeting of the Bank of Japan concerning the rates has brought no changes maintaining the instrument at the level of 0.1 per cent. Nevertheless, the news caused the rapid sales-outs of the yen has already been represented. The S&P Rating Agency has decreased the long-term forecast of the sovereign rating of Japan till negative mark. Most likely, the response to this information will be prolonged for the whole Tuesday session, and the yen will last to loose its positions won before.

Analysis prepared by:

Arkady Nagiev
Forex4you analyst