The US currency continued to enforce itself against the Europeans on Tuesday session. The investors’ reluctance to risk got a new impulse after the publication of the information that some of the Chinese banks are obliged to meet elevated reserve requirements. Such a landscape significantly increases the probability of the accomplishment of the apprehensions concerning the Chinese state authorities let down the economic activity increase and it’ll redound upon the increase in other regions of the world. Furthermore, the support to the dollar was provided by the news from the Europe. If the statistics of the Euro zone had been ignored by the market, though it appeared to be quite not bad in general; so the macro data from the “Isles” have warmed the interest to the “greenback” as they demonstrated less favorable picture as for Great Britain. Summarizing it the “buck” has enforced itself against the euro and GB pound; though it decreased as for the yen again. The latter is even more attractive as a shelter-currency within the periods of the investors’ escape of the risk. The data about the economy of the USA published in Tuesday brought positive information. In accordance with the report of the Conference Board Research Group the consumer confidence in the USA was growing up in January for the 3rd month running. The consumer confidence index rose to 55.9 against 53.6 in December. That appeared to be better than the forecast expected the increase till 54.0 only. The December indicator was revised to better side as it had been announced 52.9 before. It was stated in the accompanying commentaries of this report that the increase of the consumer confidence was arising amidst the improvements at the labor market and the consumers’ positive evaluation of the employment perspectives first of all. The positive trend was maintained at the housing market as well. The housing prices index in 20 megacities of the USA was growing up in November for the 6th month running. The data of S&P/Case-Shiller appointed to the growth of the index for 0.2 per cent m/m and the decrease for 5.3 per cent y/y. The annual dynamics showed -7.3 per cent y/y in October. This good news spoiled the US dollar’s affairs a bit. It has lost a small part of the before won positions against the Europeans. Though it’s quite possible the investors have used the positive for the common profit fixation. The US economy’s news background for today brings very meaningful information. First of all, the announcement of the FOMC decision concerning the rates should be remembered. The key rates are expected to be kept without changes. However, the investors will follow with attention the possible change of manner of the announcement and try to hear the hints allowing determining the dates of the rates’ increase in future otherwise the curtailing of the quantitative softening programs. The market will focus the attention at the capacity of the sales at the primary housing market in December until the announcement of this information, as the increase till 372 thousand after 355 thousand houses in November is expected.

EUR
   The common European currency continued to be traded within the descendant trend against the US dollar and the yen at the previous session on Tuesday. The anxieties as for the Greece continue to predominate as for the investors’ opinions shifting into shadow the economic data depicting the positive processes. The information of the Minister of Finances of Greece which appeared on Tuesday about the plan of loans procurement from the other countries of the world targeting the compensation of the shortfall in the state budget didn’t diminish the negative attitude to the euro. The plan suggests loans procurement on amount of 10 Billion of dollar in China and other Asian countries. The results of the researches conducted by the Ifo Institute published yesterday demonstrated the improvement of the business behavior in Germany in January. The business behavior index increased to 95.8 against December level at 94.6; at that the forecast expected 95.1. The current conditions index increased to 91.2 from 90.4 in the previous month and finally the sentiment index for next six months increased to 100.6 against 98.9. Such changes afford weighty grounds to suppose the largest EU economy is recovering. And the business behavior comes back to the before-crisis levels of conditions. The current count of the payment balance was marked with the positive totals. According to the data represented by ECB the total has increased to 0.1 Billion of euro from the deficit amounted to 4.6 Billion in October, whereas the expectances resolved themselves to the decrease of the deficit to -2.3 Billion of euro only. Nevertheless, no positive response concerning the euro was observed at the market. The investors prefer to escape into the shelter such as the US dollar and yen. Today the EU news set is very modest. The information about the preliminary consumer prices index in Germany for January will be represented only. The forecast suggests the return to the decrease i.e., it will be observed -0.2 per cent m/m, after 0.8 per cent m/m in a month before. If the forecast confirms the euro may get the additional factor of pressure.

GBP
   The pressure upon the British currency was maintained, at the session on Tuesday the GB pound fell down against both the US dollar and yen having got back almost everything achieved on Monday. Beside the factors of pressure “across-the-board” the statistics of its own domestic economy that hadn’t justified both the hopes and forecasts also favored the sterling’s sales. The GDP of Great Britain increased in the 4th quarter of 2009. It determined the get out of the deep recession that started in the 2nd quarter of 2008. In accordance with the advancing evaluation the main economic indicator grew up for 0.1 per cent q/q and shortened for 3.2 per cent y/y in the 4th quarter; whereas the economists predicted the enlargement for 0.4 per cent q/q and the decrease for 3.0 per cent y/y. The market has evidently disliked such a dynamics. Summarizing it, the GB pound decreased almost for 170 points against the “buck” and not less than defaulting to the yen. The data of the net mortgage loaning for December published in Great Britain demonstrated the highest possible tempos of the increase starting from October 2008; however, they didn’t favor the remedy of the sterling situation. In accordance with the data of the British Bankers’ Association (BBA) the mortgage loaning increased for 3.5 Billion of pound in December after the growth for 3.4 Billion of pound in a month before in Great Britain. At that the November indicator was revised to the side on enlargement as initially the growth for 3.3 Billion of pound had been declared. The rhetoric of the British functionaries demonstrates difference of opinions concerning the reformation of the banking sector. The Head of the Bank of England M. King has announced in his speech the “radical” alternations like to those offered by the President of the USA B. Obama should be seriously considered. Meanwhile, the Minister of Finances A. Darling declared quite the opposite point of view. There will be not much data as for the British economy today. The Confederation of the British Industries (CBI) will represent the retailing balance in January – the indicator’s growth is expected to 15.0 after 13.0 fixed before. It will probably support the GB pound in some way; however, as it seems for the short-term period as the “nasty taste” of yesterday data concerning GDP will be probably held.

JPY
   The currency of Japan enforced itself on Tuesday against all its “opponents”, the US dollar among them. At some moment the yen appeared to be under a strong pressure. It happened when it became known about the decrease of the forecast of the crediting rating of Japan from “steady” to “negative” by the Standard and Poor’s Rating Agency. However, the factors providing the support were more powerful. The support to the yen appeared from the side of the investors’ escape out of the risky assets amidst the information from China about the measures causing the stiffening of the monetary-crediting policy in “The Heavenly Land” together with the results of the Bank of Japan meeting that were announced on Tuesday. The CB of Japan has adopted the decision to keep the key rates without changes and hasn’t announced in its commentaries the accomplishment of any stimulating measures in future. Quite probably, the absence of the remarks about the new measures for the economic stimulations targeting the suppression of the deflation has warmed up the interest to the yen. The data published today showed the growth of the trading balance surplus in December as the total grew up to 523 Billion against 493 Billion of yen in November. At that the positive trend in the foreign trading was declared. The capacity of the Japanese exports has increased for the first time starting from the beginning of the current crisis. Moreover, the Report of the Bank of Japan has already been publicized. It maintained the current evaluation of the economy without changes in January. The yen is lasting its increase at the current session as well. Though as it seems this dynamics should be accepted with the caution after the decrease of the forecast about the crediting rating of “The Land of Rising Sun”.

Analysis prepared by:

Arkady Nagiev
Forex4you analyst