The US dollar continued its enforcement at Thursday session. The results of the previous day determined the situation, which is the consequence of a significant falling down of the risks inclination at the currency market. It’s the self-confident growth of the “greenback” against the Europeans and not less confident downfall against the yen. The reason for the escape out of the risks became the same anxieties as for the budgeting problems of the Euro zone countries, which hadn’t diminished despite that the Euro commission had adopted the Deficit Shortening Schedule of Greece. The next increase of the profitability spread between the German T-Bonds and Greece, Spanish, Portuguese securities signaled about that. At the same time, the support to the American currency was provided by the "broth" of recent days, when the good statistics for the United States economy was published, which set the mind of the market on the next expectancies as for the stiffening of the policy from the side of FRS. As for the data represented on Thursday, they appeared to be multidirectional – the number of preliminary jobless claims increased unexpectedly last week, having given the reason for the predictions that the labor market is recovering unsteadily. The preliminary jobless claims grew up for 8 thousand till 480 thousand; while the decrease for 10 thousand was expected. The secondary claims have also increased, but much less considerable, here it was observed +2 thousand, that summed the total number till 4 602 thousand. At the same time the data as for the manufacturing orders in the USA demonstrated the growth in December, surpassed all expectances, as the increase for 1.0 per cent till 370.37 Billion of dollar was fixed, at that the forecast expected the growth only for 0.3 per cent. Today news brings the information, which is difficult to be overestimated and which is being looked forward by the market for a long time already. The Labor Report in the USA for January will be published. The forecasts expect a significant improvement and after the December shortening for 85 thousand they predict the growth; at that the dispersion swings within the range from + 20 thousand till +50 thousand. As for the unemployment level here the opinions resolve themselves to the absence of changes and maintenance of the rate at 10.0 per cent. The better is the result, the greater support will be provided to the American currency. Though, it’s necessary to make a notice that there’s a possibility of some restriction in the activity as the G7 summit is starting, which the issue of the currencies’ rates may be touched upon at.
EUR
The common European currency looked the worst among others at the leas session. The euro has fallen down to its minimums that were observed almost nine months ago and “gambled away” the US dollar just less than 200 points. The profitability spreads between the Greece and German T-Bonds began to rise rapidly again giving signal of the growth of the investors’ apprehensions. Moreover, the process of the collapse in confidence strengthened concerning other EU countries that are reckoned among the “unreliable” list. These are Portugal and Spain, which treasury securities were noticed in the margin increase as for the profitability spread corresponding with the German assets considered the benchmark. The ECB decision concerning the rates together with J.-C. Triche’s explanations of the European regulator’s positions at the press-conference have provided no support to the euro. It’s entirely possible that the remarks of the Head of ECB might add some pressure upon the European currency. The announcements that the economic growth would most likely stay moderate and irregular by reason of the unemployment growth in the current year; and the inflation’s prospects may be considered satisfactory presume the absence of the intents to stiffen the ECB policy. As known, ECB has kept the key rates of re-financing at 1 per cent i.e., without any changes. The news of the EU economy hasn’t also encouraged the uplift of optimism. The orders in the processing sector of Germany shortened rapidly in December. The orders fell down for 2.3 per cent compared to the previous month, though the forecasts expected the growth for 0.1 per cent. There won’t be much news about the EU economy. It will be represented with the data of German manufacturing in December. The forecast expects 0.7 per cent m/m and -3.7 per cent y/y after 0.7 per cent m/m and -8.0 per cent y/y before. However, the market attention will be focused at the information about the employment in the USA. That’s why the Euro zone statistics will most likely be ignored.
GBP
The British pound like to the euro was under powerful pressure at Thursday trades. The sterling has fallen down amidst the fact there’s a great probability that Great Britain will join Greece concerning the analogous troubles and also by reason of the increasing ambiguity as for the anticipating general elections. The BoE information about the meeting as for the rates and the prospects of its policy was neutral as well like to the ECB report; though it had some hints that the British regulator wasn’t ready to deny categorically the quantitative softening program. The Bank of England has declared the accomplishment of the Bonds Relief Program; though it hasn’t excluded its renovation in case of another decrease in the economy. It has signaled about the uncertainty in the steadiness of the recovering processes. The Bank of England has maintained the rates without any changes at its present level of 0.5 per cent, which is a historic minimum. The economic statistics from the “Isles” stated the home prices continue their increase. The housing prices index from the Halifax grew up for 0.6 per cent m/m in January. This dynamics has coincided to the forecast, but it was worse than the average value for the previous six months, when it was 1.1 per cent. The experts have mentioned the raise of the real estates supply, and that may provide the restriction of the increasing pressure and lead to a little decrease of the prices. The economic news set of today consists of the data of the manufacturing inflation in the “Isles” in January. The producers’ procurement prices index is presumed to be seen with growth for 0.9 per cent m/m and 6.5 per cent y/y after +0.1 per cent m/m, +6.9 per cent. The transfer prices index is presumed to be at 0.3 per cent m/m, 3.7 per cent y/y, and while before it had been 0.5 per cent m/m, 3.5 per cent y/y. As it’s clear, the inflation is increasing; though it’s less probable it may encourage the market to purchase the “cable” as on Thursday BoE announced the absence of any apprehensions as for the pricing pressure. The main influencing factor will be the US Labor Report at the current session. It’s expected to be positive, and that can contribute some extra pressure upon the “cable” if certainly it is proved by facts.
JPY
The Japanese currency enforced itself rapidly against the US dollar and the rest of the majors at the session on Thursday. The downfall of the willing to risk has determined the escape into the yen as a shelter-currency. The investors hastily closed the carry trade positions financed with the less-profitable currency. That in its turn has led to very voluminous purchases of the yen, and correspondingly, its enforcement at the market. The yen is traded under the influence of the foreign factors. If the US Labor Report being published today demonstrates positive which is expected the pair of USD/JPY will continue its enforcement. It’s entirely possible, this won’t like to the state authorities of the “Land of Rising Sun” thereupon on Thursday the increase of the Japanese currency for almost 200 points against the US dollar and for not less impressive figures as for other major “opponents” was observed. As a result, the risks of decision to intrude into the market through the intervention will appear. As it seems, such a perspective will be taken into account by the market, and in concerns of the yen it’s reasonable to keep a special caution. Nevertheless, the expectances as for the session of today for the yen are positive. This currency will obviously continue its growth.
Analysis prepared by:
Arkady Nagiev
Forex4you analyst
