The retracement started last week towards the previous enforcement of the US dollar against all majors maintained the “greenback” under the pressure as for the sterling only, however, against both the euro and the yen the “buck” has still fixed the growth summarizing the weekly trades anyway. Though, it was loosing for these majors as well during some period of time. The support for the “buck” was provided by the outside news in a greater degree, such as reports concerning Greece, which were contradicting each other and so reasoning ambiguity. The news from China that the CB of PRC had announced the stiffening of the monetary policy again and raised the banking debt provisioning standards for 0.5 per cent was another drop. The latter news exactly has enlarged the fears of the investors concerning the acceleration of the global economic increase and enhanced the popularity of the American currency. The US economic news published the former week provided no earth shattering information. The trading balance enlarged its deficit to -40.2 Billion of dollar in December. The supplies data demonstrated a sudden decrease in December. The consumer crediting kept itself the same month in the negative dynamics, but much less impressive than before as its shortening amounted to 1.7 Billion of dollar only; however, in January the retailing grew up for 0.5 per cent monthly. Although, the Michigan consumer sentiment index showed a decrease in the beginning of February, and that sets minds on some anxieties that the consumers’ activity may start its lowering down and the retailing will further keep them within the positive trend. At the same time the preliminary jobless claims gladdened with their downfall till the rates of last month of the previous year; however, it’s known that something is out to lunch with these data concerning their authenticity. The current week will be shortened for the USA as Monday is a day-off thanks to the President’s Day. The news background of the rest will be actually dedicated to 3 issues: the first one is the development, where the growth of the new constructions’ number is expected together with the curtailing of the development permissions’ capacity. Moreover, the developers’ sentiment will be represented with the February housing prices index – NAHB, which is expected with increase. Another issue is a manufacturing inflation. It’s presupposed the producers’ prices indexes for January (PPI) – both general and core (exclusive of fuel and food products) will demonstrate a slight growth. And the last one is dedicated to inflation as well but consumer one (CPI) as the general consumer prices index for January is expected at 0.3 per cent m/m, 2.8 per cent y/y, and the core one – at 0.2 per cent m/m, 1.8 per cent y/y. Besides, the manufacturing producing news stands apart, here the growth is expected for 0.9 per cent in January, together with the publication of the FOMC last meeting’s minutes, as the market usually expects form it the hints on the beginning of the stiffening of the monetary policy from the side of FRS. Generally speaking, the trades will be less liquid in the first day of the week by reason of the holidays both in the USA and Asia where the celebration of the New Year is starting.

EUR
   The common European currency became a hostage of the flow of contradictory information in concerns of Greece and its bailout from the side of the European Union at the session during the former week. The hints on this country would get the support have afforded grounds for the purchases of the euro in the beginning of the week. The sudden departure of the Head of ECB J.-C. Triche from the seminar in the Australia amidst the information that the Greek issue might be solved positively at the EU summit have let the impulse to the expectances of this kind. However, the invariability of the reports from such an important EU member as Germany have suppressed upon the European currency as this country has denied the rumors about the plans as for the Greece’s rescue, though it has supported the exaggerated gossips meanwhile. Everything has finished with the maintenance of ambiguity. The EU summit’s insufficiency to justify hopes and the fact that it has finished with the general declarations only by reason of the absence of the specified outline have brought to nothing the patience of the market, which in its turn has melted down the euro till its new local minimums. Furthermore, the Euro zone economic statistics hasn’t encouraged to optimism. The advancing estimations of GDP for the 4th quarter appeared to be worse than expected. The decrease was observed in Spain, Italy, and Greece; at the same time the absence of growth was noticed in the EU largest economy i.e., Germany. This situation was let down a little by France as this country has marked the increase for 0.6 per cent for a quarter, though minus was here as well per annum. The GDP has grown up for 0.1 per cent as for the Euro zone in general – that appeared worse than expected. The decrease made 4.0 per cent for the whole 2009. The December data of the manufacturing were within the negative trend as well. The Euro zone has fixed the lowering down for 1.7 per cent m/m and -5.0 per cent y/y. As for the EU economic data this week the information from ZEW will be in the focus of the attention. The economic sentiment index is expected with growth in February in Germany. Moreover, the Euro zone trading balance will be interesting as the decrease of the surplus is predicted to 3.5 Billion of euro in December form 3.7 Billion. Besides, the attention should be paid to the advancing evaluation of the business behavior (PMI) both for the manufacturing and non-productive spheres in Germany and the Euro zone. The improvement is presumed in February across-the-board of this indicator. However, the debts’ troubles of the Euro zone will further keep the position of the influencing factors upon the positions of the euro and the market mood in general. Even today, on Monday, the meeting or the EU Ministers of Finances will have taken its place. This may afford new thought-provoking information – that in its turn will either neglect the decreasing pressure upon the euro or let new impulses for this process on the contrary.

GBP
   The British pound spent the whole previous week for the ranging trades. This lateral movement may obviously be considered as the retracement towards the downfall of the “cable” against the US dollar at pre-last week. Summarizing all this, the GB pound has managed to keep its positions, which have determined its advantage to the US dollar. Not much economic news was published as for Great Britain. The increased foreign trading deficit caused by the enlarged import of fuel together with the raise of apprehensions in concerns of budgeting troubles have pressed upon the “cable”. However, later some support, but short-term only, has been provided by the data about the industrial production in Great Britain, which grew up higher than forecasted in December. The Bank of England Quarterly Inflation Report has also favored the decreasing pressure upon the sterling as it contributed the information reasoning the essential diminishing of the probability of increase of the BoE rates. The British regulator has mentioned that the inflation rate would reside lower than the targeting one even in case of low rates. Alongside to it, the functionaries of the British principal bank have indicated that it was too early to curtail the quantitative softening programs. Moreover, the news background of the week represented the data form the British Retailer’s Consortium (BRC), which in its turn had announced the sales downfall in January that might generally be grounded after the increase of VAT in the “Isles”. The news set of the already started week is quite heavy as the homes price from Rightmove will be represented for February. They’re presumed with the continuation of growth till +6.0 per cent y/y. The statistics will also report the dynamics of the consumer price (CPI) and retailing ones for January, where the annual growth will probably be observed; however, the raise will cease in a monthly dynamics as it’s expected. It’s also predicted that the unemployment kept itself in January at the former level and didn’t mark the enlargement. Although, the market’s attention will be focused at the data about the state finances affairs and the money supply in Great Britain in January. The forecast predict the improvement. If these expectances aren’t justified rough times may roll around for the GB pound.

JPY
   The Japanese currency was traded within a very narrow range against the US dollar gradually giving ground, but as for the results of the weekly session it decreased against the “buck” for 50 points only. The economic data represented quite a breezy picture – the orders in the machine-building increased at once for 20.1 per cent in December after -11.3 per cent in November. The corporate products prices index decreased for 5.2 per cent in 2009, but in January of the current year only for 3.9 per cent by now. The volume of the banking crediting in Japan fell down in January for 1.7 per cent y/y. The employment kept itself at the previous level of 5.5 per cent. The trading balance surplus increased, but the payment’s one vice versa shortened. Besides, the data fixed the raise of consumers’ and householders’ behavior. Evidently, the indicators demonstrate the multidirectional dynamics. At the same time, these publications have never made any influence upon the currency of the “Land of Rising Sun”, which is most often influenced by both external data and the level of the willing to risk. Not much economic news as for Japan is going to be represented this week. Even today the data of GDP for the 4th quarter will have been represented, which are expected with growth for 0.9 per cent q/q. The précised data about the manufacturing for December will also be read off, and no changes are predicted in comparison with the advancing assessment. Later on this week, the ISM indexes will be represented both for the services and the manufacturing. As for the services the downfall is expected for 0.2 per cent and in the manufacturing – the growth for 0.1 per cent. Concerning the expectances connected to the Japanese currency positions they may be connected to the prediction of the growth of the yen in the beginning of the week, as the quarterly disbursements will be paid out and there will also the redemption of some part of expired securities in the USA. Taking into account that the Japanese investors are traditionally represented in these assets quite not bad, it’s possible to suppose the probability of the US dollar profits conversion into the yen and the growth of the Japanese currency against this background.

Analysis prepared by:

Arkady Nagiev
Forex4you analyst