The emotional background of the former week can be well determined as “For the US dollar”. Although the “greenback” appeared to be under the pressure in the beginning of the week amidst the rumors, expectances, gossips, and all rest concerning EU was going to render aid for Greece this very process became short-lasted. The new subtleties of the Hellas affairs together with the news from the US regulator got back the predominant positions to the US dollar, and that exactly was expressed through the confident enforcement of the “buck” all over the “front”. The key event for the market was the decision of the Federal Reserve to increase the discount rates from 0.50 per cent till 0.75 per cent; that was explained as the first step of the liquidities delivery’s gradual curtail program. At that the FRS functionaries persuade the investors in concert the whole next day that it didn’t mean the intents to begin the stiffening and the reference rate would be kept at zero mark for a along time still yet. The success has probably been achieved, and the final day of the former week completed not in favor of the US dollar. However, such a development of the events may be also charged to account of a very tempting for the profit fixation situation concerning the “long” dollar positions. The statistics published in the USA was as usual diversified, though it demonstrated no clear negative. The manufacturing grew up in January for 0.9 per cent after the increase for 0.7 per cent in December. The consumer price rose for 0.2 per cent in January; but in the core variant i.e., excluding the fuel and food products they decreased. The weekly results as for the jobless claims rocketed again; and the monthly budget execution account noted the lasting of the negative dynamics. By the way, the budgeting troubles in the USA are very like to the European ones as the deficit approaches to 11.0 per cent of GDP, and the budget revenue lowed down for 10.0/10.5 per cent last year. It’s also necessary to mention quite not bad dynamics in the regions, where the business behavior indexes grew up in February. Moreover, the State Treasury reported quite nice cash flow from the side of the foreigners into the US securities in December, + 63.3 Billion of dollar. The news set of the just started week includes a lot of important information. The following should be emphasized among the whole list of the macro statistics data: the business behavior index from the FRS Chicago, the Chicago provision managers index (PMI), the business behavior index in the US manufacturing, and also the data of the housing prices in the US mega cities after S&P/Case-Shiller. Besides, the sales data from both the primary and secondary housing markets will be in the full glare, and certainly, the précised data about the GDP run-up for the 4th quarter as well. However, beside the essential statistics the current week is also fruitful for the political events as the Heads of the regional FRB – Yellen, Boullard, the Minister of Finances T. Geitner, and also the Head of FRS B. Bernankey will appear with speeches as long as even twice. Furthermore, the greatest interest may be aroused by the biannual report of the Head of the Federal Reserve in the Congress, which is scheduled for February, 24. This whole gross of events encourages to the opinion that it’s reasonable to expect a high volatility at the market and most likely multidirectional at that.
EUR
In the beginning of the week the market’s attitude to the euro was allegiant enough as the euro was supported by the hopes for the making of the far-reaching in the positive lay-out decisions for the rescue of Greece at the summit of the EU Ministers of Finances. Even their absence summarizing the summit already as the latter had confined itself to claims concerning the assuredness of the aid hasn’t disappointed the market. The euro grew up last Tuesday as the risks inclination increased. The investors obviously annoyed with the ambiguity; and the situation afforded a sound moment for another profit fixation at the same time. However, the “bulls” had their day as for the euro very short as the Greek troubles returned to the agenda, wit the new “jacks” at that, which afford grounds for suspicions that the debt of this Balkan country was greater than mentioned before. As it turned out, the Greeks have delivered not entirely disregarded transactions with the derivatives and the candle-holder for the descendants of the Ancient Hellenes in these very deals became the American Goldman Sachs. Furthermore, the FOMC minutes have also helped to make pressure upon the euro, where the investors found threatens for the increase of the rates, together with the FRS decision concerning the increase of the discount rate. As a result, the common currency found itself at the minimums, which were fixed in May of last year. Not much EU economic news was represented; moreover, they made no influence upon the market in fact. The production in the development branch of the Euro zone grew up for 0.5 per cent in December, but it was -8.0 per cent for the former year in total. The economic sentiment index after ZEW decreased in February both in Germany and in the Euro zone. However, the PMI indicators of business behavior raised a bit specks and span. Frankly speaking, these indexes increased in the manufacturing branches only, while the decrease was observed in the services. The whole sequence of the economic data is expected this week. The reports concerning both the economy and the business behavior of the Euro zone will be noteworthy. These “sentiment” indexes are expected to demonstrate a very faint improvement. The EU consumer prices are still presupposed to be seen with the decrease and that exactly gets back the anxieties concerning the deflation. Against this background the forecasts as for the money supply in the Euro zone are accepted as even more threaten, because the absence of its raise is expected in January, and the entire curtail is predicted for last three months. The German economy will be represented with the large quantity of the significant data. The special attention of the investors will be instigated by the Ifo Institute information for February, which predicts the increase of the economic expectances together with the précised results of GDP for the 4th quarter, where in its turn, no changes are predicts in concerns of the disappointing data represented before. Besides, the forecasts signal the acceleration of the unemployment growth in Germany in February. The common currency mustn’t obviously wait for support from the side of the fundamental news as the influencing factor will be still for the political component of the week. Meanwhile, the very attractive for the profit fixation technical conditions may contribute some corrections into the negative expectances for the euro; moreover, the beginning of this mood has already been observed the previous Friday, while some portion of the losses were saved thanks to the increase of the common currency.
GBP
The British pound was traded with the decrease to the US dollar last week like to other majors. The budgeting deficit of Great Britain which may turn out to be at the same level as in Greece; and also the anticipatory parliamentary elections, summarizing which there’re apprehensions to face the absence of the majority, what in its turn would complicate the solving of the deficit troubles made pressure upon the sterling. Both the supplement and the justification for these anxieties became the data of the state finances for January published the previous week as the budget turned out to be in the deficit in January; by the way, it’s a case beyond compare historically high growth as the first month of the year was always with surplus as a rule. Besides, the unemployment grew up in January; and also the retailing collapsed for 1.8 per cent per month – that was in fact expected by reason of VAT increase. This tax increase has flung up the consumer prices where more than annual growth maximum was observed in January. In accordance with the message of the Confederation of the British Industry (CBI) the orders grew up a little in February, but maintained a great minus. The Bank of England announced the business crediting in Great Britain had shortened for 8.1 per cent y/y in December. To say it a word, nothing especially supporting the sterling was represented, and the enforcement of the latter last Tuesday was a consequence of the profit fixation together with the improvement of the general mood at the market, that in its turn has instigated the increase of the risks inclination. The weekly totals were far from being for the GB pound as the session closing price turned out to be at the rates observed for the pair of GBP/USD in May of last year. Not much economic statistics will be this week as for the “Isles”. The favorable results are predicted as for the précised data concerning the GDP of Great Britain for the 4th quarter, where the changes to the side of increase will probably be announced together with housing prices index from the Nationwide. The housing prices are predicted to demonstrate the growth for 0.4 per cent m/m in February again, and summarizing it the annual raise was marked with two-digit figures, +11.0 per cent y/y. Meanwhile, the mortgage loans capacity is expected with the curtail in January, and the consumer confidence index for February in Great Britain after Gfk is predicted without changes, -17, after a sudden decrease in January. As is evident, no special supports for the British currency are predicted from the side of the economic statistics. However, except for the fundamental indicators the public speaking of the members of the Committee for the Monetary Policy of the Bank of England and the Head of BoE M. King himself are going to be this week. It’s difficult to say how it may influence upon the market events as the rapid splashes of optimism in concerns of the GB pound are possible, but the positives emotions aren’t supposed to stretch for a prolonged period of time. The support for the sterling may still come from the side of the technical aspect as the price has already reached very powerful supports indeed in the pair of GBP/USD, and the GB pound decrease for almost 4 patterns is quite a sweet spot for the profit fixation.
JPY
The Japanese yen have never become an exception among the major currencies and also fixed the minus against the US dollar resulting the weekly session. Only the previous Monday the yen was in a greater demand than the US dollar; thereupon the GDP for the 4th quarter grew up for 1.1 per cent against the previous quarter. Some support for the Japanese currency was also observed amidst the Bank of Japan’s decision concerning the maintenance of the rates at the previous level of 0.1 per cent, but at that it didn’t want to broaden the commercial banks’ crediting program, by reason of the maintenance of the influence supply as for this instrument. Nevertheless, the FOMC minutes and FRS campaign including the increase of the discount rate have determined the result for the pair of USD/JPY, where the US dollar fixed the convincing plus. As for other economic news as for Japan, the manufacturing demonstrated the growth in December again as the activity in China obviously continued to help to the production branch of the country. Though, the business intensity both in this area and in the services decreased and was remarkable for the negative dynamics, -0.3 per cent and -0.9 per cent accordingly, in last month of the former year. The Japan news will be fruitful enough for the economic statistics as usual in last week of the month, and its quantity will enlarge as far as the week approaches up to its end. The most interesting data will be represented on Friday. The consumer prices are expected to keep them in minus in January concerning the whole country and also in February as for Tokyo but with some retardation. By the way, the corporative prices are also retarding their falling down according to the forecast. The manufacturing increased in January, at that with significant tempos per annum as forecasted. The retailing also increased in January, according to the analysts’ expectances, per month for 0.3 per cent m/m, but annually it obviously kept itself with minus for 0.2 per cent y/y. Besides, the important information concerning the trading balance for January is also planned to appear on Wednesday. Concerning the yen’s positions, here, likely to other majors, the technical picture together with the willing to fix the profit using the increase of the “buck” may become the core idea for the investors, especially in the beginning of the weekly session.
Analysis prepared by:
Arkady Nagiev
Forex4you analyst
