The absence of significant news determined the multidirectional trade on Tuesday. The greater part of the session on Tuesday the US dollar was traded within the range against both the GB pound and yen, but it demonstrated the volatility in its controversy to the euro. As a result, the losses both to the yen and euro were fixed summarizing the day and a very little profit as for the GB pound. In the very beginning of the trades the “buck” enforced itself against the Europeans amidst the same apprehensions concerning both Great Britain and Greece. However, a bit later the hopes for the meeting of Papandreu and A. Merkel in the end of the week eased tension, and that was marked at the bonds market with curtail of the spread and the enforcement of the euro as for the “greenback” against this background. The appearances of the Head of FRB Kansas-City T. Hennig, who has announced the necessity to turn around the market to a little increase of the key rates, and also of the newly-appointed Head of FRB Minneapolis N. Cocherlacotte, which has included the conclusions that in their turn encourages the escape out of risk, supported the US dollar up to the moment, but didn’t provide any great changes at the market. Concerning the published statistics it’s reasonable to remember the data from the Redbook Research about the sales in the US retailing networks along the first four weeks of February. The indicator grew up for 1.6 per cent compared to the first month of the year i.e., January. In comparison with the same period of the previous year the sales increased for 1.5 per cent. The US economic news tape, which is going to be published today, brings interesting and significant information, at that the forecasts predict the positive dynamics all over the spectrum of today news. The supply management index in the services (ISM) for February is expected with the growth to 51.0 from 50.5; the February ADP report may demonstrate an essential loss of jobs’ shortage in the private sector, till -9 thousand after -22 thousand in January; and finally, the FRS Report “The Beige Book” about the regional affairs will also be represented. Besides, another representative of FRS, the Head of FRS Philadelphia E. Rosengren will also speak. Generally speaking, the US dollar seems to possess fundamental “legs”, which may give it back the possibility “to make a pressure” upon the “opponents” if certainly the forecasts come true, or the data, especially those from ADP, turn out to be better than expectances.

EUR
   The euro increased against the US dollar at the trading on Tuesday amidst the profitability spreads’ narrowing concerning both the German and Greek bonds. This fact together with the announcement of the state authorities of Greece as for the coming report about the new steps aimed to the budgeting deficit shortage, have obviously determined some lessen of tension and provided the support to the common currency. As like as not, the expectances and hopes for the positive totals of the meeting of Papandreu and A. Merkel, which is going to occur in the end of the week, did their bit to some flatten of the situation. The EU news was represented with the inflation data. The producers’ prices demonstrated fast growing tempos in January by reason of rapid price hike for energy resources. The producers’ prices index (PPI) grew up in January for 0.7 per cent m/m and decreased for 1.0 per cent only in annual comparison. It was observed +0.1 per cent m/m and -2.9 per cent y/y in December. The forecasts predicted +0.5 per cent m/m and -1.2 per cent y/y. Meanwhile, the consumer prices suddenly lowered down in February as the consumer prices index fell down till 0.9 per cent y/y from 1.0 per cent y/y, whereas the forecast expected no changes and the maintenance of the level at 1.0 per cent y/y. This moment assured the market’s opinion that in the anticipatory ECB meeting concerning the rates, which decision would be announced on Thursday, there will be no increase of the rates. The data going to be published today will provide the final estimation of the February purchasing managers’ index in the services (PMI) of Germany and the Euro zone in general as no changes of the advancing evaluation are expected. Furthermore, the special attention will be paid to the information about the retailing – as the analysts suppose the sales downfall will be observed for -0.3 per cent m/m, -1.6 per cent y/y in the Euro zone, and in Germany for -1.0 per cent m/m, -1.0 per cent y/y. The perspectives of this kind never set the mind on the expectance of the support for the euro. Nevertheless, the main factor of influence upon the positions of the common currency is still the situation in Greece – either the absence of the outlines concerning the new effective measures aimed to the budgeting deficit’s shortage or the failure in the achieving of agreement about the aid from the side of the EU countries – will keep the euro under the pressure.

GBP
   The British currency continued to stay keep itself the pressure at Tuesday trades, but it was much less pressure already than in the first day of the trades when the “cable” fixed about -200 points after its collapse almost for 500 points. Some composure was contributed to the situation by the data of the last public opinion poll in Great Britain population as they demonstrated the decrease of the chances of the situation occurrence when the Parliament has no majority. Besides, the economic data published at the session didn’t instigate the raise of optimism. The activity in the development area of Great Britain rapidly retarded in February and the reason for it turned out to be the new orders shortage. The purchasing managers’ index in the development area (PMI) fell down to 48.5 in February from 48.6 in January, at the expectancies of the growth till 46.9. The components of this indicator demonstrated the powerful decrease of the employment level, and that casted more pall over the general picture. Nevertheless, it was denoted in the report that the confidence to the activity level in future keeps itself high; and the development companies are optimistic concerning intensity during this year. At the same time the state authorities’ intents to start the state expanses’ shortage amidst the massive budgeting deficit may make a negative influence upon the sector’s state as it has already been in the conditions of the decreasing activity for recent two years. Today’s news set will represent the last portion of February data from PMI for the non-manufacturing sector. The supply management index in the services is expected with the growth to 55.0 from 54.5 in January. If the dynamics analogous to the data of the development area is observed concerning this indicator the GB pound will come back under the powerful pressure as the services area in the “Isles” is a leading one. Moreover, the expectations of the meeting of the Committee for the Monetary-Crediting Policy of the Bank of England, where the adoption of the decision concerning the further implementation of the quantitative softening policy may influence upon the investors’ opinion. The decision from this BoE meeting will be represented tomorrow.

JPY
   The Japanese currency spent the whole trading day on Tuesday within the narrow range against the US dollar, but finished the session with the enforcement to the “buck” and even with the exercise of the new local minimum. The less impressive economic news from Japan published at the previous session and the absence of the significant data from the USA caused ambiguity and the lack of ideas at the instrument of USD/JPY. Today the data about the average wages in January were published. As the results state the level significantly increased, to 0.1 per cent y/y, from -5.9 per cent y/y, whereas much less successful changes were expected – the growth till the rate of -1.2 per cent. Concerning the yen’s perspectives, as it seems, the much lowered possibility of the rates increase in the USA and departure from the risk reigning at the market will keep the yen among the leaders of the growth at the market all over the front for some time. The current situation greatly increases the probability of the Japanese currency raise till the new local maximums – 88.00/87.50.

Analysis prepared by:

Arkady Nagiev
Forex4you analyst