The former week turned out to be volatile, while the main driver was the political component that has enforced the “buck” and afforded ground for risk aversion in the very beginning of the session due to the probability of the conflict between the USA and China, which might be caused by the dispute over the yuan positions. Afterwards the same politics caused its sales-outs on the contrary when FRS announced the maintenance of the low interest rates for a long time still yet. Nevertheless, the “greenback” has completed the weekly trades with a confident advantage against the European currencies, but neutrally as for the yen, while the US dollar was traded against the latter within the range during all five days of the session in fact. The ambiguity as for the solving of the Greek financial troubles has instigated the support for the American currency that enforced itself thanks to the discord between Greece and Germany. Meanwhile, the economic statistics made a very weak influence upon the development of the market events. The deficit of the US payment balance’s current account grew up till 115.6 Billion of dollar in the 4th quarter from 102.3 Billion of dollar in the 3rd one. The foreign capital inflow made only 19.1 Billion of dollar in January, and that was much worse than previous 63.3 and also predicted 50.0. The business activity indexes in the areas of responsibility of FRB New York and Philadelphia demonstrated quite not bad dynamics. However, the development branch’s affairs have never gladdened as the new developments’ capacity fell down together with the development permissions; moreover, the prevailing tone of the development sector was pessimistic – that was confirmed by the National Association of House Builders (NAHB) index for March that decreased. These processes were caused to great degree by the continued supply to the market of the pledged houses derogated by banks from the loan-debtors and were on the bargain counter. The inflation has never shown any increase. The prices decreased in February, but according to the general index only; while the core one, which is a guide for FRS, demonstrated steadiness. The preliminary jobless claims curtailed as compared too the previous period, though the secondary ones enlarged. Generally speaking, the fundamental data have presented no fresh news and depicted common multi directed trends. The news set concerning the US economy isn’t too overloaded with the significant information. That’s why, it’s better to presuppose that the political component will be the main factor of influence again. Concerning the statistics data that are planned to be published the February results of the sales both at the primary and secondary real estates markets stir interest, because both the raise and decrease are expected correspondingly. The investors will also put attention to the ISM indexes from FRS of Chicago and Richmond, which are predicted to be with increase. Quite probably, the advancing indicator will also be interesting, which the information about the long life goods’ orders. The forecast presumes the growth of this indicator in February. Finally, the political component – it’s reasonable to pay attention to the appearance of the US State Treasurer T. Geitner concerning the fiscal reform which will already have occurred today, in the end of the American session, and also the speech of the Head of FRB B. Bernankey on Thursday about the curtailing of the economy supporting programs.

   The new wave of the euro’s sales decreased the common currency till its local minimums summarizing the trades of last week. Tuesday was the only day when the investors bought the euro. The investors preferred the euro due to expectances at first and later on actual basis as well when FRS declared the maintenance of the low interest rates. All the rest of the previous session the common currency was under pressure. As it seems, the apprehensions concerning the Greek debts have moved to a new level. The talks appeared that the state authorities of Greece will request assistance from IMF amidst the absence of any peculiar schedules concerning rendering of aid directly from the EU countries. Besides, both the announcement of A. Merkel about the necessity of working-out the Euro zone log-off procedure for cases of rules-breaking by the exhibiting countries and also the claim of the Greek Prime-Minister G. Papandreu concerning the necessity of values’ return into the country that had been taken out of Greece by Germany during World War II have aggravated the situation. The English of this is the unvarnished disagreements in former “united family” of the countries of the Euro zone haven’t encouraged confidence to their currency that turned out to be next the minimums of this year, at 1.3500. The economic data have also better encouraged the anxieties about the economic recovery than to the contrary. The employment in the Euro zone fell down for 0.2 per cent in the 4th quarter compared to the 3rd one. The productivity in the development branch of the Euro zone lowered down for 2.2 per cent m/m in January since after the decrease for 1.0 per cent m/m in December; whereas the annual shortage made 12.5 per cent. The payment balance demonstrated the deficit and the capital outflow in January; the very same processes were observed in the trading balance as well where the surplus gave way to the deficit of 8.9 Billon of euro. The economic sentiment index from ZEW in Germany decreased in March. There’s going to be not much news about the EU economy this week. The main part of them – also the most significant one – will be concentrated on Wednesday. The purchasing managers’ index (PMI) both for the manufacturing and services of Germany and the Euro zone in general are expected with some revision to the side of increase for March. Besides, Ifo Institute’s “sentiment” indexes for Germany are also presumed to be seen with raise. The new manufacturing orders in the Euro zone foe February are also predicted to be with the significant growth, 2.2 per cent m/m, 13.9 per cent y/y since 0.8 per cent m/m, 9.5 per cent y/y before. Nevertheless, despite fine promises of the fundamental forecasts the main driver of cheers concerning the euro will be the issue of the budgeting deficits together with the EU countries’ ability to fulfill their debts’ obligations. At this moment no decision that gives hopes for the stabilization is observed still yet; and that in its turn may determine the further maintenance of the distrust to the common currency.

   The optimism for the GB pound was observed a bit longer than for the euro as for two long sessions the sterling was demonstrating the increase against the US dollar. The information about the raise of the rating gap between two parties that pretend to get the majority in the parliament and also the emersion of hints on the inclination to the hard monetary-crediting policy of the Bank of England as its functionaries had stated the risks of the inflation raise incase of further weakening of the GB pound, has favored all mentioned above. Besides, the published data as for the labor market of the “Isles” caused the raise of hopes for the steady improvement in the economy. The February statement demonstrated the shortage of the jobless’ capacity for 32.3 thousand of persons, and the January value was also revised to the positive side. However, despite the above stated, both the apprehensions and the data for the disappointment turned out to prevail; that’s why, the GB pound was decreasing quite greatly during the whole second half of the weekly trades. The mortgage market in Great Britain began to decrease. The appeals for credits curtailed for 5.5 per cent in January and also for 2 per cent in February. The house prices will obviously continue their decrease as it has already been demonstrated by the data of the previous week and also preceded it. The wide money supply (M4 aggregate) mentioned the further curtailing and marked with its worst level since 2000, which has afforded serious grounds for considering the talks about the accomplishment of the quantitative softening distinctly premature. The Confederation of the British Industries reported the decrease of the orders in the processing branch in March, which had stated an extremely low level of the domestics demand and had got no hopes as for perspectives correspondingly. However, the state budget’s data afforded some grounds for optimism as the February deficit turned out to be record-breaking, but much lower than the forecasts at the same time. The data about the consumer inflation in February are going to be represented the current week. It’s predicted the CPI will prove the decrease of the annual tempos of the inflation. If this isn’t confirmed the before mentioned BoE tunes concerning the prices increase will be able to instigate the market’s inclination to purchase the “cable” basing upon the expectances of the measures from the side of the British regulator. Besides, the publication of the retailing data is also expected. The raise is possible here, moreover, with more rapid tempos than before as the weather conditions have finally settled. The budgeting report, which is going to be represented on Wednesday, will also be in the full glare of publicity. It should be considered that the fundamental data presumes no pressure upon the sterling. If there’s no pressure from the political side as well the GB pound will be able to cease its downfall and even demonstrate the inclination to the increase possibly.

   The Japanese currency spent the whole week within the narrow corridor and completed the trades against the US dollar next to the opening prices and fixed a neutral result. Obviously, such result might be explained with the investors’ indecision amidst the ambiguity connected to the multi directional factors that reason the positions of the Japanese currency. The final month of the fiscal year disposes to expectations of the profit repatriation, which may cause the yen’s enforcement. At the same time, the clear discontent of the government in "The Land of the Rising Sun" with the powerful yen afforded grounds for apprehending the interventions aimed to weaken the currency. Besides, the announcements of the Bank of Japan about the possible enlargement of the softening programs concerning its policy, which had been made before, also encouraged the expectations of the yen’s weakening. As a result, the Japanese regulator doubled the program of emission, but kept without changes the plan of T-Bonds’ redemption at its last meeting concerning the interest rates. Obviously, this information disappointed the market a little and also didn’t put the entirely clarity as the currency failed to overpass the edges of the range and was further traded within this pattern up to the end of the week. In general, the economic news was the same in nature – the dynamics of the average salary for January turned out to be negatively directed after the revision, till -0.2 per cent from +0.1 per cent, though the February consumer sentiment index demonstrated the growth. The business activity indexes both in the manufacturing and services increased in January likely to the January business activity index for other economic branches for the same month, which was published last Friday and made 3.8 per cent m/m, after -0.2 per cent m/m. The corporative capital expenditures during the completing financial year have been curtailed for 25.3 per cent averagely. The news of the current week will be represented to a great extent by the data of the prices’ dynamics. In accordance with the forecasts the deflation will continue to "run the show" in the Japanese economy as the corporative services’ prices index will probably demonstrate the negative result in February, -1.2 per cent after -1.0 per cent; the consumer prices index (CPI) will demonstrated -1.1 per cent all over the country for the same month and -1.7 per cent for Tokyo in March. The trading balance’s totals for February will also be represented as the decrease till 400 Billion of yen from 730 Billion of yen is expected. In other words, the forecasts concerning the economic indicators don’t afford any grounds for supposing any breakout to the side of an upturn in business of the Japanese economy and also set mind on the expectations of the continuation of pressure upon BoJ from the side of the government targeting to take measures for lessening the deflation. Obviously, that suggests waiting for the yen’s falling down in the nearest future, but as it seems, since the end of March still yet.

Analysis prepared by:

Arkady Nagiev
Forex4you analyst