The beginning of the first day this week was remarkable for the enforcement of the America currency. The weekend’s interview of the German Bundeskanzler A. Merkel, when she stated that the EU summit, which was going to be this week, would never lead to the adoption of the Greece rescuing outline, carried the investors off the risk and provided the enforcement of the “greenback”. Besides, the information that CB of India had raised the interest rates didn’t encourage the willing to risk as well. However, the totals of the trading day turned out to be opposite to its beginning. The US dollar has fixed the minus against all its main “opponents”. The change of mood occurred just after the opening of the US stock market when the indexes neglected their losses and passed into the positive sectors after the initial decrease. Against this very background the “appetite to risk” has enlarged, and that was marked with the sales of the “buck” all over the market. No significant statistics concerning the economy of the USA was published. The announcement of T. Geitner about the financial reform made no influence upon the market events. The US State Treasurer ensured the Congress that the bill draft that doesn’t guarantee any permanent defense or restrict risks wouldn’t be got through and heard an answer not to listen to the advices from the Wall Street. There’s going to be a bit more economic news; moreover, there’s quite important information among them: first of all, there’re the data about the ready homes market’s sales in February. The forecasts predict to observe the decrease till 4.95 Million of houses per annum after 5.05 Million of houses in January, when the indicator demonstrated the decrease also. The weather conditions in the United States are considered as the causes for it. Furthermore, the housing prices index for January will be also interesting as the decrease for 0.9 per cent is presumed to be seen after -1.6 per cent in the former month. The positive dynamics is expected in the data of the statement of FRS Richmond only. The Institute of Supply Management index (ISM) of the manufacturing will probably demonstrate the growth to 3 after 2 in March. As it’s seen, the great support for the US dollar isn’t forthcoming from the side of the fundamental data. However, everything will depend upon the events that make influence upon the inclination to risk. The disputes in the Euro zone afford enough grounds for expecting the return of the special interest to the American currency.

   Most likely, the current situation in the Euro zone is made red-hot and becomes a scandal. The categorical position of Germany as for the Greek troubles, which was declared through the announcement of A. Merkel that it wasn’t worth to hope for the positive verdict of issue through taking the set of measures aimed to support Greece at the next summit of the European leaders on March, 25, has sharpened the situation even more. The euro decreased in the beginning of the trading day and marked the new local minimums at 1.3460/70. The presuppositions of the necessity to appeal to IMF for assistance were another portion of supplement. Some lessening of tensions occurred since in course of his speech in the EU Committee for Economy and Monetary-Crediting Policy J.-C. Triche declared that ECB would have no objections to bilateral aid to Greece by other countries of the Euro zone, but under strict conditions. Besides, the Governor of ECB has also denoted that the measures for the budgeting deficit’s curtailing, which were declared by the Greek state authorities, were credible and might yield the desirable outcome. The euro’s default has ceased, and the strengthening of the investors’ inclination to risk together with the American securities’ increase have instigated the raise of this currency. Surely, the support was also provided by the investors’ willing to fix the profit. There was little news concerning EU as the only consumer confidence index for March was worth to be remembered, though even this indicator hasn’t been changed almost. In accordance with the represented data the advancing consumer confidence index grew up to -17.2 from -17.4 in February – actually, that were predicted. Besides, the monthly report of the Ministry of Finances of German was also published. The data of this statement point to the transitional increase of activity in the manufacturing and also to the maintained dullness of the private personal consumption. The sate authorities’ forecasts concerning GDP for the current year are based upon the expectance of the growth for 1.4 per cent since after the shortage for 5.0 per cent in 2009. Also, such burning moment for the present sate as the lessening of federal budget’s revenues was also mentioned in the report. The revenues rapidly curtailed in February for 10.6 per cent. There’s going to be no news about the EU economy today. The only point among the European events that can make influence upon the euro is the speech of the Swiss National Bank’s Governor, if certainly this act of publicity contains any information making hints on the probability of the interventions’ implementation targeted the weakening of the Swiss frank.

   The British currency didn’t make an exception, while after the initial decrease it rose sharply and fixed the “profit”' against the US dollar as a result of the day. The active positive dynamics of the sterling was caused by the same reasons as the euro as well i.e., the optimism at the stock markets in the USA; however, at the same time, it might quite possibly be explained with the expectations of the publication of the data about inflation, which is planned for today; and also because this very process is mostly active in the “Isles” and the “cable” weakening disturbed the Bank of England concerning the plans of further escalation of the pricing pressure. Anyway, that exactly has been announced by BoE functionaries recently, the previous week. The appearance of British top-management might be considered as some support for the sterling. The Prime-Minister G. Brown announced that the budget that will be represented on Wednesday foresaw the shortening of the state expanses for 20 Billion of pound in the following years and also that the government “will be curtailing the state debt carefully but decisively”. The Governor of the Bank of England M. King hasn’t also spoiled the optimistic picture when he reported that the economic activity in Great Britain would most likely be lower than the levels that had been observed before the recession and the economic conditions would be “far away from normal”. However, he also denoted that the recent data of GDP would be revised “a little” to the side of improvement. Today the news set involves the data concerning the consumer inflation and retailing. The consumer prices index (CPI) for February is expected with the decrease of the annual tempos till 3.1 per cent y/y after 3.5 per cent y/y. Probably, the retailing prices won’t also demonstrate any growth per annum and will stay at the previous level of 5.7 per cent y/y. The Confederation of British Industries (CBI) will represent the retailing report for March, which is expected with the decrease of the indicator till 20 after 23, but in this case the updates to the side of improvements are quite possible as the weather conditions in the "Isles" became better and now they don’ make negative influence upon the consumers’ activity. It should be mentioned that together with the growth of inflation higher than forecasted the GB pound may also turn out to be the object of massive purchases based on the expectances of stiffening steps from the side of BoE.

   The situation at the pair of USD/JPY didn’t suffer any radical changes at the trades on Wednesday. The currency of Japan enforced itself summarizing the day, though it kept itself within the narrow range against the US dollar. The Tokyo markets were closed due to the vernal equinox day. The minutes of the February meeting of the Bank of Japan, which have already been published today, stated that the Governing Board of the Bank considered the influence of velvet monetary-crediting conditions as increasing. Quite probably, the remarks that “the Bank needs to make rapid and decisive steps” for it to support the economic recovery by means of the monetary-crediting policy were conceived by the market as another hint on the readiness for further softening through the enlargement of the securities redemption’s capacities; that in its turn has made a negative influence upon the yen, which has decreased at the current session. The data about the supermarkets’ retailing all over the country will be published today as well. The dynamics of this very indicator is negative as per annum, and that is most likely to be observed in the report for February as well. Concerning the perspectives, the lateral trend for this pair of currencies will most likely last further in view of the ambiguity of the current state of affairs, which is caused by the finish of the fiscal year and also the apprehensions of the aggressive steps from the side of BoE.

Analysis prepared by:

Arkady Nagiev
Forex4you analyst