The US dollar decreased against the euro at the session on Wednesday and also maintained the negative dynamics in its controversy to the GB pound as well. The general market situation during the previous session has demonstrated the raise of the investors’ inclination to risk as the Japanese currency was mainly lasting to lose ground. Obviously, the end of the quarter caused the necessity to adjust positions, which are open “in favor of the USD”, making to sell the “greenback”. Not so good as expected economic data from the USA and, on the contrary, favorable ones from the Europe provided these trends. The pressure upon the US dollar has already begun at the European session and strengthened thereupon the ADP data about the number of the private sector’s payrolls ha turned out to be significantly worse than the forecast. The payrolls suddenly lowered down for 23 thousand in March, whereas the growth for 50 thousand was expected. The values of last month were revised also to the worse side – they were decreased for 24 thousand, while it had been informed about -20 thousand in the initial statement. The information from Chicago didn’t also gladden as the purchasing managers’ index, which is well-known as a Chicago’s “business-weatherglass”, decreased till 58.8 in March compared to 60.8. As it’s clear, the business activity was further growing in March, though with significantly slower tempos. However, all 7 sub-indexes within this indicator have demonstrated the growth, and that encourages the prospects. The retardation of the business activity was also observed in New-York as well. The business dealing’s current conditions index lowered down to 60.6 in March from 78.1 in February, but the prospect is considered to be pinky here as well as the employment index grew up to 55.1 in March and has been residing higher than 50 for the fifth month running. However, there were also positive data in the news set about the US economy. The manufacturing orders demonstrated the surmount of the forecast in February, while the growth was for 0.6 per cent in accordance with the represented data, and the forecasts supposed to see +0.3 per cent. The January information was revised to the side of increase – to 2.5 per cent from 1.7 per cent. Concerning the news, which are going to be represented today, the special attention will be paid to the preliminary jobless claims, which may show the shortage from 442 till 440 thousand following the predictions, also the Institute of Supply Management index (ISM) for March, where the increase will probably be shown from 56.5 till 57.0, and finally, the development expenses in February, which are presumed with curtail for -1.1 per cent m/m since -0.6 per cent m/m before. It should also b mentioned, that no special support for the “buck” is expected from the side of the fundamental statistics, that’s why, the continuation of decrease is quite probable, whereas the expectance of good dynamics as for the employment i.e., the US Labor Report, which is settled for tomorrow, may become the restricting factor.

  The necessity to put the balances right till the end of the 1st quarter of this year and al so the willing to continue the fixation of the profit since the euro’s default obviously supported the common currency at the trades on Wednesday, while the respectively favorable economic data helped the investors. Having said so, the fact was disregarded that the current situation is still challenging, and it’s too far from the finish of the debts’ crisis. The profitability of the Greek bonds, which reached high levels by reason of the sales again, may be considered as the confirmation for this. The statistics was supporting the European currency as the consumer prices grew up in the Euro zone in March greater than expected as this index increased for 1.5 per cent y/y, compared to February growth for 0.9 per cent y/y, while the analysts expected the increase for 1.2 per cent. It proves the price situation’s steadying alongside to the diminishing of the deflation’s threaten, which has resided high positions recently. The affairs in the EU employment was depicted ambiguously as the number of jobless fell down for 31 thousand in March in Germany, and the February data were revised from +7 till -1 thousand; however, the unemployment increase to 10.0 per cent in February for the whole Euro zone. The news background will most likely chill down a little optimism in concerns of the euro today. The February data as for retailing in Germany, which have already been published today, turned out to be worse than predicted, -0.4 per cent m/m and -0.9 per cent y/y, while it was expected 0.1 per cent m/m and -0.4 per cent y/y. The purchasing managers’ indexes (PMI) for the manufacturing both of Germany and the Euro zone for March will be finally announced a bit later. No changes compared to the recent publications are expected; otherwise, if any result differs from these expectances the response as for the euro will be relevant.

  The GfK consumer confidence index for Great Britain, which was published in the beginning of the previous session and turned out to be worse than forecasted, didn’t disappoint the investors, who continued their purchases of the sterling on the Wednesday. The good statistics from the real estates market and, first of all, the encouraging political news that let hope for positive results of the parliamentary elections for the solving of questions touching upon the budgeting deficit, continue to support the sterling, which increased to the level of the middle of March having exceed the level of 1.5200 against the US dollar. No economic data were published in the “Isles”, and as said, the sterling was supported by former “breed”. Today the publication of the March business activity picture in Great Britain will start, and as usual, the first part will represent the purchasing managers’ index (PMI) for the manufacturing. The forecasts expect the growth of the indicator, though with slower tempos now than earlier, while it’s expected to see 57.0 after 56.5 in February. If the hopes don’t come true the sterling will start its decrease, but in case of much higher fact then the forecast the “cable” will get additional impulse to its growth. As for more distant prospects, there’re great doubts at the market concerning the sterling may maintain its steady growth, and this very uncertainty is based upon the political background, that connected to the parliamentary elections.

  The dull economic data from Japan and also the initial stages of curtail of the liquidities in the USA, which are determine by the accomplishment on March 31of the redemption program concerning the securities, which were covered by mortgage, jump-started the increase at the pair of USD/JPY. Moreover, the expectances that the US Labor Report, which is going to be published on Friday, will be favorable provide some extra support for this pair of currencies. The purchases of the US dollar by the Japanese importers in the end of the fiscal year in Japan have also contributed to the popularity of the American currency. The data, that have already been published today, stated the coincidence to the forecast for the data of the Tankan Report from the Bank of Japan for the 1st quarter as the ISM index for the sector of big producers turned out to be just forecasted -14 since -24 in the previous period. The activity index for the services for the 1st quarter also demonstrated -14, though it ha been expected at a bit lower level of -17. As for the events, which will reside later today, the attention should be focused to the appearance of the Governor of BoJ M. Sirakawa as any announcements that concern the enlargement of the softening programs aimed to the struggle against deflation will suppress the yen even more.

Analysis prepared by:

Arkady Nagiev
Forex4you analyst