During the former weekly session the American dollar felt out in the cold against the Europeans, especially in its controversy to the GB pound. However, the “greenback” was further racking up profit concerning the yen. As a result, there was a picture, which is used to be considered as distinguished for the situation, when the level of the investors’ inclination to risk resides at high values – both the US dollar’s increase as for the yen and its falling down against the Europeans. However, it should also be mentioned that the losses against the euro were quite not large. Obviously, the resolution to render aid to Greece, which also caused optimistic attitude to the common currency, didn’t carry out that very cogency, which was necessary for the change of tone; whereas, the British pound possessed quite not bad support both political and macro economical. The economic data from the USA were multidirectional as usual. The development expenses lowered down for 1.3 per cent m/m in February thereupon the decrease for 1.4 per cent m/m, while in annual comparison it was -12.8per cent y/y. The expenses continued their raise in February, while the incomes stayed at their previous levels. The Conference Board stated the increase of the consumer confidence in March. The main topic of the week – the employment – demonstrated the discrepancy of the results, because the state statistics had declared the growth of the payrolls for 162 thousand by reason of the state recruitment for the population census and also the recovery of the employment since hard snowfalls, whereas the ADP exploration of the affairs in the private recruitment demonstrated the totals worse than the expectances, and consequently, marked minus despite the positive dynamics. The Institute of Supply Management index (ISM) for the manufacturing was remarkable for its sound raise, though the data from the regions were ambiguous as the index of FRB Dallas grew up and neglected the February decrease, but the Chicago PMI demonstrated the shortage. There’re going to be not many significant events, which may greatly influence the currency market, this week. All of them will be mainly of political character: there’re the FOMC minutes, which are going to be published on Tuesday, and also the speeches of B. Bernankey on Wednesday and Friday. Though, this very day may become trendsetter for the starting weekly session. Beside the March ISM index for the services, which is going to be presented today and expected with increase, and also the number of the outstanding real estates transactions in February, where another curtailing is predicted – for 1.0 per cent now, thereupon -7.6 per cent in January, the market’s attention will be focused on the USA FRS meeting. As it became known on Friday, the Federal Reserve had decided to hold a special session, where the discount rates’ future would be decided. Its increase is certainly also possible, and these expectances under the terms of low liquidities of the market by reason of day-off in a lot of countries may arouse a high volatility, in favor of the US dollar of course.

   Inspired by the EU summit’s decision in favor of rendering aid to Greece the state authority of this country have placed the bonds in amount of 5 Billion of euro. That contributed to the support for the common currency, though for a while only. The more particular reasoning of the situation by the investors aroused the sales of the debt instruments of this country. As a result, the profitability up-rocketed till extremely high levels again and determined the escalation of diffidence. However, the decrease of the euro in the beginning of the week changed with its raise in the middle of the weekly session, as obviously, the end of the quarter reasoned the adjustment of the positions, and that in its turn helped to maintain the endurance of the common currency. Resulting all the above mentioned, the euro has fixed plus as for the US dollar, but frankly speaking, not large, while the negative result was kept in concerns of the GB pound. There wasn’t much data about the EU economy. The German retailing demonstrated a decrease for 0.9 per cent y/y, and for the month -0.4 per cent m/m, since after the falling down for 0.5 per cent in January. On the contrary, the unemployment lowered down in Germany as the number of the jobless turned out to be for 31 thousand less, while the February data were also revised till the curtail for 1 thousand. The unemployment data were worse in the Euro zone in general as the raise from 9.9 per cent to 10.0 per cent was denoted. The increase of the consumer confidence was observed as the consumer prices grew up for 1.3 per cent in Germany during a year, and for 1.5 per cent in the Euro zone in whole, and that is higher than forecasted. The purchasing managers’ index for the manufacturing (PMI) reached its maximum in EU for almost 4 years, while the German PMI also demonstrated the impressive growth, from 59.6 to 60.2. The news set of this week, which is also shorter for the euro by reason of a day-off on Monday, has concentrated all significant data in the middle of it. Alongside to the interest rates’ decision, which is going to be pronounced on Thursday, the data of the retailing in the Euro zone will be represented as well. Here a slight annual raise is expected for February, 0.0 per cent m/m, -0.4 per cent y/y, since 0.6 per cent m/m, -1.7 per cent y/y in January. In contradistinction to this, the data about the German manufacturing are expected with an essential uplift for the same February, +0.8 per cent m/m, +6.3 per cent y/y since 0.6 per cent m/m, 2.2 per cent y/y. A ay before, on Wednesday, the results of the final estimation of business activity in the services will be reported. It’s presumed, the March values will be little better than represented previously both in Germany and in the Euro zone. Besides, the final data of the Euro zone’s GDP for the 4th quarter should be publicized – the insignificant growth of this indicator is expected to be proved. Probably, ECB won’t change the key interest rates and will maintain it at 1 per cent as the recovering tempos of the EU economy couldn’t be supposed distinctly stable still yet. The troubles of Greece, as it’s clear, will further make a negative influence upon the euro. It would appear that the euro will be under the great influence of rather political data than the fundamental indicators.

   The British pound was mainly increasing during the former weekly session. The causes for it were quite not bad data about the economy of the “Isles” together with the investors’ willing to fix the profit. The British GDP for the 4th quarter was slightly revised upward. The PMI of the manufacturing rose up till the peaks of 1994 in the final estimation. The Nationwide has denoted the renewed price increase at the market, but the payment balance totals – the sudden decrease of the deficit in the 4th quarter of last year. These data served as a nice support for the “cable” during the previous trading period, though there were also negative results: the mortgage activity was further lowering down, and the GfK consumer sentiment index for March decreased. Nevertheless, as already mentioned before, the sterling was a leader of the growth at the previous session. The publication of the business activity data will be lasted this week. The decrease is expected in the services area, but the neutral dynamics in the development sector. However, the key event should be connected to the Bank of England, which is going to shape destiny of the interest rates and quantitative softening programs on Wednesday or Thursday. No changes of the interest rates are expected, but the opinions concerning the volumes of securities’ purchases differed as some part of the analysts supposed that the enlargement was possible and that never favored the popularity of the sterling. Besides, the February data about the British manufacturing including the processing branch are scheduled to be published; and the forecasts resolve themselves to the raise. Till the end of this week the inflation data will have been published: the producers’ prices for March may demonstrate the continuation of the growth, and that subscribes some extra ambiguity to the situation, which will rise by reason of solving the questions in concerns of the monetary policy by the Bank of England. Generally speaking, no special negative is expected for the GB pound from a perspective of the economic data. Though, by appearance of the parliamentary elections the political component gets more influence, the probability of the parliamentary majority’s occurrence; that’s why, the polls’ results dedicated to this issue will intrude into the development of the market events.

   The Japanese currency was decreasing against all majors in the previous trading week. The willing to risk and high profitability of the United States’ T-Bonds made the yen the main instrument for foundering of the carry trade transactions. Alongside to it, the economic data didn’t raise optimism as for the recovery; and the disturbance of the state authorities concerning the deflation reasoned the probability of further growth in the volumes of the quantitative softening. The average salary in Japan was -0.6 per cent y/y in February, the households’ expenses shortened for 0.5 per cent compared to the January value and for 1.6 per cent y/y, the new developments sought down for 0.8 per cent m/m and 9.3 per cent y/y in February, the development orders turned out to be in minus for 20.3 per cent y/y, while in January the growth was denoted for 15.7 per cent. The manufacturing production was -0.9 per cent m/m, but +31.3 per cent y/y in February. Naturally, there were the data, which could be considered positive along some assumptions – the Tankan Report of the Central Bank demonstrated improvement in the first quarter, but kept minus, and the unemployment level didn’t demonstrate the growth and stayed at the previous degree of 4.9 per cent. The retailing was improved for 0.9 per cent m/m, and for 4.2 per cent y/y – most likely, because of celebration of the New Year. This week there’s going to be little economic news as for Japan; and the key event will be the decision of BoJ concerning the interest rates, which will be represented on Wednesday. No changes of the rates’ degree are expected, but the question of the capacities as for granting the liquidities to the market may become the moment, which will add the pressure on the yen as the announcement of the increase is also possible.

Analysis prepared by:

Arkady Nagiev
Forex4you analyst