The past session was the first trading day this week, the dollar recorded a minus against the Europeans and growth relative to the yen. The very good data on the UK economy contributed into the efforts of the pound to show its benefits of the “green currency” and for the euro, the support came from information on the improvement in the issues of budget deficits in Greece, where there was a decrease in the 1st quarter of this year by 40% compared to the same period last year. Of the significant statistics on the U.S. economy, in fact, only the data for weekly employment were represented - the number of applications for unemployment benefits unexpectedly rose by 18 thousand and constituted 460 thousand, though, expected to fall by 1 thousand. The indicator of the previous week was revised upward to 442 thousand from 439 thousand, however, the number of secondary applications decreased by 131 thousand and constituted 4 550 thousand to 4 681 thousand, though, the positive can be correlated with the method of counting and does not give much optimism. The political content of the day (speeches of the FED functionaries) has not produced any effect on the market. Today, once again, the economic data will be not much, the information on wholesale inventories in February is likely to be published. Forecasts suggest an increase by 0.4% after -0.1% in the previous period. This information is unlikely to influence the market. It is possible that the trade will be carried out in the positive mood relative to the news emerged on Thursday and this threatens to leave the dollar under pressure.

   The trading on Thursday started with a continuation of the decline of the euro against the background of the investor’s continuing concern relative to the problems with the debt financing in Greece. Though, later, the single currency of Europe regained the lost ground. This turn occurred after having passed the message on the significant improvement in the fiscal deficit in Greece. The Minister of Finance of this country said that the budget deficit in Greece in the 1st quarter of this year fell to 4.3 billion euro against a deficit of 7.1 billion euro in the 1st quarter of 2009. Further, the government spokesman said that there is no need for support within the program of salvation from the EU and the IMF. In addition, the euro was helped by the optimistic comments of J.-C. Trichet at the press conference after his announcement of the decision on a rate that “the default is not a threat to Greece.” The main event of the day - the decision by the ECB on a rate - showed the expected result: the key interest rate remaining at 1%. At the same time, macro statistics of the EU economy did not give reason for a rise in the moods - the data on retail sales in the euro area were the lowest in 13 month period. The decrease in February is designated by 0.6% m / m and 1.1% y / y. This trend happened to be worse than a forecast by 0.0% m / m and -0.7% y / y. Moreover, the data in January were revised to go down. The industrial production in Germany in February did not show anything interesting – the production was unchanged compared to January when the growth was expected by 1.0% m / m. The published data today showed growth in the current account surplus of the payment balance in February to 9.1 billion compared to 4.4 billion euro in the previous month. A year earlier the surplus was at the level of 7.1 billion euro. The forecasts supposed the growth to only 6.5 billion euro. Perhaps, this will be a positive added to the mood rise for the euro and the European currency will continue to rise at the current session.

   The news background on the UK economy was full of the positive news on Thursday. The start was set by the data from the housing market. According to the Halifax, the house prices in the “islands” rose in March, the price index rose by 1.1% m / m and by 5.2% y / y. It should be recalled that in February the index decreased by 1.5% m / m and rose by 4.5% y / y. The forecasts supposed more modest results – the growth by 0.4% m / m and by 4.7% y / y. The next positive package was the data on the industrial production. As it was presented, the production in the manufacturing industries of Great Britain in February showed the highest annual growth for 24 months. The production in manufacturing increased by 1.4% y / y and by 0.1% m / m. The industrial production in general, also, turned out better than expected, the index showed an increase by 1.0% m / u and a decrease by 0.1% y / y. The forecasts suggested growth seen at 0.5% m / m and falling to 0.5% y / y. Besides, the Bank of England’s decision on the interest rates was not disappointing. The British regulator did not change the amount of the program to buy bonds, leaving it within the 200 billion pounds and has kept key rates steady at 0.5%. There were no comments on the prospects of monetary policy. Obviously, it is provoked by the political situation related to the coming parliamentary elections. Today, the information on the production of inflation on the “islands” in March is to be published. As it is known, the price pressures in Britain are strong and the forecast assumes continuing momentum of growth, and  rather confident, so that this may lead to further interest in sterling since it raises the  fears on tightening  the BoE policies earlier than expected.

   Japan's currency began trading session on Thursday by continuing growth against the major currencies but has completed trades with a little minus in all the aspects. The growth of appetite for risk in the second half of trading on Thursday, amid the positive from Europe and the rise in the stock market in the U.S., helped draw attention to the yen as the funding currency for carry trade. The report of the Bank of Japan showed no change in the assessment on the economic situation in April. However, there were more optimistic statements about the main components of the economy including investment companies and financial conditions. Today, the economic data from Japan have not been reported. As for the prospects for the yen, the burst of optimism, which is observed in the higher-yielding currencies, can leave the yen under pressure.

Analysis prepared by:

Arkady Nagiev
Forex4you analyst