The European events were the main driver at the market for a week now. The collapse in confidence to the aid rendering program as for Greece provided a support for the US dollar in the first half of the former session, while the “buck” was self-confidently enforcing itself against the euro and less intensively as for the GB pound, but yielding its positions to the yen due to the uprising of the tone, which determines the departure out of risks. However, till the end of the weekly session the same matter reversed the market quite oppositely and afforded grounds for the sales of the US dollar by the investors. The decline of the Greek bonds’ profitability together with the announcements about the budgeting deficit’s shortage in this country in the annual comparison and also the support declared by J.-C. Triche grounded the sales of the “buck”. As a result, the “greenback” has kept only a tiny portion of its achievements against the euro and recorded a great minus as for the GB pound, which had all chances to grow thanks to good economic values. Not much US macro statistics was published, and it actually made no influence upon the market. The outstanding sales transactions at the ready homes market rapidly increased in February: the households obviously hasten to seize the moment before the benefits’ expiry date. The number of the preliminary jobless claims grew up during the pre-former week, though the secondary ones curtailed greatly. The ISM index for the services rose up till the 4-years maximum in March; however, the consumer crediting is again in great minus in February (-11.5 Billion of dollar), since after a slight advance in January, whereas the forecasts predicted further raise. Moreover, the rest of the crediting spheres are in the negative dynamics as well. Both the industrial and trading loans curtailed for more than 20 per cent during a year, and that in its turn makes a bad influence upon the volumes of the money supply and also greatly complicates the task of the United Sates regulator to increase liquidities. Except the economic statistics, the news set included a political component as well. The speeches of B. Bernankey and some other functionaries of FRS mainly set mind on the opinion about the maintenance of the low interest rates and so made no support for the US dollar. There’s going to be a lot of economic news in the coming week. The consumer inflation should certainly be considered as one of the most important as it’s going to be published on Wednesday and should demonstrate the advance over the general index, 0.2 per cent m/m, 2.4 per cent y/y, since after 0.0 per cent m/m, 2.2 per cent y/y, but the decrease as for the core one, which excludes the food products’ and power resources’ prices. Further on, the retailing data will attract attention as they’re expected with the increase, and also the February data about the trading balance of the USA, which are predicted with the raise of the deficit. Besides, the market will pay attention to the state of affairs in the development branch. It’s presumed that the capacity of the recent developments has enlarged, but the number of the development permissions has curtailed. “The Beige Book” report will let us know how the situation stands in the regions form the point of view of the FRS explorations. The political component takes a lot of place this time as well, because two appearances of B. Bernankey are scheduled together with the Heads of the regional FRS Henning, Bullard, and some others. The data from China, which were published this weekend and stated the first case of the trading balance deficit, which is quite impressive by the way, -7.24 Billion of dollar, postpone the probability of the revaluation of the national currency in this country. The expectances of the yuan’s enforcement have pressed upon the US dollar. That’s why the probable time displacement of this event for quite remote future determines the probability of the American currency’s enforcement during some short-time period in the beginning of the week. Though, these presumptions haven’t still been proved yet, and the information about adopted peculiar steps concerning the aid for Greece prevails at the market now, and that causes the negative attitude to the US dollar’s prospects for the near future.

   The euro’s sag caused by the raise of the apprehensions that the Greek rescue schedule would malfunction through fault of “the Achaeans”, who had considered the IMF crediting terms too tight rate, ceased in the second half of the weekly trades. The reason of it is the announcements about the improvement of the budgeting affairs in this Balkan country as compared to the former year and also the proponent comments of J.-C. Triche at the press-conference after the pronouncement of the decision concerning the interest rates. Moreover, last day of the former week was remarkable for the confident advance of the euro, which has improved its positions for 100 points against the US dollar and almost for 80 points against the yen; the result of the controversy to the GB pound was less impressive, but positive as well. The cause for such a raise of popularity of the common European currency was the information that the EU authorities had settled the terms of the Greek aid financing schedule, moreover, the interest rates for the rendered funds would be much “below the market”. The investors’ enthusiasm wasn’t even marred by the announcements that the Fitch Rating Agency had decreased the sovereign crediting rating of Greece, as the advance of the euro was ceased for a while only. Concerning the economic indicators, they haven’t encouraged the opinion about the steady recovery within EU – the Euro zone’s GDP for the 4th quarter was revised to the worse side both in the annual comparison and compared to the advancing quarterly evaluation. The corporative investments curtailed for 1.3 per cent q/q, the households’ expenses stayed at the same level, the only improvement turned out to be in the export deliveries. The EU producers’ transfer prices grew up for 0.1 per cent m/m and shortened for 0.5 per cent y/y in February. The German manufacturing orders increased in February per annum, though they didn’t change compared to January – such an absence of movement was observed in the manufacturing of the EU largest economy as well. Specially it’s worthwhile noted that the purchasing managers’ indexes (PMI) were increasing till 3-years maximums. It’s reasonable to pay attention to the influence of such a matter as the decline of the discounts and state stimulating programs for purchasing cars as the new cars registration curtailed for 27 per cent y/y in March in Germany, and the new cars’ sales lowered down for 11.2 per cent in the 1st quarter in France. The demand doesn’t obviously increase by itself, without any pushup, and that encourages the pessimistic prospects. There’s going to be not much news about EU this week. The data about the manufacturing within the Euro zone are going to be represented; it’s predicted with growth in February. The final estimation of the consumer inflation for March both in the Euro zone in general and in Germany in particular. The forecasts presume the maintenance of the data within the advancing estimation, though a slight increase is probable as for the core index, till 0.9 per cent y/y since after 0.8 per cent y/y. As it became known at the weekend, the decision was made about the granting of the 5 per cent annual interest credit for Greece in amount of 30 Billion from the side of EU and of 10 Billion of euro form the side of IMF. Against this background Monday started with a sudden advance of the euro. If nothing happens that may deny the optimistic attitude to the decision of the Greek troubles the common currency may probably continue the raise this week.

   The major part of last week the British pound resided within the ranging trade. The political difficulties of Great Britain, caused by the apprehensions of so-called “tight-up” parliament, which might appear as a result of the elections, pressed upon the sterling, whereas the economic data provided the support together with the optimistic splashes both at stock and commodity markets. As a result, the optimism conquered, and the “Briton” competed a week with a confident advantage against the US dollar. The statistics helped the “cable” to increase in a greater degree, as the prices up-rocketed for 0.9 per cent monthly and for 5.0 per cent per annum in March, and the British manufacturing grew up for 1.3 per cent. The advance was also observed in the development branch. This is especially interesting, because this area of the British economy showed dullness for a long time. The British Chamber of Commerce publicized the series of encouraging data, though it registered the decrease of the retirement at the same time. In accordance with the data of the researching agencies the real estates market has demonstrated the price increase once again. There’s going to be not much economic news. The data as for the foreign trading of Great Britain is expected to demonstrate the trading balance deficit’s shortage in February thereupon the rapid growth in a month before. There’re opinions that the data about the commodities prices together with the consumer confidence index from the Nationwide will demonstrate a positive dynamics again. The prospect of this kind will certainly support the sterling. However, as it seems, the political events, connected to the election campaign, will become the main factor of influence upon the GB pound’s positions, and the risks of return to default are predicted for the currency of Great Britain from this very point of view.

   The profit fixation thereupon the great sag of the Japanese currency signaled the enforcement of the yen in the beginning of the previous week’s trades. Later on, the raise of the European troubles reasoned the massive departure out of risks, and that made the yen’s purchases more attractive, as a currency, which financed carry trade deals. As a result, the yen has recorded a steady plus against the “greenback” and also other majors. The enforcement of both the euro and the GB pound in the end of the week regained their losses against the yen only partially. The economic data again demonstrated the decline of the visible indicators, but the growth of the virtual ones as the Japan machine-building sector’s orders fell down for 5.4 per cent in February against 3.7 per cent in January, whereas the forecasts expected the growth for 4 per cent. At the same time, the sentiment indicators demonstrated the positive trend: the “economic observers’ index” raised in March to the new levels as for the indicators, which reflect the current moment and also as for the perspectives’ indicators. The government again increased the economic evaluation, and that coincided to the opinion of the Japanese CB. The news tape is not very informative as for the domestic economy this week. However, the data, which have already been planned for the publication, corresponds to the very significant statistics, as the domestic deflation is presumed to begin losing ground as the wholesale prices’ inner index may demonstrate in March an increase for 0.3 per cent m/m, -1.1 per cent y/y, since after 0.1 per cent m/m, -1.5 per cent y/y earlier. The final February data as for the manufacturing will most likely stay in the previous degree, -0.9 per cent m/m, 31.3 per cent y/y; though there’s also the opinion about their review to the better side. The M2 money aggregate, which has already been published today, demonstrated the shortage – 2.0 per cent in March thereupon 2.7 per cent before. Under the conditions, when the state CB makes efforts to grant the liquidities to the market, this distinctly negative result may press on the yen as it provokes the assumption of the necessity of the softening measures’ extension by the Japanese regulator.

Analysis prepared by:

Arkady Nagiev
Forex4you analyst