The previous session was distinguished with the raise of ambiguity at the market. The successful Greek bonds’ subscriptions fed optimism for a while as the investors obviously wonder already “What comes next?” Beside the rescue plan never settles the Greek point completely, there’ re also reasons for apprehensions in concerns of some other countries of the European block, which had faced the same deficit’s troubles as Greece had. To say it English, the market doesn’t believe in the finishing of the financial difficulties of the Euro zone. That’s why, the US dollar completed the day within the area of the opening prices with slight losses against both the Europeans and yen since after it had spent the whole session within the lateral trend. The US economical data, which were published yesterday, didn’t warm up the interest to the “greenback” as the deficit of the US foreign trading enlarged even more than forecasted by reason of the import’s increase. In accordance with the represented data, the deficit in the US foreign trading concerning both the goods and services grew up for 7.4 per cent till 39.7 Billion in February from 36.9 Billion of dollar in January. However, the trading deficit in the Chinese-American trading relations curtailed in February till the lowest possible level for almost a year, and that in its turn might be considered as “one of the trumps” in favor of the Chinese state authorities in their disputes with the American government touching upon the issue of the yuan’s revaluation as the Chinese can’t in all conscience agree to it. The Leader of PRC Hu Jintao told on Monday to the President of the USA Barak Obama that “China will stand to the principles of restructuring the rate of exchange forming’ mechanism basing their own social and economic needs ...” Quite probably, such vigor partially neglected the impressions of the events, which could press upon the US dollar. Furthermore, the small business sentiment index from the National Federation of the Independent Entrepreneurs fell down for 1.2 point till 86.8 point in March. Though, the retirement decrease is even more disappointing as the employment subindex decreased for 1 point to -2 per cent in March. However, the American consumers turned out to be better spirited concerning the economy and indexes of their personal finances in April compared to the previous month. The IBD/TIPP sentiment index, which was represented yesterday, grew up to 48.4 in April compared to March, and the indicator, which estimates the consumers’ opinion about the economic prospects for next six months, increased for 5.5 point till 51.9. The news background of today is quite amazing as at first the consumer inflation is going to be represented, where the consumer price index (CPI) is predicted to be seen with the essential annual raise, 0.1 per cent m/m, 2.4 per cent y/y. In elation to the FRS meeting concerning the interest rates on April, 27-28 that may become a supporting factor for the “greenback” if certainly it is proved by facts. Later on the market’s attention will be focused on the speech of B. Bernankey. Finally, till the end of the day “The Beige Book” report will be publicized, this will afford a foretaste of the US regional affairs. It looks like there’re no especial factors of pressure upon the “buck”, that’s why the continuation of the ranging trade is quite probable.

   The demand for the nondurable Greece debt instruments at the auction on Tuesday turned out to be high. The Greek have involved 1.56 Billion instead of expected 1.2 Billion of euro. Primarily, that news supported the common currency, but then the euro weakened, and having failed to keep its positions stayed within the ranging consolidation in the sector of opening prices and completed the day with slight plus against the "greenback". The investors worried about the perspectives, because the auctions for the durable debts instruments will be more important, and the problems are quite possible there as there’re also debts of Spain and Portugal. That certainly arouses concerns and makes the common currency less attractive for the investments. There was not much EU economic news: the consumer prices in Germany increased in March for 0.3 per cent, and the annual inflation accelerated till 1.1 per cent. That dynamics didn’t add great optimism to the market events as it coincided to the analysts’ forecast. Obviously, the strengthening of the inflation processes in such volumes don’t set mind on the assumption about the reaction of stiffening from the side of ECB. However, the wholesaling prices begin to presume such anxieties. During a month the wholesaling price index added 1.3 per cent and annually it also added 4.3 per cent. Today the European statistics will represent the February data about the Euro zone manufacturing only. Both a very serious annual growth and slight monthly increase are expected, 0.1 per cent m/m, 2.9 per cent y/y, while in the previous period it was 1.5 per cent m/m, 1.2 per cent y/y. These annual changes may afford grounds for the tone’s cheering up, but for a while, as it seems; because the euro will most likely stay within the lateral corridor, which is being shaped.

   The GB pound is further getting the support from the side of the fundamental factors, though the political component of the current moment makes damage for this currency at the same time. So, the British pound failed to withstand and get success on Tuesday thereupon it had got an impulse from the positive data – it returned to the beginning and completed the day with a slight profit against the US dollar. As it has already been published, the deficit in the British foreign trading curtailed in February more than expected and reached the lowest possible level for almost four years. At that the export was increasing with the most rapid tempos starting from 2003. The foreign trading balance showed -6.2 Billion against -8.1 Billion of pound in January, whereas the January value was revised to the side of raise. The forecasts expected the deficit’s shortage till 73 Billion of pound, because the dull GB pound obviously encouraged the presumptions of this kind. The market’s response uplifted the British currency till the local maximums, but then all straightened out, as the constraining factor i.e., the anticipation of the parliamentary election in Great Britain, is still the pressing cause for the anxieties, and that cool down the interest to the sterling. No economic news is expected from the “Isles” today. The British pound will be traded basing upon the exterior information and also the general attitude to the US dollar at the market. Quite possibly, the pair of GBP/USD will make an attempt to recover the advance, though the risks, which are determined on May, 6, encourage expectances of the restricted trading. The sterling will probably keep itself within the ranging trade until any more significant checkpoints appear.

   The information flow on Tuesday differently influenced upon the currency of Japan. The unfavorable data as for the US foreign trading provided the support to the yen, as well as the report that the Bank of Japan may increase its economic forecast and also hold back from further inflows of the liquidities. However, the announcement of the Japanese ruling party’s Committee, which claimed for “radical monetary-crediting softening”, caused the opposite response in concerns of the Japanese currency. Thereupon this very information the yen returned to the sales-outs, and that certainly allowed the US dollar to fix only slight losses against the yen summarizing the day. It’s also possible, the impressions of the paper, where the legislature establishment appeals to the government and the central bank for taking “decisive measures” in concerns of the monetary-crediting policy for the struggle against the deflation risks, was strengthened by the before published data, which had stated the maintenance of the deflation processes, because the domestic wholesaling price index stayed in March at high negative degree. No economic statistics is expected, but the appearance of the Governor of the Bank of Japan M. Sirakawa is outlined for today. The speech of the Head of BoJ will probably set the record straight as for the mater of the risks of increasing the capacities of the quantitative softening program from the side of the Japanese regulator.

Analysis prepared by:

Arkady Nagiev
Forex4you analyst