The state of affairs in the mainland Europe, the Greek troubles precisely, further stayed an object of regard and also factor of influence last week. However, this issue became more severe, and that certainly afforded grounds for arousing of pessimism and anxieties concerning the European defaults. Against this very background the US dollar confidently increased against the euro and marked new local maximums. Though, the sterling’s advance emerged again in the controversy of the American currency to the GB pound as the statistics about the British economy encouraged the opinions about the steady recovery and so favored the “cable”. At the same time the yen decreased as for the “buck” all over the session, because the reasonably good US corporative statements strengthened optimism at the stock market and relatively tempted investors’ appetite for the American assets. The economic data were relatively good, though they couldn’t be taken as confirming the steady positive economic processes in the USA. The durable goods’ orders curtailed in March, and the advancing indexes demonstrated just an essential advance, for 1.4 per cent monthly, but the consumer sentiment and the wide money supply declined. The money supply’s squeeze states that the crediting market was still “frozen”. The producers’ transfer prices grew up for 9.0 per cent during last year; not in the least the demand’s growth, but the price increase at the raw markets is a cause for it. The particular boom was observed at the real estates markets as the sales increased both at the primary and ready homes markets. Obviously, the short end of the stick is the quick expiration of the state stimulating programs. The weekly employment indicators demonstrated the decrease, though the ABC News/Washington Post reports still speak about the weakening of the consumer sentiment. The statements of the US big companies showed reasonably good results for the 1st quarter. The incomes better than expected were fixed in the consumer and financial sectors, and the hi-tech companies gave good reports as well. The news set of the already started week brings a lot of essential information, first of all it’s the FOMC meeting concerning the interest rates as it can instigate through meditations and also give the checkpoints for trading decisions. Besides, the Tuesday speech of B. Bernankey is also worth of attention as it will take its place a day before the pronouncement of the interest rates’ decision and is able to prejudice the market in an adequate favor if it alludes to any tips. Finally, the Conference Board consumer sentiment statement will be also worth of attention as it’s predicted with quite a significant advance, from 52.5 to 54. The information, which is planned to the end of the week, is as many as important and amazing, because the data as for GDP for the 1st quarter are going to be represented together with the Chicago purchasing managers’ index (Chicago PMI) and the April final estimation of the University of Michigan consumer confidence index. The forecasts predict the advance all over these indicators, though together with the retardation of the US GDP, which might be fixed at +3.0/3.4 per cent q/q since after 5.6 per cent q/q in the last quarter of 2009. The macro statistics holds out no negative, that’s why the “greenback” positions will depend upon the political component of the week i.e., the European news (both the Greece’s troubles and the British elections) and also the functionaries’ rhetoric just before the FOMC meeting.

   The common European currency rubbed through one more week of troubles at the currency market. The first impressions of Greece rescue program from the side of EU and IMF favored optimism for a while only. As it became clear, Greece needed much more money than 45 Billion of euro. The rumors circled enough great varieties as for presumptions of capacity – from 80 Billion to 200 Billion of euro. The Greek state authorities has placed the bonds in amount of almost 2 Billion, but it was short-termed loans – for 3 months only; while more durable bonds started to demonstrate the profitability raise amidst the sales – almost 9 per cent per annum for 10-year ones and above 11 per cent for 2-year bonds. Another portion of negative in concerns of the euro was provided by the Eurostat’s announcement that the budgeting deficit in Greece was not 12.7 per cent but 13.6 per cent and possibly even more. Furthermore, the Moody’s Rating Agency “poured oil on flames” when it decreased the rating both of the Greek authorities and of largest banks in this country. By the way, the revision of last year deficits stated the increase in Portugal, where the deficit turned out to be at 9.4 per cent in spite of 8.0 per cent. Against this background the Greek authorities had to request officially both EU and IMF to implement the rescue program on Friday. This event made some release of tension at the market; and the common currency regained some portion of its losses to the US dollar, though it still stayed in minus generally. There wasn’t much statistics as for the EU economy. The Euro zone’s development still demonstrates dullness, as the monthly decline was 3.3 per cent in February. The sentiment indexes, which were represented during the former week, fixed the advance; and the German indicators according to the line of the ZEW and IFO Institutes rose up to the new maximums in April again. The manufacturing orders grew up for 1.5 per cent m/m and 12.2 per cent y/y in the Euro zone in February. The producers’ prices grew up in March for 0.7 per cent in Germany, but they still stayed in minus per annum, -1.5 per cent y/y. The German budgeting expenditures grew up for 4.9 per cent in the first quarter, though the revenues turned out to be for 11.1 per cent below the beginning of 2009, and that, of course, instigates great concerns as for the raise of the budgeting deficit till hazardous rates in the EU largest economy. There’s going to be not much EU economic news this week again. Moreover, they seem not to contribute anything able to provide the steady support for the euro as the essential improvements are expected concerning so-called sentiment indicators as the manufacturing sentiment index and economic sentiment index in general are predicted with the raise for the Euro zone. The advancing data concerning the consumer price index (CPI) are also expected to demonstrate the advance, though slight one. The unemployment, which is also going to be represented, will probably mark out the absence of any changes as its level should stay at 10 per cent. As is evident, the European currency shouldn’t expect any support from the fundamental data; moreover, the market is unlikely to have begun adjusting its strategy to the EU economic indicators yet. The troubles of the European countries, which are connected to the budgeting troubles, are still the main factor of influence for the euro; of course, this matter is far from being calm and flat.

   Despite the threaten of occurrence of the “pendent” parliament with the possibility of no majority the sterling kept a leading position in concerns of the US dollar for the first half of the previous week. The support to the GB pound was provided with the economic data as both the recruitment and inflation in the “Isles”, which were mentioned in the former week news, encouraged optimism at the market as for the British currency. The consumer prices grew up for 0.6 per cent m/m and +3.4 per cent y/y, the February unemployment curtailed for 40.1 thousand, and the retailing increased in Britain for 0.4 per cent in March in comparison with February. The support to the “cable” was partially provided by the “hawkish” temper of the minutes from the Bank of England last meeting as well. Later on, however, the statistics again did the British pound an ill turn. Thereupon the publicizing of weaker than expected GDP advance in Britain in the first quarter, which grew up for 0.2 per cent q/q and decreased for 0.3 per cent per annum, alongside to the forecast prophesied +0.4 per cent q/q and -0.1 per cent y/y, and also the data about the state sector loans, which had been represented a day before and turned to be higher than previously, at that the March budgeting deficit summed up to 14.8 Billion of pound and the public debt increased to 62.0 per cent of GDP and so marked the historic maximum, the GB pound started to decrease and stayed within the negative trend as for the US dollar during last tow days of the week. However, the totals of the recent session turned thumbs up on the “cable”. The advance, which was mentioned in the manufacturing, though alongside to the negative value of orders made no influence upon the market. The latest news from the arena of political struggle reasons even greater apprehensions concerning the effective parliament as since after the TV debates the leader of the third political force – the Liberal Democrats, spurted into the lead, whereas the gap between the leader of the Labor Party and G. Brown is tiny. Not much economic data are expected from Great Britain this week. The consumer confidence is predicted to decrease in April again in the anticipatory of the general elections as the shortage of the public expenditures will inevitably follow them. The results of the Nationwide and Hometrack explorations of the home market prices will probably demonstrate another increase. The state provided tax benefits, which will be operative during next two years for the first-time real estates purchasers (for those cases when the estates value will be below 250 thousand of pound), will most likely favor the demand. As is evident, the statistics affords no special disappointing factors for the GB pound, though the politics will further stay the main checkpoint for the market, and the anticipation of the elections will exasperate caution as it seems, and that may have an impact of decreasing pressure on the sterling.

   The currency of Japan was tumbling as for the US dollar the great part of the previous week and yielded more than 200 points of its positions as a result. The positive totals of the US corporative statements contributed to the confidence of the presuppositions about the economic recovery and encouraged the risky transactions with the yen as a foundering currency. As concerning the economic indicators of the “Land of Rising Sun”, they were multi directed as the ISM indexes as in the manufacturing as in the services fell slipped in February – for 2.3 per cent and 0.2 per cent monthly respectively, but the consumer sentiment values reached maximum for last two years in March. The trading balance demonstrated the raise of surplus in March together with the splash of export into the Asian countries, the PRC first of all, whereto the supplies were almost for 52 per cent y/y more; and so it allowed the total to grow up to a Trillion of yen. Though, within Japan itself the domestic consumption further keeps itself at low degrees, even more, it gives way, because the Japanese supermarket retailing was worse for 6.6 per cent y/y in March since after -2.4 per cent y/y in February. The Moody’s Rating Agency has threatened with the Japanese authorities’ rating decrease if it fails to assure appropriate return of duties. The news tape of this week will be quite fruitful as a lot of indicators in concerns of the Japanese economy are going to be published, as it usually happens in the end of the month. The information about the retailing in March is worth of special attention, which is expected with shortage, -0.6 per cent m/m, 3.6 per cent y/y, at the same time the households’ expenses are presumed to be seen with growth for 0.7 per cent in March. The deflation continues to “gnaw” the Japanese economy: the April consumer price index (CPI) will probably mark out within the negative sector again, -1.1 per cent, whereas the wholesale prices’ data, which have already been published today, demonstrated -1.1 per cent already. The manufacturing is predicted with upturn as it is expected 0.8 per cent m/m, 31.36 per cent y/y here. However, the economic statistics is unlikely to become a driver for the currency of Japan. Obviously, the yen will stay under the influence of the political factors and also data, which determines the vector of the economic processes in the USA. On the assumption of the above stated presumptions the yen’s derogation will further last.

Analysis prepared by:

Arkady Nagiev
Forex4you analyst