The major part of the Thursday session was the American currency’s decline against the European currencies, but sitting on the fence as for the Yen. Some easing of stringency on the market in the absence of negative messages and one more FRS announcement of another “long period of time” for low Federal rate afforded grounds for more investor’s concernment in risking. On the other hand, the publication of the positive data on the Euro zone’s economy may also whets the investors’ appetite to the risky assets. The Brazil’s rate increase also said for the confidence in the global economic recovery. Against that background the US Dollar declined against the Euro a bit, yielded more than 100 points to the GB Pound and kept the daily opening prices as for the Yen. The recent data on the US economy showed reasonably good result as the FRS of Chicago report stated the raise of the American economy in March. The ISM index increased to -0.07 in March from -0.44 in February due to the upturn of the manufacturing and labor affairs. The advance of the production activity was also mentioned in the FRS of Kansas City press-release as the industrial production index grew up to 24 in April compared to 18 in March, while the annual dynamics amounted to 14 compared to -1 in the former month. The positive changes were also marked in the sector of employment of the USA as the number of the primary jobless claims lowered down for 11 thousand to 448 thousand last week, whereas the capacity of secondary claims also shortened for 18 thousand – so the whole “army of unemployed” made 4 645 thousand against 4 663 thousand a week before. Today’s set of economic news brings very essential information, which may make a great influence upon the market. The data on GDP of the USA for the 1st quarter are going to be represented. Here the advance for 3.4% is predicted in comparison with the analogous period of last year, thereupon it was +5.6% y/y in the 4th quarter of the former year. Besides, the University of Michigan consumer confidence index will be published. Here the advance is expected to 71.0 against its advance value of 69.5. Moreover, the Chicago purchasing managers’ index (Chicago PMI) will be publicized; it’s also expected with the raise from 58.8 to 60.0. As seen, the indicators afford no grounds for negative in regard to the “buck”, but the market will look up to the European events. As the resolution about Greece may be adopted on Sunday the trades will probably be restrained, because chances are the investor won’t show great intention to risk before the weekend.

   It seems Thursday was one of few recent days when no negative messages about the Greek troubles and unenviable prospects for some other countries of the European block. Moreover, the hopes that the aide schedule would be finished soon and positive information about the EU economy provided the slight Euro’s gain against the US Dollar at the former session. The represented statistics was remarkable for a sudden upturn of the German labor affairs, because the number of the jobless curtailed for 68 thousand, while only -11.0 thousand was expected. Besides, the confidence indexes achieved the highest degree for last 2 years in April in the Euro zone. The Euro Commission overview demonstrated the increase of the consumer sentiments to 100.6 from 97.9 a month earlier, whereas the forecasts expected 99.4. The business climate index shifted to the positive sector, to 0.23 from -0.20 in March. The consumer sentiment index grew up to -15 from -17 before. The confidence of the manufacturing rose up to -7 since -10, while the services’ value increased to 5 from 1 alongside to the expectances of 3. The outgivings of the President of ECB J.-C. Triche perked up the investors’ mood. This functionary announced the results of the Athens negotiations would be “courageous, comprehensive, and satisfactory durable program, which would render assistance to the greatly indebted country”. Furthermore, while speaking in Munich J.-C. Triche claimed the German Bundesparliament to exert every effort targeting to make necessary legislative amendments, which are necessary for effective aide for Greece. The information about the advancing consumer price index (CPI) of the Euro zone will be in the focus of attention during the current session. The forecast resolves it to the slight increase of inflation in April as it’s expected 1.5% after previous 1.4%. Besides, the data on the unemployment in the Euro zone in March will also be entertaining as the degree should be unchangeable and make 10%. Of course, this statistic will make no influence upon the market. If nothing extraordinary happens the pair of EUR/USD will probably keep itself within the shaped range before the weekend.

   The GB Pound gained in the situation of easing the market tension and in the forefront of the investors’ mood improvement. Moreover, better than forecasted data on home prices from The Nationwide provided some support to the GB Pound. As a result, the sterling fixed more than 100 points of gain to the US Dollar and the decisive whip hand to the rest of the major currencies. The political concerns that neither of the parties will get the competent majority in the British Parliament weren’t an obstacle to it as well. The results of the polls, which were published later, in the end of the day, proved a high probability of such an outcome as the Conservatives got 34%, the Liberal-Democratic forces had 28%, and the currently ruling Labor Party – 27%. Nevertheless, the British Pound demonstrated steadiness and maintained high achieved rates to the US Dollar. The already published today’s data marked the decline of the consumer confidence in Great Britain for the second month running. The consumer confidence index according to the version of GfK NOP Company sank down to -16 points in April from previous -15 points. This news is very ugly for the Prime-Minister of Great Britain G. Brown just before the elections. However, the GfK representatives said that “the affairs were much better that a year before”. There’s going to be no more news from Great Britain today. Obviously, the sterling has all chance to increase, though as seems the investors will be more careful before the weekend and trading will be measured, because the negotiations about the aide for Greece are to be finished with the pronouncement of results during these days-off. As concerns of relatively near prospects for the British currency there’s a probability to be in the focus of special attention of the rating agencies, especially under the terms of “hung” parliament. It certainly creates a menace for the sterling’s positions. Maybe, it’ll become clear after May, 6 when the results of the elections will be available.

   The Japanese currency was limited within a very narrow corridor to the US Dollar for the whole session on Thursday. The ambiguity due to the absence of any specifics as for Greece reasoned the dull volatility in the move of the pair of USD/JPY. The daily closing prices almost coincided to the opening ones. Today there’s to be plenty of information about the economy of Japan. The already published statistics showed the manufacturing activity increased in April as the index rose up to 53.5 from 52.4. The data on industrial production in March also demonstrated a monthly uplift for 0.3% m/m from -0.6% m/m. The home expenses also enlarged as it was +4.4% y/y since after -0.5% y/y in February. However, the unemployment rate increased in March to 5.0% from 4.9% thereupon the curtailing in the former months. The deflation also continues its advance as the core consumer price index (CPI) demonstrated -1.2% y/y in March after -1.2% y/y all over the country; whereas the Tokyo indicator grew up to -1.9% y/y from -1.8% y/y. Of course, the Bank of Japan kept the interest rates at the former degree of 0.1% under such conditions. As regards the near-time positions of the Yen, the continuation of the neutral-colored move within the range is supposed to be the most probable up to the publication of the data on GDP of the USA. The good results will afford grounds for the further sales of the Yen for the US Dollar at the market. On the contrary, the opposite result will reason the increase of short-term savor to the Yen.

Analysis prepared by:

Arkady Nagiev
Forex4you analyst