The first day of the week fell short of expectations that were associated with the return of optimism to the market on basis of the information referring the package of measures to help Greece. Bidding opened in the tradition of recent weeks, - with gap, this time against the dollar but the “Bears” could not do more on the “Bucks”. Subsequent events have demonstrated the total growth of the “green” and a positive result at the end of the day against all the majors. The measure package valued at 110 billion euros to aid Greece was agreed at the weekend but it has not erased the doubts about the fact that the authorities of some Euro zone countries agree to finance the plan of salvation because the approvals of the Parliaments are also necessary.  The pressure on the high yielding currencies was created by the news from China, where there has been a further tightening of the monetary policy, the authorities increased the reserve ratio for the banks for the third time. The support to protect the dollar was helped by the positive data on the U.S. economy. The consumer expenditures / revenues in the  U.S. in March showed growth according to the reported data, personal income grew by 0.3% m / m, while the consumer spending by 0.6% m / m. This dynamic has been within forecasts suggesting showing profits +0.3% m / m and expenses +0.6% m / m. The results of the previous month was revised for the better, the revenue up to +0.1% m / m at 0.0% m / m before and expenditures with the addition of up to +0.5% m / m after +0.3% m / m. The positive trend showed the construction expenditures in March, which unexpectedly exceeded expectations and rose for the first time in five months. The expenditure increased by 0.2% against the February indicators, up to 847.32 billion dollars at the forecast fall to 0.5%. At the same time, this statistics has not given reason to improve the mood as February's results are reviewed in the direction of a sharp decrease rather than -1.3%, as previously reported 2.1%. Though, the data from the Institute of Supply Management (ISM) increased the positive in concern of the dollar. The activity in the U.S. industry in April has continued to grow - the production index noted the significant growth and rose to 60.4 against 59.6 in March and 56.5 in February. The forecasts stated 60.1, with the components of the indicator, which suggested the prospects, were also at the high level - the index of employment in April was 58.5 after 55.1 in March and the index of new orders showed 65.7, when in March it was 61.5. The U.S. news is less eventful today but still contains some interesting information - the pending transaction on sales in the housing market in March are expected to increase by 3.1%, while the factory orders without the dynamics of 0.0% after +0.6% in February. This statistics are unlikely to influence the market, the situation will remain unchanged. Until a final clarification on Greece, - the approval of the parliaments of the European bloc, - the propensity to take risks in the market is not expected.

   The turn of events in the market on Monday showed that the limit of confidence in the Euro zone authorities has been exhausted and the investors have significant doubts about the final solution of problems in Greece. The optimism at the opening of the new week, after it became known about the decision to grant aid package in amount of 110 billion euros, was quickly offset and the euro turned out to be under pressure in concern of the doubts on the aid package receiving the approvals of the Euro zone parliaments. In addition, it seems the pressure on the market is produced by the uncertainty in regard of the other Euro bloc countries experiencing budget problems similar to the Greek scenario. It includes Portugal, Spain and, to some extent, Italy. The market participants have not been impressed by the information on the Government of Germany approving a plan to help Greece on Monday and willing to provide loans amounting to approximately 22.4 billion euros, or that the ECB has decided to ignore the minimum credit rating. So that the European regulator is ready to accept all new and active bonds issued or guaranteed by the Greek Government as collateral for loans. Yesterday the euro remained under pressure all day and gave up the Bucks over 100 points of its positions if to judge upon the closing prices on Friday. The data for the EU economy was not much, the information on production activity of the Euro zone and Germany in April showed growth, with the rise carried at the fastest pace since June 2006. The report showed that the Purchasing Managers Index (PMI) in the production sphere in April rose to 57.6 against 56.6 in March with the forecast of 57.5. In Germany, this indicator showed 61.5, though, 61.3 expected. Today's news will announce the results of retail sales in Germany in March, the forecast expects -0.1% m / m and -0.6% y / y, i.e. there are no optimistic prospects for the euro. The price dynamics in the Euro zone manufacturing sector in March may be better, the index of producer prices (PPI) predicted at 0.8% m / m, 1.0% y / y after 0.1% m / m, -0.5% y / y previously, which may mean some progress towards improving the threat of deflation. However, the statistics is unlikely to be a factor of influence in the near future. The aid package for Greece will remain as the primary focus in the market. Obviously, this situation will continue until the end of the week because the Heads of the EU countries will meet on Friday for final approval of the plan of salvation and the Parliaments will state their decisions this week or at the beginning of the next one.

   The British pound repeated the movement of the euro and after the opening session of the plus-gap to the dollar was being traded with a decrease during the rest of the trading day. The  British currency is influenced not only by a general sentiment in the market when the problems of continental Europe “discourage” the desire to take risks, but also by its own risks associated with uncertainty about the results of the upcoming national elections. There were no news from the “islands” because of the national holiday - which was not a working day but today’s news on the British economy will provide interesting information. It starts with the publication of data on business activity in Britain. The first part - PMI index for the production sector is projected to rise in April to 57.5 against 57.2 in March. Further news will talk about credit and the number of approved applications for mortgages, which is less positive, the negative results are expected, i.e. there may a decrease observed in relation to the previous period. In addition, the present dynamics of the broad monetary aggregate M4 will be presented, where the reduction can also be indicated. The pound cannot count on the foundation support. Therefore, we can assume that the British currency will remain in the trade range with the risk reduction under the weight of problems in its own country and the continental Europe.

   The Japanese currency continued to fall and happened to be in the annual minimum in relation to the dollar. The good statistics from the U.S., as usual, put pressure on the yen. The favorable data from USA economy increase the investors' expectations regarding the fact that the U.S. interest rates will be raised this year, while Japan's monetary policy will remain soft and, moreover, it is forecast to be even softer. The news on the economy of “Land of the Rising Sun” has not been presented as it was a day off in Japan. In general, the Japanese markets will be closed until the end of Wednesday in connection with the Golden Week. Obviously, the yen will remain under the influence of the external information and, most likely, will continue to fall as the investors are set to see the good statistics on the U.S. labor market.

Analysis prepared by:

Arkady Nagiev
Forex4you analyst