The Tuesday session turned out to be a little milder than the previous trading days. Nevertheless, the Euro was kept under pressure almost all over the day and completed the trades with now traditional loss to the US Dollar. The political rebalancing in the “Isles” pressed on the “buck”, which fixed losses to the GB Pound and Yen, which is still the most favorite shelter-currency. The new menaces of the rating agencies to downgrade the crediting ratings and also the new wake of presumptions concerning the stiffening of the monetary-crediting policy in PRC favored the maintenance of the terms, which provide departure out of risk. As a result, the “greenback” fixed the gain to the Euro only, but there was negative dynamics as for the GB Pound and Yen in the end of the day. There was little economic news from the USA. It was best remembered for the NFIB report about the small businesses’ sentiment. The small businessmen’s optimism turned out to be higher than expected. The small business sentiment index grew up for 3.8 points to 90.6 in April, 9 of 10 components of this indicator increased at that. The increase of the employment subindex gave a special buzz as it rose up for 1 point till -1%. Today the workflow on the economy of the USA is going to be highly-charged. The data on the foreign trading are worth of attention as the trading balance deficit is foreseen to be kept at the previous degree of -39.7 Billion of dollar. The budgeting totals for April will be also interesting, because they may demonstrate the slow of the deficit increase till -21.5 after -65.4 in March. The rest of the news will be supported by the speeches of the FRS functionaries – Rosengran, Lokhart, and Bullard. If only the slightest hint on the policy’s stiffening appears in the rhetoric of these representatives of the Federal Reserve the US Dollar purchases will resume with renewed vigor.

   The optimism, which aroused after the pronouncement of the EU and IMF Financing Program in amount of 750 Billion of euro, is still declining. This program obviously failed to conceive the investors that the problems were solved and the risk of the national debts’ defaults in Greece and some other countries of the Euro zone were over the worst. The Moody’s Rating Agency added negative to the tense atmosphere when it warned about its intents to revise and greatly change the A3Greek rating. Though, this claim never caused any great response of the market unlikely to the recent past. Nevertheless, the pressure on the Euro strengthened and the common currency lost another 100 points to the US Dollar. The before given talk on ECB was able and ready to purchase T-Bonds doesn’t also provide the mood improvement as it attends to very complicated and abnormal current environment. Despite the Head of ECB J.-C. Triche denied the presuppositions that the Bank had yielded to pressure while agreed to purchase the bonds, it never convinced the market. Concerning the economic statistics, the data on the consumer inflation in Germany are going to be represented. Following the recent estimation, the April value was kept at the former degree, -0.1% m/m and 1.0% y/y. It turned out to be much lower than in the Euro zone in general, where this indicator demonstrated the advance for 1.5% y/y in April. However, the wholesale price index greatly increased in the EU largest economy in April – for 1.7% m/m after 1.3% m/m previously, whereas the forecasts predicted +0.3% m/m only. The today’s news set will be interesting due to the data on GDP for the 1st quarter both in Germany and in the Euro zone in general first of all. The speedup of the rate of growth are expected to be seen in the Euro zone, +0.1% q/q and +0.4% y/y together with the maintenance of the quarterly rate in Germany at 0.0% q/q, but also with the annual improvement, +1.2% y/y. The increase of the industrial production is also presumed to be observed in 16 Euro block countries in March. Nevertheless, even if the Euro gets a support from the positive macro statistics it will certainly be for a while only, and the main influencing factor will still stay the national debts’ matter.

   The British currency lost to the US Dollar in the first half of the trades on Tuesday, though it managed to gain back these losses in the second one. Moreover, it also added to its positions and so advanced against the “buck” and the better part of the majors. The tint of the investors’ mood changed under the influence of the political events in Great Britain thereupon the elections, which led to the absence of the majority for neither of the Parties. It’s being solved now, which of the British political leaders will form a coalition with the Liberal-Democratic Party. The news that the coalition with the Laborists was also possible provided the pressure on the GB Pound. However, the later apparition of messages about more probable alliance with the Conservators supported the Sterling on the contrary. The announcement that the Conservators’ Leader Cameron had become the Prime-Minister aroused the raise of the “cable” purchases. The economic news also provided some support to the Sterling: the processing industry’s production grew up five times quicker than expected in Great Britain. The manufacturing enlarged for 2.3% starting from February, and the forecasts expected the increase for 0.4% only. As stated, the dull GB Pound also played a great part in this increase, because the foreign orders grew up. The today’s news set is voluminous and significant. The Labor Report for April is going to be represented in Great Britain. The number of the jobless claims is predicted to be curtailed, while the unemployment rates are most likely to be kept at the former levels. The ILO rate for March will be kept at 8%, and the April value, got by the British counting methods, – at 4.8%. However, the most of the attention will be focused on the Bank of England Quarterly Inflation Report, which is going to be represented today. The absence of the peculiar details amidst the political uncertainty in the country is the most expectable feature of this very document. However, the investors will still rely upon any hint, which at least can clarify the situation concerning the prospects of the monetary-crediting policy. The same attitude will be demonstrated to the speech of the BoE Head M. King, which will attend the publication of this report. Meanwhile, the reports about the Liberal-Democratic Party will make a decision either to form a coalition with the Conservative Party or not on next Tuesday only “hangs” the situation and encourages the expectances of the ranging trade of the Sterling to the US Dollar.

   The currency of Japan strengthened to the US Dollar on Tuesday. Some quiet conditions decreased the intensity of the dealing with the Yen, but the maintained tension, which is clearly seen due to the stock markets’ sagging, keeps the interest to the Yen quite high. There was no economic news from Japan. The data, which have already been represented today, stated the raise of the main economic indicators till 102.8% from 98.4%, whereas the increase till 99.4% only was predicted. They also showed the increase of the coinciding economic indicators’ index for March from 100.5 till 101.1. However, the forecasts were looking forward for more amazing dynamics, till 101.6. This information makes no influence upon the market as a rule, but it provides a rough idea of the direction of the processes in the economy of this country. As concerning the Yen’s positions to the US Dollar, it’s possible to predict the ranging trade with the incline to the decrease as for the “buck” due to some raise of ambiguity. The reasonably good statistics from the USA tips the scale in the pair of USD/JPY to the advance after all.

Analysis prepared by:

Arkady Nagiev
Forex4you analyst