The U.S. dollar was being traded in different directions at the session on Thursday and most of the time maintained the advantage against the euro and the pound. As for the confrontation with the yen, here the “green” continues to incur losses on the background of the investors’ avoiding risk. The debt crisis of the Euro area remained the main factor of influence during the last session that helped the Bucks' lead. Also, the data on the States’ economy have not disposed to optimism, which were worse than forecast and it strengthened investors’ opinion about the dollar as the safe currency. However, the situation has been “corrected” by the National Bank of Switzerland, having invaded the market again in order to maintain its franc against the euro, which provoked a refinement of orders stop and gave a strong impulse to the dollar bid against the European currencies. Later, the Bucks' regained part of the lost but the session was finished with a minus against the euro and the yen, as for the sterling, advantage has been restored. The data on the U.S. economy, as noted above, have not met the expectations of forecasts - the number of initial applications for unemployment benefits rose sharply and according to the weekly data, the number of primary applications increased by 25 thousand up to 471 thousand, though, decrease by 4 thousand was being expected. Obviously, the number of secondary applications reduced, the decrease happened to be by 40 thousand and the total number indicated 4,625 thousand against 4,665 thousand the previous week. The data from the Conference Board have not been impressive as well - an index of the leading indicators fell in April, the fall of the indicator took place for the first time since March 2009.The index fell in April by 0.1% after rising by 1.3% in March. The index in March was revised for the worse, previously reported an increase by 1, 4%. The forecasts as for this indicator expected growth by 0.2%. The data from Philadelphia alleviated the situation a bit, the report from the FED in this region indicated 21.4 as the index of business activity in manufacturing in May after 20.2 in April and 18.9 in March. The index this month was within the forecasts, expecting to meet the level of 21.2. Today’s economic news on the United States will not be published, obviously, the dollar will remain under the influence of the changing mood of the market but the priority seems to be left with the “green” currency.

   The single European currency has demonstrated a very high volatility during the last session on Thursday. The first part of the trading was marked by the loss of position won against the dollar and the yen on Wednesday, when rumours on the possible intervention by the ECB to stop falling of the euro and on the intervention of SHNB gave rise to purchasing. Obviously, understanding that a coordinated intervention to support the euro is unlikely and the unsubstantiated rumours that the authorities of Europe, following Germany’s banning short selling in the region, provoked a decline of interest to the single currency. The second half of the day was remembered as the opposite turn of events, the single currency has shown strong growth with the impetus of the Swiss regulator to this situation again, which resumed buying the single currency to weaken its franc. As a result, the euro recorded a positive result against the dollar and pound, but remained weak against the yen. It should be noted that the authorities are not concerned about the euro's decline – the European Group Chairman Jean-Claud Juncker acknowledged on Thursday that the euro's failure has a positive impact on the European economy because it supports the export-oriented sector. The data on the economy has not been presented, -  in Germany the producer prices in April rose 0.8% m / m and 0.6% y / y, well above the forecast, expecting to see +0.6% m / m and +0.4% y / y. In March the PPI index in Germany rose by 0.7% m / m and decreased by 1.5% y / y so that the escalation of the inflationary process is being renewed. Nevertheless, this has not become a factor of influence on the market, which is entirely based on the political events. Today's package of news is much more filled with quantity and quality. There will be provided a preliminary assessment of the business activity index (PMI) in manufacturing and in service sectors of Germany and the Euro zone in May, besides, the IFO Institute will announce its research on the mood in the business world; it is projected to increase to 101.9 from 101.6. Also, the interesting facts will contain the data on the GDP of Germany for the 1st quarter – the regular evaluation of the changes is not expected: 0.2% q/q, 1.6% y / y. In addition, the present outcome of the foreign trade in the EU in March is to be presented, the forecasts suggest that the deficit is likely to remain at the same level and constitute 3.9 billion euro. With the evolving rising interest to the single currency the euro purchase is probable to continue.

   The negative attitude to risk had a pressure on the position of the pound at the session on Thursday. The sterling is affected by the same factors as the single European currency, but, additionally, with the fears about the ability of the British Government to take adequate measures to deal with its own budget deficit, which is at the record levels. On this background, the “cable” was less appreciated in the moments of the high-yielding currencies purchasing and concluded the day in the negative result against all majors. Maybe, some disappointment in respect of the pound has been provoked by speech of a member of the Monetary Committee of the Bank of England, A. Posen, who said on Thursday that the increase in the core inflation in Britain amid sinking it in other countries is a little worry for him. Against the backdrop of the annual growth of the consumer price inflation, which has grown by 3.7% in April, the investors have the idea that the British regulator can take proactive steps to restrain it but such statements of the BOE functionary, of course, reduce the hope of tightening, the more that a report on inflation, which was released last week, saves the same “dovish” mood. Some support for the pound has been provided by the data on retail sales on “islands” in April. An increase by 0.3% m / m was reported that is slightly higher than the forecast +0.2% and this allowed the pound to strengthen its position a little at a time in the pair with the dollar. Today's statistics can add effects on sterling, as it contains important information. The first and foremost data is on the public sector borrowing in April, it is assumed to demonstrate a decrease to 11.0 billion pounds after 23.5 billion in March, this may be considered as positive but much will depend on the information on the money supply - the broad monetary aggregate M4 and in case if contraction is shown, the pressure on sterling may return. In addition, the market will pay attention to the data the 1st quarter on the amount of commercial investment. If the figures in the end of the last year, -4.3% q/q and -23.5% y / y, will not change for the better - the “cable” bid will increase so that the investors will lose hope for a speedy economic recovery  of  the “islands”.

   Japan's currency strengthened confidence in trading on Thursday, its falling in the stock markets continues to push investors to reduce carry trade, which leads to the yen purchase all around the market. Today in Japan a significant event has taken place, - at its regular meeting the BoJ Committee adopted a unanimous decision to leave key rate at 0.1%, the comments will follow later at the press conference. Besides, the published indexes noted the positive dynamics in the economy - the March index of coincident indicators rose to 101.5 against 101.1 in the previous period and the index of leading indicators rose to 102.8 from 102.7. Anxiety in the market may cause a message that the Finance Minister of Japan N. Kahn received from Prime Minister Yu Hatoyama an order to closely monitor the currency and stock markets. Although, the information does not note any indications of the exact actions, this news can be interpreted as a hint of the verbal intervention to weaken the yen, which naturally may give reason to sell the Japanese currency in the market.

Analysis prepared by:

Arkady Nagiev
Forex4you analyst