For the first time since the beginning of this April the American currency fixed the loss to the Euro summarizing the weekly trades. That’s not to say the investors’ attitude has changed greatly – neither the economic data nor the political information set mind on any market reversal. Nevertheless, the “buck” has demonstrated anything but the result, which has been usual lately as it yielded to the Euro and stated very little profit to the GB Pound. As concerning the Yen, everything turned out to be “traditionally” as the session completed with the loss of the “greenback” to this currency. It should be mentioned, however, the Euro became “the hero of the day” thanks to the Swiss National Bank, which greatly supported the common currency in his attempt to loose the Swiss Frank’s rate. Meanwhile, the very fact of the steady Euro at the rates, whereto it advanced due to the SNB intervention, proves the marked commitment of the market at least to fix the profit thereupon such an impressive strengthening of the American currency. By the way, the US economic statistics noted reasonably good results, so it couldn’t probably caused the pressure on the US Dollar. Though, the last minute of the US FRS meeting was also possible to afford grounds for disappointment. Generally, this very document favored the “buck” as the Federal Reserve looks at the bright side of both the current state and the future prospects of the national economy. The GDP forecasts were raised to 3.5% in this year and till 4% in the following one, while the expectances of the unemployment rate were downgraded to 9.6% in 2010 and 8.3% in 2011; but the inflation mark was also leveled down. The latter points to the fact that no upturn to the target 2% during next 2 years is predicted i.e., the hopes for the interest rates’ increase may be forwardly procrastinated. The data on the US long-dated securities noted a great surge in interest of the foreign investors as the net revenue reached 140.5 Billion of dollar. The nearly expired home purchases stimulating program caused another increase of the recently developed objects for 5.8% m/m in April, i.e., up to the maximum since October 2008. The advancing indicators curtailed in April for the first time this year, whereas the regional indexes of the manufacturing activity go ahead demonstrating the steady positive dynamics. However, negative was also in it, as usual, because the preliminary jobless claims suddenly grown up for 25 thousand and the total number of those, who are on the doldrums, increased till 10.1 Million people. The consumer price lowered down in April like to the producers’ transfer prices, where it was -0.1% m/m. The demand rate is obviously still dull. It may also be proved with April data on the expenses, which are going to be represented this week and predicted with both the raise and significant retard as compared to the previous period, +0.3% after +0.6% before. Besides, the wide-ranging information about the US home market will be also represented. Both the primary and ready home markets’ sales are predicted to grow; the US megacities price indexes also turned out to be higher than before. However, the final estimation of the GDP runup in the 1st quarter may also be in the focus of the attention. As more essential enlargement, till 3.5%, is presume to be seen, while it was spoken about 3.2% before. The US Dollar shouldn’t come across any serious troubles caused by the statistics as the “buck” will be prioritized at the market and also may renew its strengthening if certainly no interventions are observed from the side of the European regulators – as known, there were some hearings about the ECB probable approach a market.

   In the beginning of the former week it was as if the Euro would continue its downgrading move, because the European currency marked new minimums in the first two days in its controversy to the US Dollar. However, the situation changed – the Euro began to strengthen and completed the week with positive achievement to the US Dollar. The common currency was next to 1.2700 to the “buck” just after it checked endurance of the support at the minimum of 1.2140 in the beginning of the session. The Swiss National Bank turned to be the main factor of influence, because the aggressive market intervention of this regulator pushed up the cross of EUR/CHF and certainly EUR/USD as well. In general, there were no more reasons for the Euro’s strengthen as the EU finance markets’ stabilization outline fails to encourage the investors’ optimistic attitude, the same as ECB purchases of the Southern European countries’ T-Bonds. Germany grumbles about the ECB performance and calls for superseding the Head of Bundesbank A. Weber as another Head of ECB instead of J-C. Triche. There weren’t much economic data. The estimations of GDP for the 1st quarter noted a slight increasing change in the German economy, for 0.2%, though it should be mentioned that this improvement was mainly provided with the raise of the unsold commodities and it couldn’t be reckoned as an efficient process. The trading balance surplus curtailed in March within the Euro zone, but the payment balance showed the transition to the positive totals thereupon the previous minus. The European sentiment indexes stated a dull dynamics amidst the Greek default as it was reported by the Institutes of ZEW, IFO and also the data on PMI. The consumer sentiment’s falling-off in the Euro zone in May was also certain as the crisis runs up at full speed. However, the producers’ transfer prices grew up for 0.8% m/m in Germany – it was in April, when the annual value was +1.5%, what hasn’t been much in evidence since December 2008. There’s going to be published not much EU economic statistics during this week. The main attention will be put to the consumer price index in Germany in May, as it’s predicted with increase, and also the new manufacturing orders all over the Euro zone, where the May uplift is probable to +2.3% m/m and +15.0% y/y since after 1.5% m/m and 12.2% y/y. Besides, the consumer sentiment is expected to become even more pessimistic in May by reason of still relevant concerns as for the possible stiffening of the tax-budgeting policy as the consumer confidence index is predicted by GfK with decrease to 3.7 after previous 3.8. As it seems, the Euro will face no special supports this week, if certainly, both the political news and next interventions don’t make any positive impact. That’s why the ranging trading at the cross EUR/USD is considered to be much more probable, even though within a broad price range.

   The GB Pound like the Euro looked very dull and showed new minimums to the US Dollar in the beginning of the week. Later on, however, the Sterling increased in popularity; that’s why the weekly totals was remarkable for much less losses to the “buck” than it might be, because the “cable” still got back some part of its positions. The budgeting troubles still stay the main factor of pressure. Moreover, the new government, which was formed just after the Tory’s victory, espied great Treasury expenses, which weren’t publicized by the Labor Party. The promises of the State Treasurer to cut down the state expenses for 6 Billion of pound in the current year didn’t inspired as well. The economic data were in general reasonably good, as the Confederation of the British Industries (CBI) demonstrated a sudden improvement of the total balance of manufacturing orders in May; but it still stayed within the negative sector through thick and thin; finally, the home prices went ahead increasing according to the version of the Rightmove, though the advance is already dull, for 0.7% only. The evidently increasing home sales supply states the further retard of the price increase will go on and the upturn will probably cease. In accordance with the data of the Council of Mortgage Lenders (CML) the next curtailing of borrowings as they dropped down for 12% in April compared to the March value. However, the inflation is going on increasing in the “Isles” as the consumer prices grew up for 0.6% m/m in April and marked out +3.7% y/y; the retail price index up rocketed for 1.0% m/m and for 5.4% y/y. Meanwhile, the crediting is still very dull, because the money supply increased for 3.3% per annum in April – that’s the least value for 10 years; though the governmental loans remain high: the recorded volumes of 10 Billion of pound for the first month of the 2nd quarter were fixed in April. This week the news set offers prospects of quite interesting information – it’ll be the GDP data for the 1st quarter first of all. According to the second estimation the main indicator will probably be revised upgrading due to the increase of production in the processing industry in March. The GfK consumer confidence index is presumed to remain unchangeable in May in comparison with April; whereas the retail sales index will demonstrate a slight increase compared to the previous month in accordance with the data of the Confederation of the British Industries (CBI). As concerning the GB Pound’s prospects, the Sterling will most likely keep under threaten of further decline until it gets the checkpoints, which clarify the policy of the new Cabinet. However, it’s probably worth expecting the broad sideway trading in the near time.

   The savor to the Yen maintained the former week as well. However, the result of the kind was explained far from the improvement of the Japanese economy, but the investors’ lasting departure out of risks. The Japanese troubles are very similar to the European as the default in the national debt servicing dictates necessity to increase the taxes and cut down the expenses, and that is dissonant to the current national economy crisis anyway. The Bank of Japan kept the interest rate at the former rate of 0.1% and announced the beginning of the implementation of the new crediting plan amounted to 1 Trillion of yen targeting to minimize the liquidities troubles and also to lean on the deflation, of course. The data, which were published during the weekly session, stated the raise of Japanese GDP in the 1st quarter for 1.2% q/q, the uplift of the machine building orders for 5.4% m/m and 1.2% y/y in March, and finally, the increase of the manufacturing production for 1.2% m/m in the same month. The average salary in Japan grew up for 1.0% in March and that probably implied the improvement of the consumer sentiment in April. The producers’ transfer prices rose up for 0.4% in April, while it was +0.2% in March – that’s the fifth improving month running. It offers some hopes for the triumph over the deflation. However, the annual dynamics stays in minus for 0.2%. As usual, the last days of the month will be “fruitful” for the economic statistics from Japan, but no good dynamics is predicted as the household expenses may show shortage; the consumer price won’t probably demonstrate any positive trend, the same is for the unemployment; finally, the April retail sales are expected with the fracture completely: -1.0% m/m, 3.7% y/y since after previous 0.8% m/m, 4.7% y/y. Nevertheless, the Yen’s positions are under the influence of the risk liability’s rate, and will obviously stay steady in its position to the US Dollar and other majors under the terms of uncertainty, which is actually maintained all over the world. At the same time, the probability of the temporary pressure on the Yen can’t be shut out, of course.

Analysis prepared by:

Arkady Nagiev
Forex4you analyst