The US Dollar again got a convinced profit to the European currencies at the Wednesday trades, and that in its turn stated the high-rated departure out of risk. The major currency crosses resided within the ranging trades, the only Euro showed greater dullness while moving downgrading surely. The causes for such a layout were all the same – the raised apprehensions concerning the national debts of the Euro zone’s countries and also the high rate of ambiguity in different inner matters of some other currency shelters’ countries. The “buck” was slightly supported thanks to the speech of the Head of FRS B. Bernankey, who declared in course of the meeting in the Bank of Japan about the unwillingness to make constant the kindness of US Dollar swaps. This announcement aroused the US Dollar’s purchases at the moment as the cancelation of these agreements will inhibit access to the US Dollar’s liquidity for the foreign banks. Moreover, the US Dollar got some support from the data on the US economy as well. The statistics satisfied as the durable goods’ orders exceeded the expectances in April, because they increased in volume for 2.9%, whereas the forecasts expected the upturn for 2.2% only. The primary real estates market’s sales were also much better than forecasted; moreover, this indicator has been showing the increase for the second month running already. In accordance with the represented data the sales rose up for 14.8% m/m at once and so made up 504 thousand in a year. The forecasts predicted the uplift for 3.4% m/m till 425 thousand only. The March values of these sales were greatly revised upgrading to 439 thousand thereupon previously represented 411 thousand. However, it should also be mentioned, the further prospects of such tempos are very doubtful as there will be no more support for the dwelling purchasers from the tax benefit by reason of its expiration by the end of April. Besides, the message appeared about the intents of the US authorities to pass in the Congress the bill of new package of economic stimulating measures in amount of 200 Billion of dollars, which is aimed to support the minor business through the crediting enlargement, new payrolls tax benefits rendering and also the aid in the mortgage loans rescheduling. There’s going to be not much news about the USA today. First of all, it touches upon the results of another estimation of GDP for the 1st quarter. The improvement is predicted as the increase to 3.5% from 3.2% represented before is foreseen. The number of the jobless claims will also attract some attention, that’s especially important expecting the publication of the main Labor Report next week. The appeals number is expected to curtail for 30/35 thousand. The range trading will probably stay at the market. Moreover, the absence of any signs of changes in the investors’ mood keeps the advantage of the US Dollar relevant. In other words, the risk of further US Dollar purchases to the European currencies is very high, despite the already observed sales of the American currency today.

   The Euro was showing the greatest vulnerability among all other majors and was under downgrading pressure almost all Wednesday session. The common European currency completed the day at the last week mentioned annual minimums actually. The investors’ fears as for spreading the crisis over the Euro zone’s fiscal sector as well drift them away of this currency. Besides, favorable economic information from the USA affords grounds for preferring the US Dollar, because of the probable raise of the American currency’s profitability is significant in the relatively near future, while the stiffening of the fiscal policy in the Europe looks absurd in such environment. Of course, the Euro zone debts crisis together with the apprehensions concerning the Euro’s stability also had an impact on the consumer sentiment. The yesterday represented GfK consumer confidence index for Germany in June fell down to 3.5, whereas 3.6 was expected, thereupon 3.7 in May (despite previously announced 3.8 for May). The Organization for Economic Cooperation and Development (OECD) represented its report, which stated that there was no threaten of the second wave of recession for the Euro zone, however, no attention was put to it. The investors were obviously more disturbed with the information that the Euro zone’s banks might face a very significant capital deficiency, which was valued as 1.5 Trillion of dollar. There were appointed the Irish banks, the Royal Bank of Scotland, the Commerzbank, etc. among these financial institutions. There’s going to be little EU news today again. The only consumer price index (CPI) for Germany in May is expected to be published, and it’s predicted increasing for 0.1% m/m, 1.2% y/y, since after -0.1% m/m, 1.0% y/y observed before. There’s little hope that will have any impact on the Euro – the support to the common currency will most likely be provided thanks to the investors’ intention to fix the profit, what has already been observed at the current session, in fact.

   The British currency was pronouncedly traded within the range to the US Dollar at the former session, and the result was in favor of the American currency by all ends. The ambiguous situation in the “Isles” obviously goes ahead making influence, so the investors would better reside in such currency shelters as the US Dollar and Yen. However, the Sterling showed better steadiness than the Euro. Probably, it’s possible to explain with different announcements of the emerged government, which give hopes for the improvement of the situation, and also the statistics, which states results, which mean nothing evidently negative. In accordance with the yesterday represented data, the mortgage loaning grew up in the “Isles” for 1.8 Billion of pound in April, what is greatly less than the volumes in the previous period, which showed 2.4 Billion of pound. The developed polls stated the inflationary expectances of the British inhabitants for the annual period up-rocketed in May to 2.8% against 2.2% in April, while more long-period inflationary expectances (for 5-10 years) increased slightly, till 3.1% compared to 3.0% in a month before. The OECD forecasts cheered up and rose to the Sterling’s profile at the moment. This institution once again pointed out the necessity of increasing the Bank of England’s key interest rate to 3.5% up to the end of 2011 yet. A little before, in its November report, OECD announced the necessity to maintain the velvet monetary-crediting policy till the end of 2011. Concerning the news from the “Isles”, the Confederation of the British Industries’ data (CBI) on the retail sales will be in the focus of the attention today. This index is predicted to demonstrate a slight raise in May; it’s foreseen 14 after 13 in April. The GB Pound’s prospects will probably be brighter than of the Euro. So, the advance of this currency at the current session encourages more optimism than the increase of the common European currency. All the same, as it seems, this the result of the investors’ inclination to fix the profit; that’s why no further massive advance of the Sterling will be observed. In other words, the comeback to the range trading is high probable.

   The currency of Japan spent the whole previous day within the narrow range and completed the session with gain to the US Dollar. The investors evidently prefer to stay in the currency shelter, which the Yen is, – to say particularly, the carry trade deals with the Yen’s participation aren’t in great request in the present situation. The Organization for Economic Cooperation and Development (OECD) upgraded the outlooks of the Japanese economy for 2011 from 1.8% to 3.5% in its next report on Wednesday. As stated in the report, it became possible by means of the export’s recovery and also due to the governmental stimulating measures. The already published today’s data might obviously be considered as some degree of confirmation for these OECD statements, because the trading balance totals’ surplus reached 687.5 Billion in April since after 666.2 Billion of yen before. As it’s already known, however, the economic data make no direct influence upon the Yen’s positions. The Japanese currency is tumbling at the current session, probably, due to the optimistic splash, which is currently observed at the market today. As concerning the Yen’s prospects, it’s reasonable to note, there’s a high probability of turning into reality for the talks about the intervention of the Bank of Japan. The necessity to restrict the advance of the currency of Japan is rising, because the Euro lost to the Yen till the minimums for almost 9 years, the same is also concerning the US Dollar. Inasmuch as it makes a great influence upon the slow recovering economy, the Japanese state authorities will obviously have to make an intervention; and that certainly causes the special awareness in the deals with the Yen’s participation.

Analysis prepared by:

Arkady Nagiev
Forex4you analyst