The US Dollar was under pressure at the Wednesday trades. The hearings about the expected massive raise of the Chinese foreign trading balance gave a handle for the risk increase, and that in its turn strengthened the Euro slightly, and the GB Pound quite impressively during the previous session. Moreover, the B. Bernankey’s announcement concerning the economic recovery in the USA was also considered as a relevant cause for all mentioned before. As it seems, however, there’s actually a common willing to fix the profit, so any reason for optimism is quite enough for the investors to do it under the circumstances. On Wednesday the Head of FRS spoke to the Budgeting Committee of the Congress, he mentioned about the economic recovery in this speech again, though it never encouraged any optimism. Moreover, the FRS report “The Beige Book”, which has been published before the closing of the trades, was quite upside, but the market was purchasing the US Dollar in that very moment. It was reported about the improvement of the economic situation in almost all American regions, though the tempos of the business activity’s increase turned out to be moderate. Some improvement of the labor market was also noted. The represented report also mentioned the growth of the consumer expenses. Meanwhile, the budgeting deficit was the main subject of the Head of FRS’s appearance. Speaking to the Budgeting Committee of the House of Representatives B. Bernankey pointed at the necessity of working out the schedule of the budgeting deficit’s cut down in the closest possible time, since otherwise the USA would face the loss of trust. Concerning the list of news, which is going to be published today, it’s worth keeping eye out for the data on the foreign trading, where the balance is expected with the raise of the deficit from 40.4 Billion in April to -41.0 Billion of dollar; and also the number of the jobless claims with the probable shortage for 5-7 thousand till 447/445 thousand. At the same time, the information from the Europe will mostly make influence upon the market events today, because the ECB and the Bank of England are going to proclaim their decision concerning the interest rates and the monetary-crediting policy’s prospects.

   The common European currency was upturning during the greater part of the former session, however, the pressure on the Euro renewed during the American session, and so, the result was neutral. The support for the Euro was provided by both the hearings and hopes that China would state 50%-increase of its export and confirm the recovery of the global economy in such a way. The publications of this day have already proved these hopes as the foreign trading surplus of “The Heavenly Empire” increased greatly, and the Common European currency renewed its advance. No data on the Euro zone economy was published yesterday and today as well, there’s going to be not much statistics information. The only May consumer price index (CPI) of Germany is going to be represented. The indicator is predicted upturning till 0.1% m/m, 1.2% y/y, i.e., most likely, the advancing estimation will be confirmed. Both the pronouncement of the ECB decision concerning the interest rate and the press-conference of J.-C. Triche will be the main events of the day. Of course, the interest rate will remain unchangeable, that’s why all attention will be focused on the press-conference, in other words, J.-C. Triche’s viewpoint about the Euro zone prospects and the national debts’ matter. The point is that the market doesn’t wait anymore for any announcements and decisions, which might give a handle to presume any possible radical changes. Most likely, the pressure on the Euro may renew even today against this background, and so, the sales will drop down the common currency till the new minimums.

   The British Pound opened the Wednesday trades downgrading. Obviously, the claims from the side of the Rating Agency went ahead influencing. Moreover, the sagging of the retailing prices was pronounced in the “Isles”, and that greatly decreased the probability of the interest rates’ increase. Despite all that, the Sterling suddenly changed its trend and started advance even at the European session. As like as not, the market considered the “cable” sales exceeding and decided to indemnify it. Furthermore, the stock market also demonstrated optimism. The data on the British foreign trading balance, which turned out to be worse than forecasted, didn’t obstruct the GB Pound’s purchases. The foreign trading deficit remained unchangeable in April, -7.3 Billion of pound, while the export lowered down for the first time since January. The forecasts predicted the negative totals in amount of 6.8 Billion of pound. However, the March overall totals were revised slightly downgrading, from previously stated 7.5 Billion to 7.3 Billion of pound. The April export curtailed for 0.6% m/m, and the import – for 0.4% m/m. The state authorities’ hopes concerning the dull GB Pound would provide the export increase and also help to level the economic recovery failed. There’s going to be published no economic statistic of Great Britain. However, the pronouncement of the Bank of England’s decision concerning the interest rate and the qualitative changes as for the purchase of the securities in amount of 200 Billion of pound will be in the focus of attention. No changes are expected, though the fact of recently emerged government in Great Britain might cause the appearance of the surprises of any kind. That’s why the market will closely watch the attending comments, if certainly they’re, of course. It’s worthy of note, if there’re any surprises from the side of BoE they’ll be just not favorable for the Sterling. That should be considered in the moment of the news publication, of course.

   The currency of Japan was mainly traded narrow sideways to the US Dollar on Wednesday, though it strengthened up to the end and so completed the day gaining to the “buck”. As it became known, the market is upset with the absence of any announcements from the side of the new Prime-Minister of Japan about the essence of the Yen’s dullness for the export recovery, as it’s the main compound of the inner economy. The today published data have already been better than expected concerning the GDP raise for the 1st quarter. The GDP last estimation demonstrated 1.2% q/q, while it was expected 1.1% q/q. The final GDP deflator was also represented. This price parameter improved from -3.0% y/y to -2.8% y/y. Besides, the May households’ confidence index has been published today: this indicator rose up from 42.0 to 42.8. That might be considered as another portion of positive for this day. The Yen has slightly enforced at the current session as compared to the yesterday closing prices. Quite possibly, the good data made some influence. Though, the further prospects will depend on the market climate; and the decisions of the European Central Banks will set the pace to the market’s dispositions. Quite probably, the Yen’s current state of a currency shelter will be eagerly sought again.

Analysis prepared by:

Arkady Nagiev
Forex4you analyst