The former week got off to quite a good start for the US dollar and bad in all honesty for the European currencies, that’s why it completed neutral. The Us dollar completed the weekly session at the level of the opening prices both against the euro and GB pound, but enforced itself greatly to the yen, while it demonstrated the weakness in the beginning of the trading week. The Euro zone’s troubles connected to the budgeting deficits in the countries of the block and the analogous difficulties in Great Britain provided the support to the “greenback” in the beginning of the week and reasoned the massive sales-outs of the euro and GB pound. Later on, however, the willing to fix the profit and some outlet amidst the plans represented by the state authorities of Greece corrected the situation, and the US dollar started to loose its positions. The factor of pressure upon the “buck” was also the publication of the US Labor Report as it turned out to be more favorable than expected. At first the market marked it with the purchases of the US dollar, but the US stock market’s opening with the rapid raise of optimism signaled the increase of the willing to risk and that consequently led to the enforcement of the high-profitable euro and GB pound and sales-outs of the yen. The economic news for the previous week were multidirectional as usual as the manufacturing orders grew up for 1.7 per cent m/m in January, the labor efficiency rose for 6.9 per cent in the 4th quarter, by the way, that hasn’t been observed since 2002. The purchasing management indexes turned out to be positive in February as well as the FRS Report “The Beige Book”. The development expenses fell down for 0.6 per cent m/m in January after -1.2 per cent in December, and the outstanding ready homes deals crushed down for 7.6 per cent. All the decreases i.e., negative values were explained with snowfall, and that sets minds on some incredulity in concerns of these sources of information. The data that concerned the employment turned out to be not bad – firstly, ADP stated the improvement, further, the weekly statistics concerning the jobless payments noted itself with a good dynamics, and in conclusion, the February Nonfarm payrolls demonstrated -36 thousand in spite of -65 thousand, and the unemployment level kept itself at 9.7 per cent alongside to the growth’s expectances till 9.8 per cent. The US economic news set that is going to be represented this week is quite meager, because it’s reasonable to accent the trading balance totals concerning the significance, which is presumed with a slight increase of the deficit in January, the retailing for February, where no positive result are also predicted, and the monthly budgeting report with the forecast of the rapid deficit increase in February. Besides, both the manufacturing and trading supplies will attract interest as they’re expected with raise in January, and the jobless claims for the former week, which decreased again. It should also be mentioned that the weakness of the news background both concerns quality and quantity i.e., the positive dynamics leave the “greenback” without any support during this weekly session, what might be expressed with the US dollar’s sales.

EUR
   The market mood concerning the euro changed everyday last week, in fact. The disquietude with the Greek debt and the absence of confirmation as for the rumors about the German-French rescue plan pressed upon the currency of the Euro zone. Both the claims of the German Bundeskanzler A. Merkel that the European countries should solve their own problems themselves and the Greek Banks’ rating decrease from the side of the rating agencies contributed to the negative attitude to the common currency. Later on, however, the announcements of the state authorities of Greece as for the recently planned steps aimed to budgeting deficit shortage, which were approved by ECB and German authorities, afforded grounds for some relaxation of tensions and also supported the common currency. Furthermore, the report that the Moody’s Agency had lowered the rating of the Deutsche Bank also provided some pressure upon the common currency. Although, on Friday the euro rose up thereupon the appetite to risk had been warmed up due to the good US Labor Report, which in its turn aroused the stocks market increase. There were a lot of EU news as the ECB has maintained the key rates without any changes and J.-C. Triche promised to afford the liquidities as much as necessary to the banks; but Greece has still issued the T-Bonds and also invested them very successfully together with Spain. Moreover, the Greek state authorities have the incomes’ growth and expenses’ curtail plan, and that instigated another, even greater than before, splash of the massive streets protests. It was also proclaimed that the Euro zone GDP had grown up for 0.1 per cent per quarter and fallen down for 2.1 per cent annually. The Germany’s retailing didn’t demonstrate any positive dynamics in January per month, but it curtailed for 3.4 per cent y/y; but the indicator fell down for 0.3 per cent monthly and 1.3 per cent y/y for the Euro zone in general. The manufacturing orders in Germany gladdened as well, because they increased for 4.3 per cent m/m in January after -1.6 per cent in December. The consumer inflation afforded grounds for less awareness of the deflation threaten as the producers’ transfer prices in the Euro zone grew up for 0.7 per cent in January compared to December and were for 0.9 per cent y/y. Not much EU news will be this week. The most significant should be the Euro zone manufacturing data for January, which are likely to have increased in a monthly comparison, at that confidently, and also the final consumer prices index of Germany for February while here, as expected, the final value will concise to the advancing estimation, as both of them demonstrated an essential monthly increase, but not very impressive annual growth in comparison to January at the same time.

GBP
   The British pound turned out to be under powerful pressure at the trades in the very beginning of the week as the budgeting troubles in Great Britain together with the political situation that deepens the problems concerning their decision for these issues didn’t reason the raise of the faith to the sterling. The information about the purchase by the British Insurance Company “The Prudential's” of the AIG Asian department also “poured oil to flame”. But the powerful collapse of the GB pound made interesting the profit fixation. The interest to the British currency increased and even more, the opinions about excessive sales-outs of the “cable” appeared at the market. Against this background the “Briton” neglected its losses and completed next to the opening prices of the weekly trading against the “buck”. The most important weekly event expected at the market –the Bank of England meeting concerning the rates hasn’t denoted any changes. The hopes that Bank of England may continue the monetary softening and widen the bonds’ relief program weren’t justified as the rates stayed without any changes. The fundamental statistics demonstrated the downfall of the manufacturing for 1.0 per cent per quarter in the development area, the lessen of the approved mortgage claims’ number in January for 29 per cent against December, and transfer prices increase of the British producers in Great Britain in February for 4.1 per cent y/y, that has turned out to be the maximum since the end of 2008. The services were remarkable for good result, and thanks to this it has supported the sterling significantly, the purchasing managers’ index in this area (PMI) rose much higher than expected. The housing prices for February were presented in the multidirectional dynamics as after the version of the Hometrack there was a growth for 0.3 per cent m/m, and the Halifax certified of the lowering down for 1.5 per cent. In the current situation the RICS will probably speak as an arbitrator, which will represent the housing prices index for February this week and where the forecast expects the decrease. Besides, the data forecasts, which are prepared to be published this week, expect the manufacturing growth. Furthermore, the information about the foreign trading of Britain for January will be interesting. The trading balance deficit shortage is expected amidst the weak sterling, which increased the competitive ability of the British export. In easy words, to fix the profit based upon the maintained “breed” as the absence of negative may support the sterling this week.

JPY
   The first half of the former week was on the distinct enforcement of the yen all around the “front”. The investors’ willing to escape out of risk reasoned the purchases of the yen, which rose against the US dollar and other majors. Nevertheless, the completeness of the session turned out to be quite opposite as the currency of Japan has fixed great enough losses as for all its opponents. The announcement about the possible widening of the quantitative softening program from the side of the Japanese state authorities and more favorable data from the US labor market afforded grounds for the purchases of the risky assets, and the yen has got back its popularity immediately, though as a carry trade foundering currency already. The economic news from the “Land of the Rising Sun” demonstrated the companies’ capital outlays for 18.5 per cent in the 4th quarter; but the unemployment level suddenly curtailed from 5.2 per cent to 4.9 per cent in January, and that encourages great doubts concerning the accuracy of the Japanese statisticians. However, the greatest problems for Japan start to proceed from the budgeting troubles where the deficit is increasing. There will be much economic news as for Japan this week. The précised estimation of GDP for the 4th quarter will be in the focus of attention as it’s predicted to demonstrate less impressive achievements than spoken in the advancing estimation. Furthermore, the special interest will be devoted to the adjustment of the manufacturing in January where the revision is never expected, and also to the manufacturing orders data; finally, to the prices, of course. Both the orders and the prices are expected with negative dynamics. The statistics published already today reported the surplus’s growth in January and also such a negative as the monetary supply compression in Japan in February – M3 from 2.2 per cent to 2.0 per cent, and M2 from 3.0 per cent to 2.7 per cent. It states that the efforts of the Bank of Japan bring no desirable effect, and the quantitative softening programs will be enlarged. Certainly, such a breakdown makes the yen’s perspectives less attractive.

Analysis prepared by:

Arkady Nagiev
Forex4you analyst