The opening of this week was remarkable for the gaps as well as the previous one, though in favor of the US dollar this time. The charge of fraud for the Goldman Sachs Group Inc. by the Securities and Exchange Commission of the USA (SEC), the negative impact of the Icelandic volcano to the economy, the actual apprehensions as for Greece and the rescue plan, and finally, the raised ambiguity in concerns of the workable majority in the British Parliament made sure that the investors had nothing to do, but escape out of risk. The American currency enforced itself against the Europeans, but it declined as for the yen, and so proved the high degree of anxieties at the market. However, this picture was observed in the first half of the Monday trades. The opening of the US stock market changed the situation as the high profitable currencies had reversed the trend amidst the shares’ advance; summarizing it the US dollar completed the trading worse than had started against the GB pound and euro, but better as for the yen. The closing prices were unfavorable for the US dollar in its commitment to the European currencies, though much better than the closing prices last Friday. There wasn’t much news about the US economy. The Conference Board published the statement, which represented the index of March advancing indicators. It demonstrated the significant advance for the 12th month running. The index of the advancing indicators grew up for 1.4 per cent thereupon the raise for 0.4 per cent in February. The forecasts predicted the advance of this indicator for 1.1 per cent only. This statement commented that the indicators appointed to the sluggish economic recovery, which would last for several months. No economic news is outlined to be published in the USA today. The US dollar will further be under the influence of impressions, which will be produced on the investors due to the information both from the Continent and Great Britain. However, as it seems, the above mentioned events will further determine the market tone, which will depict the raise of the unwilling to risk. The prospects of such kind mean the further advance of the “greenback”.

   The Greek troubles, which continue to pres on the euro, and the apprehensions, that the volcanic eruption will negatively influence upon the Euro zone’s GDP, caused the negative gap against the US dollar in the opening on Monday. Later on the optimistic tone of the US stock market amidst reasonably good corporative statements in the USA helped the common currency to enforce its positions at the currency market and also complete the day with the positive result as for the “buck”, but resulting that day only, because in general the negative dynamics stayed. The pretty annoyed issue of the aid for Greece was again exaggerated at the yesterday session. Another summit of the European Ministers of Finances stated that the authorities of the countries of this block still spoke out the advices for Athens concerning the necessity to remove impediments, which detain from getting emergency aid. Responding these claims the Prime-Minister of Greece mentioned again that his government imposed violent measures for saving, and so on – to say in short words, “the same old stew”. Probably, the effectiveness of the rescue schedule for this Balkan country will be checked today, because Greece is going to implement another placement of its securities in amount of 1.5 Billion of euro. If the market players don’t show confidence it will be interesting to know how on earth the rescue schedule is going to be accomplished. The fact that no air planes fly over the Europe hasn’t allowed the representatives of the Euro zone and IMF to conduct negotiations, dedicated to the working-out of the joint program for that case if Athens needs help. Certainly, it hasn’t conciliated the market to be confident that everything is in readiness for urgent intervention if the Greeks say “mayday”. The deficit troubles are acute not only for Greece as the deficit over the Euro zone in general probably grew up till 6.4 per cent of GDP in 2009 against 2 per cent in a year ago by reason of financing of the stimulating programs. At the same time, however, the analysts unanimously state the forecasts will be revised to the side of increase. On Monday the President of ECB J.-C. Triche emphasized this point in his speech, while he claimed 16 countries of the Euro zone to support the program of steadiness and focus attention at the expenditure’s restructuring. The EU statistics represented the data of the development only. Here the capacities crushed down -3.3 per cent m/m, -15.2 per cent y/y in February. The economic data, which are going to be published today, may support the euro: the ZEW Institute report is presumed to show with raised sentiment indexes both for Germany and the Euro zone in general. Besides, the EU payment balance deficit is expected to be curtailed till -5.3 Billion in February from -8.1 Billion of euro, while the increase of the producers’ prices in Germany – 0.5 per cent m/m, -1.8 per cent y/y in March, whereas it had been observed 0.0 per cent m/m, -2.9 per cent y/y. If the Greek bonds’ auction never adds negative the euro will have all chance to increase a bit during the present session.

   The British currency opened the trades on Monday with the biggest negative gap to the US dollar among all majors. Beside all other factors, which were connected to the charge of fraud in the USA, the Icelandic volcano and the Greek deficit, the GB pound was also pressed with the domestic problems. The latest results of the pre-elections poll in Great Britain again raised the concerns that the so-called “up-tight parliament” might be formed in the “Isles”, where the absence of the majority will prevent from effective solving of the issues concerning the shortage of the possible-recorded budgeting deficit of the country, which amounts to 167 Billion of pound at the moment. The market made such an opinion thanks to the increasing popularity of the Liberal-Democratic Party, which may get many seats and so deprive the political leader at the British arena of the majority. The economic data from the “Isles” were reasonably good, though they failed to help the GB pound to improve its affairs as the sterling neglected only some portion of its losses during the American session thanks to the optimistic raise at the US stock market. The Rightmove information stated the price increase at the real estates market in April as this index demonstrated +2.6 per cent m/m and +6.0 per cent y/y. The Council of the Mortgage Loaners of Great Britain (CML) also represented positive data on Monday. The total mortgage loaning suddenly intensified in March as the raise was for 11.5 Billion of pound. It’s 24.0 per cent more than fixed in February and also 3 per cent better than the March volume last year, when it was +11.2 Billion of pound. Concerning the today news the data about the consumer inflation in Great Britain will attract all attention of the market. As known, the prices increase rapidly in the “Isles”, and that arouses the apprehensions concerning the possible measures from the side of the Bank of England. The forecasts presume the CPI for March grew up for 0.3 per cent m/m and 3.2 per cent y/y, while the core one, excluding the food products and energy resources prices, for 2.8 per cent. The indicators surmount the targeting level (2.0 per cent), as it was determined by BoE, and any supplements to the forecasts may instigate the purchases of the GB pound as they will favor the raise of the anxieties about the possibility of the monetary policy’s stiffening from the side of the British regulator.

   In the beginning of the first day of this week the US dollar fell down against the Japanese yen as the charges of fraud, which were brought against the Goldman Sachs, and all rest factors, which suppress the willing to risk made the investors to escape in the yen as a shelter-currency. However, later the advance at the US stock markets changed the matter, and the US dollar stole thunder and completed the day with a significant plus to the yen. The data, which were published on Monday, stated the improvement of the consumer confidence, though it by no means reflected on the retailing in Japan, where the results further demonstrated negative dynamics. Today the information about the business activity in the Japanese services has been publicized: this index fell down for 0.2 per cent in February against 2.9 per cent in the first month of this year. The equipment orders for March are going to be pronounced in Japan later; and they’re predicted with increase. Concerning the prospects of the yen, everything will still depend upon the degree of the inclination to risk – if the events, which take the investors away of the risk, (the investigation of the fraud in the USA, the Greek troubles, the natural disasters) are further relevant the yen will renew its enforcement as for the US dollar.

Analysis prepared by:

Arkady Nagiev
Forex4you analyst