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The speech of the ECB head will take place today - 3.4.2014
U.S. economic data on the labor market turned out weaker than preliminary forecasts on Wednesday. However, the employment data is still good according to ADP review.
Increase in industrial orders for February proved the highest since last September. All this contributed to the strengthening of the U.S. Dollar. Market participants continue to believe that the official labor market data will be positive on Friday. This may increase the likelihood of rate hike in the U.S. from its current level of 0.25% and contribute to a considerable increase in the Dollar index (USDIDX). The trade balance for February and unemployed rate for a week will be released today at 14-30 CET in the United States. In 16-00 CET the index of business activity in the non-manufacturing sector (ISM Non-Manufacturing) for March will be announced. In our opinion, in general, forecasts are positive if market participants are not very upset because of the expected small increase in weekly unemployment.
The euro exchange rate (EURUSD) fell slightly on Wednesday. Investors do not exclude negative statements of the ECB head. Today at 13-45 CET the meeting of the European Central Bank will take place which is not expected to change the interest rate. Now it is 0.25 %. A few days ago the IMF advised the ECB to consider reducing the interest rate. According to it, the moderate increase in consumer prices following it will contribute to the revival of the European economy. IMF forecasts a slight increase in European GDP by 1-1.5 % for the next two years. Investors fear that the ECB head Mario Draghi may announce plans for monetary policy easing to avoid deflation in the EU today at 14:00 at a press conference. Recall that the inflation rate was 0.5% in March. Whereas according to the ECB it should exceed 1% and achieve a level of 2% by 2016. Note that before the meeting and press conference of the European Central Bank, the data on retail sales for February will still be released today at 11-00 CET. They are expected to be negative for the single European currency. We think that in general , the current economic situation in Europe is a prerequisite for the weakening of the Euro . On its daily chart it would look as downtrend formation. Note that representatives of the ECB now believe the Euro to be too "expensive" and even call him the victim of devaluative policy of other countries.
The Japanese Yen exchange rate ( USDJPY ) continued its expected growth on the chart and rose to its highest in ten weeks. From the economic point of view it means weakening of the Yen. It continues for the sixth consecutive day, and we have written a lot about its reasons. Note that at the level of 104 of the Yen a lot of option contracts have been accumulated. This may prevent further growth before the U.S. data release on Friday. This week no more macroeconomic information will be in Japan. Yesterday's indicators were neutral as expected. Another portion of statistics will be released on Monday.
The British Pound ( GBPUSD ) strengthened (growth on the chart ) against both the U.S. Dollar and the Euro. Market participants expect the tightening of monetary policy over the next 12 months. The head of the Bank of England, Mark Carney announced that the interest rate can increase till the next elections (in the second quarter of 2015 ), if there is an increase in jobs . Yesterday though construction PMI for March turned out worse than expected, it was still 62.5 points. That calmed investors and supported the Pound. Prior to this, weak PMI manufacturing was released on Tuesday for March, as well. Today at 10:30 CET PMI Services and Composite PMI will be released. The forecast is neutral . On Friday no economic data will be in the UK, and the next will be released only on April 10th.
The euro exchange rate (EURUSD) fell slightly on Wednesday. Investors do not exclude negative statements of the ECB head. Today at 13-45 CET the meeting of the European Central Bank will take place which is not expected to change the interest rate. Now it is 0.25 %. A few days ago the IMF advised the ECB to consider reducing the interest rate. According to it, the moderate increase in consumer prices following it will contribute to the revival of the European economy. IMF forecasts a slight increase in European GDP by 1-1.5 % for the next two years. Investors fear that the ECB head Mario Draghi may announce plans for monetary policy easing to avoid deflation in the EU today at 14:00 at a press conference. Recall that the inflation rate was 0.5% in March. Whereas according to the ECB it should exceed 1% and achieve a level of 2% by 2016. Note that before the meeting and press conference of the European Central Bank, the data on retail sales for February will still be released today at 11-00 CET. They are expected to be negative for the single European currency. We think that in general , the current economic situation in Europe is a prerequisite for the weakening of the Euro . On its daily chart it would look as downtrend formation. Note that representatives of the ECB now believe the Euro to be too "expensive" and even call him the victim of devaluative policy of other countries.
The Japanese Yen exchange rate ( USDJPY ) continued its expected growth on the chart and rose to its highest in ten weeks. From the economic point of view it means weakening of the Yen. It continues for the sixth consecutive day, and we have written a lot about its reasons. Note that at the level of 104 of the Yen a lot of option contracts have been accumulated. This may prevent further growth before the U.S. data release on Friday. This week no more macroeconomic information will be in Japan. Yesterday's indicators were neutral as expected. Another portion of statistics will be released on Monday.
The British Pound ( GBPUSD ) strengthened (growth on the chart ) against both the U.S. Dollar and the Euro. Market participants expect the tightening of monetary policy over the next 12 months. The head of the Bank of England, Mark Carney announced that the interest rate can increase till the next elections (in the second quarter of 2015 ), if there is an increase in jobs . Yesterday though construction PMI for March turned out worse than expected, it was still 62.5 points. That calmed investors and supported the Pound. Prior to this, weak PMI manufacturing was released on Tuesday for March, as well. Today at 10:30 CET PMI Services and Composite PMI will be released. The forecast is neutral . On Friday no economic data will be in the UK, and the next will be released only on April 10th.
The value of grain futures fell because of rainy weather all over the world, from Australia to the Great Plains of the U.S. and southern Russia. Market participants believe that this can increase the harvest. The sugar rates (Sugar) stopped declining after inputting anti-dumping restrictions on Mexican sugar to the U.S..
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