Outcomes of Friday’s trades were quite contradictory. Night comments of the Atlanta Fed’s president Lockhart on weak influence of strong dollar on US economy retained the demand for dollar. At the beginning of European session an attempt to test 1.0800 against euro was made, but it didn’t go further. Once again, American statistics became a stumbling block – final GDP didn’t meet expectations of increase, after what dollar returned to opening levels and even set daily maximums above 1.0900. The speech of Janet Yellen didn’t facilitate certainty for players – increase in rates this year is still on the agenda, but there are no clear criteria, everything depends on macroeconomic statistics. However, despite quite strong bounce from daily maximums, dollar retains prospects for continuing growth.
Although this week will be short due to celebration of Good Friday at the end of the week, still, it will largely determine short-term prospects of the market. First of all, much will depend on the levels at which the month will close. To a certain extent, it will reflect the strength of bulls or bears. The main focus will be on US economic statistics, and there will be numerous of them this week – housing, consumer confidence, production ISM, trade balance, production orders, the report on labor, which is traditional for the beginning of the month. The Fed representatives express opposite opinions, what indicates the lack of single viewpoint concerning the question of increase in rates. Janet Yellen doesn’t give clear signals either and just send everybody to the dynamic of change of macroeconomic indicators. Under these conditions the market can continue to regain actively current statistics and follow facts. It is difficult to say something about forecasts relying on published statistics – for last weeks they have been very unstable and have rarely coincided with real data. Considering all American statistics, only data on unemployment show positive stable dynamics, but they will be published only at the end of the week. And till this moment the market reacts to the fact.
This week there is little statistics in Europe – preliminary data on inflation, final data on business activity, unemployment, and retail sales in Germany. Recently they have rarely coincided with forecasts too. Besides, against the background of expectations of increase in rates by the Fed, their significance has considerably faded for investors. Besides, constant “butting” with new government of Greece concerning economic aid doesn’t add points to the common currency. In general, economic news from Europe is of the secondary concern for investors. Euro reacts inactively to the positive, inevitable soft monetary policy held for long period of time remains in the foreground.
Today for euro the main focus is on preliminary data of German CPI. Last month inflation grew suddenly. After switching on “the printing press” by the ECB, their relevance has somehow decreased. So, the reaction to probable growth of inflation will be short-term. What concerns American statistics of this day, there are incomplete deals of houses sales, and personal incomes and expenses. To change the market situation to own advantage dollar needs positive.
Meanwhile, problems of political instability can appear in the foreground for Europe. Governing Socialist party of France suffered a heavy defeat in the second tour at local elections, and in most departments leadership will be in hands of opposition. Sharp fall of socialists’ popularity can provoke early parliamentary elections in some time. The results of elections in France have set negative tone for euro at the opening of the market today, and this movement can continue. It isn’t the last elections in Europe this year. In many countries citizens aren’t satisfied with economic situation, and this can provoke serious changes in political landscape of Europe.
On Friday we opened short sale of EURUSD from 1.0930, as we recommended in our overview. The pair didn’t go above 1.1100, now it tries to return to minimums of the month. At this moment we have no clear view of what the direction the market will choose – dollar has only slight technical advantage. Stop is set at the entry point. In case of closure of the position on stop, we will take one more pause.
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