EUR/usd
Ben Bernanke's speech stirred up the market yesterday, reviving hopes for the Fed's further support of the economy through asset buying and other unconventional measures. The Fed's chief emphasized that to reduce unemployment the country needs a higher growth rate. He also mentioned that in the near future unemployment might decline even at a slower pace than now. Unfortunately, markets preferred to ignore Bernanke's doubts and interpreted them as hints at new bond purchases. This interpretation immediately spurred the across-the-board weakening of the dollar. The single currency fluctuated wildly. In the European session it fell below 1.32, but at the end of the day it was making advances already to 1.3370. The growth pattern of the pair – by fits and starts – is still preserved. The single currency grows on execution of sell orders at local highs. Such dynamics may hold for several more days or even weeks, while markets, on the one hand, feel confident about further economic stimulation and, on the other hand, see real improvement in economic indicators. All this will allow for further asset purchases on the overall positive and high risk appetite. But why should Bernanke be so enthusiastic to support the economy? He is not sure that economic indicators will keep indicating improvement in the future. Over the last few years he proved right, in fact. The economy and labour market suffer a stronger slowdown in summer, when there are more workers. In spring many still believe that sparse green shoots will grow into dense fields, and only then notice that soil has been sucked dry and can yield a good crop only when nourished.
GBP/USD
Technically, the British pound enjoyed even a more advantageous position than the euro at the time of Bernanke's address. As has already been mentioned, the pound had been trading near the 200-day moving average for several days in a row, but to make a decisive breakthrough it needed some important news. And yesterday the cable got it. As a result, it has broken the MA level and is now trading close to 1.60. From the technical viewpoint the situation looks very interesting, because if this level is taken as well, the pound may get a strong impetus for growth and go up to the 4-month highs at 1.6150, and then even up to 1.65. Keeping up with the Fed, The Bank of England stated that rebalancing is still a long row to hoe. That statement belongs to the BoE's of chief economist Spencer Dale. On the whole, the country's leading politicians are mainly set to increase exports and support national manufacturing industries. Unlike Japan in the 70-90s, Britain is more disposed to achieve rebalancing by means of weakening of its own currency.
USD/JPY
New reports on inflation in Japan account for the Bank's concerns in February,when it all of a sudden declared its intention to target inflation. Despite the rising cost of energy, which entails price growth in other sectors, deflationary sentiment in the country has been growing since December. The annual figure of Corporate Services Price Index has indicated a decline down to -0.6% after -0.4% in January and +0.1% in December. The CPI data will be published on Friday; for two months in a row this figure has been expected to come in close to zero. But as the price index of corporate goods and services is a leading indicator, the CPI is likely to experience some pressure in the coming months. Under such circumstances the bank of japan is able to put forth a stronger effort to weaken the yen. Hold on China, Japan attacks!
AUD/USD
The growing demand for risk greatly supported the Australian currency. A few days ago the aussie showed one of the poorest performances in the market, but those, who cautiously bought the Aussie below 1.0360, turned out right. Yesterday the Australian dollar cost already 1.0540 and in the course of today's trading it may well go up to the 1.0600-1.0650 area.
