EUR/usd
Yesterday there was a real tug-of-war in the markets. It's surprising that none of the camps won and eurusd closed out the day just where it started it. The upward impulse in the pair was felt at the beginning of trades in London. Just as we expected, the bulls made another attempt to break through 1.34. The bears proved to be stronger, the pair didn't even touch this level. The markets gossiped about the problems of Germany's banks – that some of them would need fresh capital and others would even face splitting. Anyway, the bears failed to launch a full-fledged attack. The strong ZEW stats came to the rescue. A sharp contrast to the expectations and a heavy growth in comparison with the previous month boosted purchases of the euro. The German economic sentiment flew from 6.9 right to 31.5. This is the biggest rate since May 2010, which indicates shaping of a new cycle of economic upturn. It's really surprising, especially taking into account that in accord with Bundesbank's estimate the economy shrank in the fourth quarter and is expected to shrink further in the first quarter this year. So, we need to wait till Thursday when the Prelim PMI for the region will be released. It will help us to understand better if improvement of the economic sentiment was reasonable and if it will spread to other indicators or not. The US existing home sales fell short of expectations, moreover the annual sales pace declined to 4.94bln against 4.99 in November and the expected growth to 5.09. As we mentioned yesterday, the bulls' failures to break through 1.34 speak about a strong resistance. Now we'll be more cautious in our comments about the further growth.
GBP/USD
This day is really important for the pound. The front pages of newspapers speak about the expected speech of British Prime Minister Cameron, where he is likely to express his opinion on the issues of the EU integration. Now, when the euro zone and mainland Europe is taking a number of measures on the economic and even fiscal integration, we can hope that Cameron will speak about a possible referendum, where it will be decided whether to stay in the EU or not. The risk is now posed by the employment stats and to a lesser degree by the January MPC meeting minutes. Yesterday the sterling failed to get off 1.58, though was consolidating at 0.84 against the euro.
USD/JPY
The yen is still in the correction phase. Too many traders were selling it in the anticipation of the CB's decision; the number of short positions in the currency hit the 5yr highs, which quite reasonably impeded the further growth of the pair. By now usdjpy has dropped to 88.15 against the high of 90.24 hit at the beginning of the week. It's hardly the end – we are waiting for the drop below 87, i.e. to the two-week lows.
AUD/USD
The news from Australia doesn't show a clear direction. On the one hand, the leading index grew above the trend level, now being at 3.9% annually. However, these data speak about the probable economic growth rate in the coming 3-9 months. Looking back at the past, the price growth was slack. The CPI rose just by 0.2% in 4Q against the expected growth by 0.4%. The annual inflation speeded up to 2.2%. The RBA Trimmed Mean CPI fell down to 2.3% y/y, which opens up opportunities for the further easing of the policy.
