EUR/usd
Against our expectations Tuesday was a hard day for the single currency and in general for risk demand. Investors avoided risky assets because of poor corporate reports. And having dropped below 1.30, the single currency got caught into the hailstorm of sales due to the execution of limit orders. Yesterday's volatility could hardly be called impressive, yet against the scary lull of the recent days, such fluctuations do attract attention. The daily low hit by eurusd is 1.2950. The major issue with the American corporations, which are reporting on their activity now, is that they either make very gloomy profit forecasts or have failed to surpass great expectations of the market. Over 60% of the corporations, which have already submitted their reports, disappointed the markets and therefore caused their slackness. As a result, this spilt over into the 5% drop from the highs set last month. Actually, it is not surprising that the markets should be pessimistic before the Fed's meeting. Very often this is how they “beg” more incentives from Bernanke. Of course, it's not all that simple, but still we can see some regularity in this. Another interest rate decision will be published today. No changes are expected, however the commentary may stir some movement in the markets, if it contains hints at the readiness to extend the programme from the current 40bln a month to 80-90bln in the coming year when Operation Twist expires. Thus, in our opinion, the market is about to finish the correction and start a gradual growth, which will last right till the end of the year and , most likely, will cause across-the-board depreciation of the dollar.
GBP/USD
The British pound was growing against the euro yesterday morning, however closer to the noon it felt a bit worse than the single currency due to the decline of stock exchanges. Today the picture is absolutely the same: the euro is depreciating against the pound. As a result, EURGBP has been hitting against the support line of 0.8120 for four days in a row. The pair is trying to break below these levels. However, it's happening on expectations of the preliminary estimate of the British GDP in the third quarter, which is scheduled for release tomorrow. Tensions are growing.
USD/JPY
usdjpy got to 80 a day ago and is now consolidating a bit below this point. There is a sneaking suspicion that just like in case with EURGBP traders are simply taking their profits after the big rally and waiting for the signals to continue buying. The country's officials seem to put a higher pressure on the BOJ, by means of public statements as well. As a result, more and more players are sure that the CB will keep extending its incentive programmes.
USD/CAD
Speaking about the CBs, we can't but mention the Bank of Canada. The reaction it showed yesterday is a good example of how the absence of changes can kindle interest in the currency. Actually, the commentary said that the economy would return to the pre-crisis growth pace already by the end of 2013. So, in that period the CB will be gradually withdrawing its monetary policy stimulus from the market. It's much earlier than promised by the Fed.
