EUR/usd
At present we know only that Russians are not going to provide financial aid to Cyprus. Supposedly, the refusal has followed the unwillingness of Cypriots to sell their assets on the conditions favourable for Russia. Cypriots now hope for revision of the terms of the preceding loan and, less likely, for a new one from Russia. It's clear that the banks won't unblock the money till the next week, thus the banks remain in a half-frozen mode. Under such conditions the banks get liquidity from the ECB's channels, and this clearly vexes the CB, which is calling to take a decision as soon as possible. Since the very beginning of the week the single currency has been trading in a rather narrow range. Yesterday the range of fluctuations reduced to just 60 pips, 1.2890 – 1.2950, yet for the second half of the week the pair has been trading near the lower bound of the range. Only a very positive decision can contribute to closing of the weekly gap. For that eurusd needs to go up to 1.3070. In the meantime, the Preliminary PMI published yesterday aggravated disappointment in the single European currency. The manufacturing sector has sunk as the PMI fell below 50. The services sector keeps expanding, but the growth rate has visibly declined. According to the preliminary estimate the corresponding PMI dropped from 54.7 to 51.6 in March against the forecasted 54.9. The news from the USA was not favourable either, but problems there are of different nature – less serious. Slowdown, not decline of growth. Thus, the continuing claims have increased much more than expected – to 3053K against the forecasted 3050K. Not only uncertainty around Cyprus, but also significant differences between the economic situation in the USA and euro zone. The CBs' policies create an obstacle here – the Fed keeps printing the money, the ECB is withdrawing the LTRO loans issued earlier from circulation.
GBP/USD
A respite in the sterling is still going on. Yesterday's retail sales data contributed to a correction of the British currency. The sales growth in February made 2.1%. It brought the retail sales index to the highest level. The annual growth rate totals 2.6%, thus offsetting the failures of January. Let's add here the BOE's supposition that the further volatility of the sterling can tell badly on the economy. It's the same as if politicians said ‘stop' to devaluation of the sterling.
USD/JPY
Kuroda has proved to be less active than was expected by some market players. His yesterday's speech gave no hint at how the economy will be further stimulated. Besides, the yen purchases are supported by uncertainty about Cyprus. Selling of the euro and decline of the stock exchanges also increase demand for the safe-haven yen.
AUD/USD
The Australian dollar seems to be a real safe haven. Despite the heavy selling of the euro yesterday and not very optimistic sentiments in the stock markets, the aussie managed to go above 1.04, touching support at its 200-day MA. The stream of good news from Australia (the previous interest rate cuts included) makes traders revise the prospects of the RBA's further measures.
