Yesterday, during draghi's speech, common currency experienced higher volatility than usual. Big volatility on a market is a common thing, unusual here was the fact that eventually common currency stooped moving at the same level where it started, and today it is trying to start declining. Active buying of the common currency was caused by the perception of the markets that ECB does not want to hurry up with the further measures and as a whole mentions positive tendency (despite of announcement of negative inflation in the following months). However, the pair, obviously, does not have enough power and reasons for the growth above 1.14. Moreover, market participants has switched to strong weekly unemployment claims from the USA. Its drop to the lows of 1870s once more confirmed quite good situation in this field. Federal Reserve should carefully follow up wages behavior to notice its acceleration and to be on time with the rate actions. They need just to follow up and not to hurry up with rising since the coming indicators are not steady at all. Chicago index of economic activity, published at the same time, is negative the second month in a row, reflecting growth below the trend. During last 12 months this indicator was only three times in the positive area. In Eurozone as well economic activity is not that good. Just released preliminary PMI totally is worse than expected. Core PMI of Eurozone slowed down to 53.0 instead of expected growth from 53.1 to 53.3. This is not crucial but still it can act as an additional motive for bears to press common currency.
GBPUSD
Cable yesterday tried to exit the wide range of 1.40 – 1.44 but could not do that. At the end of the day the American currency boosted the attack along with the help of euro. Weak retail sales report, with decline of sales volumes at once by 1.3% (against expected decline by 0.1%) was acting against pound. But sterling did not react fast to this release. Therefore, it is rather hard this time to explain pound weakening by traders' concern about economic indicators.
USDJPY
After announcement in Bloomberg about consideration of Bank of Japan to accept negative loan rate to help financial institutes with loans, USDJPY sharply started to grow. Due to this announcement the pair rose during several hours from 109.40 to 110.70. We wrote before that as per technical analysis rising above 109.50 may be the reason to continue growing to the previous consolidation area of 111-114. It is quite possible that brought out rumors may cause further growth of the pair. This news is important for the markets since next week we will have the Bank of Japan meeting. They did not expect any policy changes from the bank but now some hopes have occurred that Central Bank is ready to stimulate economy of the country suffering after the earthquake.
Canadian dollar started to attack after period of renewal of many-months highs. The main reason was oil pullback in the end of the week as well as behavior of cautious traders. Today inflation data of the country will be released. In case of Canada, inflation can influence currency exchange rate a lot. During last months CAD has grown significantly, that should suppress the inflation in the country. Meanwhile, CPI was quite close to target figure of the Bank of Canada in the contrary to other Central banks. If the situation starts changing fast, the Bank of Canada will use deeper measures to decline its currency.
