EUR/USD
Yesterday's fluctuations were really impressive. Excluding the yen with the political nature of its rally, the market was squeezed in narrow daily ranges for a long time. It seemed that already nothing could rock that boat. But yesterday the good auction results in Spain were enough to stir up the market. draghi's concentration on the economic indicators instead of the financial sector also made its contribution. Now for details. The yield of Spanish 5yr bonds fell down below 4% yesterday in comparison with the peak of 6.46% in July. The bid-to-cover ratio was also at a quite favourable level of 2.07. Besides, the country's treasury felt that it could return to the markets with long-term loans and placed 13yr bonds with the yield of 5.56%, demand exceeded supply by 2.46 times. Further the market got support from the news that the interest rate had been kept unchanged. Yesterday we mentioned that this step could be possibly taken after the previous month's press-conference. Yesterday 5 out of 55 economists expected a rate cut, so the euro got an additional impetus for growth on the announcement of the decision. Moreover at the press-conference Draghi mentioned that the decision to keep the policy unchanged was unanimous. So, the positive shifts in the ECB's disposition are obvious. It's remarkable that the bank has set a course for a gradual improvement of economic affairs in 2013. The combination of all these factors with the previously suppressed volatility boosted growth of the euro. eurusd grew by almost a figure and a half during the day. It's notable that there hasn't been a retracement so far – the euro remains above 1.3250 with the high at 1.3270. Those, who heard our call to buy yesterday, must be quite content now, taking handsome gains.
GBP/USD
The sterling didn't stay aside this fierce market activity either. It grew against the dollar and yen, but proved to be too weak to keep up with the peppy euro. gbpusd got to 1.6178 last night despite the fact that the bears tried to push it below 1.60 just a day before. This price activity is a serious bid for the further growth, however while the pound is below 1.63 it is sure to demonstrate a poorer dynamics than the euro. The forecast of the industrial production growth by 0.8% proved to be too bold. The actual increase in November made 0.3%. Against the rate of November 2011 the drop makes 2.4%, which doesn't promise a positive estimate of GDP in 4Q from NIESR tonight. The sterling is depreciating, especially against the euro.
USD/JPY
Abe's Cabinet announced about an economic stimulation package of ¥10.3trln or $116bln. A third of this money (3.8trln) will be spent on the recovery from the earthquake and tsunami. Another 3.1trln will be allocated to raise competitiveness of the country's manufacture and to reinforce innovations. The same amount will be channeled to improve social insurance and education. As expected, the BOJ will use its reserves to regularly purchase ESM's bonds and to back mergers and takeovers of the Japanese corporations. The news about such measures caused the drop of the yen. usdjpy jumped up to 89.30.
AUD/USD
The Australian dollar has done its part and now is balancing in indecision. Its channel – 1.02 -1.06- once again has proved its strength. Yesterday on optimism of the markets (apart from the rally of EU currencies, S&P 500 reached its 5yr high) audusd grew to 1.0598. Today we can see a kind of retracement. At the moment it would be reasonable to stand aside from this pair and give it time to take breath after the steep rise from 1.04 to 1.06 in the two trading weeks.
