EUR/usd
The federal reserve surprised the markets with the promise to keep the rates at zero until the end of 2014. Before that the Fed had claimed to keep the rates there until mid 2013. This news sparked off a rally in the markets. The dollar fell across the entire spectrum of assets as well as against other major currencies. The euro closed the day above 1.31, where it keeps trading now. Besides, the rally in the stock markets is still at full tilt – it has brought S&P to the end-July levels, which the stock markets have unsuccessfully tried to break through for so many times. It is really curious that such a strong support of markets and risk demand should happen despite rather gloomy comments on the euro from politicians and economists at the World Economic Forum in Davos . Thus, Soros, who firmly believes that the euro has no future with such politicians, proposed his own recipes, which eventually were about a greater integration of the supranational structures (ECB, EFSF) with the governments stimulating the growth. Merkel, in her turn, emphasized the importance of balanced budgets. Same old stuff… The markets seem to give the European leaders a time-out on positive data on the German business sentiment. Yesterday's Ifo data for January added to the pile of indicators that turned out better that expected. We actually tend to see the drop in the euro rate as the cause of such improving sentiments. So, these very indicators as well as the momentum for the economic growth may swiftly come to nothing, if the euro doesn't hold to the current levels or higher for some more time. For now the growth of the euro against the dollar doesn't step over the bounds of the technical correction of the previous decline; that will be going on till 1.32.
GBP/USD
Nevertheless, Britain's GDP data showed a decline in the last quarter of 2011. According to the ONS preliminary estimates, the economy lost 0.2% against the expected 0.1%. To avoid a formal recession Britain has to show growth in the current quarter. This can be possible in case of the increased consumer activity due to lower inflationary pressures. However it's very unlikely to happen now, as households are still suffering from a decline in real income and have huge debts compared even to the developed countries (larger debts are only in Australia). It's interesting enough that MPC meeting minutes also made the Bank's readiness to continue the economy stimulation by means of QE plausible. But the drop of the dollar was sharper. At the end of the day the pound grew and closed positive against the dollar for the 8th consecutive day.
USD/JPY
On Wednesday the Japanese yen was falling for the most part of the day. The pair peaked at 78.28 on the wave of triggering stop orders. It even approached the 200-day moving average, but then the fall of the dollar sparked off the yen purchases across the market. The market sells the yen too fast: trading over the last two days may be called technical or electronic. Most likely, the pair will slide to below 77 in the near future. However, the Fed's softness is likely to support the markets for the coming weeks, which, in its turn, may entail the further yen weakening and the rise of such crosses as EUR/JPY, AUD/JPY and GBP/JPY.
AUD/USD
The aussie had a stunning rally yesterday. From the day low of 1.0444 AUD bounced to 1.06 and is now trading at 1.0630. This rapid growth was partly caused by the gold price hike. This asset is very sensitive to inflationary sentiments. The soft policy of the Fed provides a huge support to the commodity prices, eventually causing greater inflation. However, the whole thing will take time and until then all traffic will be of the speculative character. The rates may swiftly return to their previous levels, when once again it will turn out that the Fed has strong reasons to soften the policy, as it had in 2010 and 2011. Meanwhile, the Aussie can freely grow up to 1.07.
