EUR/usd

Yesterday morning the markets were trying to change the situation with the oversold risky assets. However they failed. EUR/USD was actively sold at the 1.2745 level on the rumours that investors had withdrawn over a billion out of the suffering Spanish banking network. Now the markets closer than usually watch the situation with deposits as the sharp investment outflow can knock down any bank. Leaving aside the fact that exactly the capital withdrawal is frequently called a trigger of the Great Depression, let's remember the year of 2007 and insolvency of the British Northern Rock. Further, let's recall the story with Lehman which was seriously affected by overagression of investors, who altogether rushed to withdraw their assets. Going back to the present, two days ago it was bruited that over Monday on the futile attempt to form a coalition government the Greek banks had to give about €800bln back to their investors – this rumour was then refuted by officials. Now, from hearsay, over the first two days the withdrawn volume has amounted to over 1bln. And during the whole period of crisis the banking deposits have shrunk approximately by a third. Yesterday it also became known that Moody's cut down the ratings of 16 Spanish banks, including the largest Santander and Bilbao Vizcaya Argentaria. This downgrade quite naturally followed the cut of the Spanish government rating. On Monday 26 Italian banks suffered a downgrade. The talks about the probable exit of Greece reached another agency. Fitch again revised down the rating of Greece to CCC, though it was raised just in March. Apparently, the agency will keep working with its sharp virtual knife in the future. They say that in Ancient China there was a torture called “death by a thousand cuts”… Taking into account such external conditions, the euro looks quite confident versus other currencies. Though day after day it's been hitting new local lows against the dollar. And already today the daily minimum makes 1.2641 against 1.2660 that we saw yesterday. From day to day the intraday high has been declining, each day coming lower than a day before. To make sure that the similar dynamics is seen from a broader perspective as well, let's consider the dynamics of the last 4 years. The peaks of the major trends have been as follows: 1.6037 in 2008, 1.5144 in 2009 and 1.4939 in 2011. The greatest lows, which were starting points of euro sales, were reported only twice: 1.2328 in 2008 and 1.1876 in 2010. If this dynamics persists further, the next low may be found below 1.17. There is a high probability of this even if Greece doesn't quit the euro bloc. There are too many problems besides this small country.

GBP/USD

The top British officials to the full employ their means to impact the national currency rate in order to enhance the competitiveness of the domestic economy.  On Thursday Premier Cameron stated that the BoE can and must do more to support the economy. On this statement the sterling started to drop faster. The BOE's King, when presenting the inflation report a day before, had mentioned the need for budget consolidation. Probably, Britain should wait a little with it, as the markets are now buying gilts to protect their assets from the dim future of the euro. It's striking that after a long break EUR/GBP has been growing for 2 consecutive days and eventually added 80p. It's not that much, but even that growth was last seen 3 months ago.

USD/JPY

By a strong movement USD/JPY put an end to the two-week flat trading. It took the dollar only a few hours to sink from the upper boundary of the range (80.30) to the level of 79.30 against the yen. Thus, the down trend remained in force and the attempts to break it  (those we described a couple of days ago)failed. The market decline, which has been now triggered by the rating cuts, puts an additional pressure on the pair, again depriving the Japanese politicians, who fight for the cheap yen, of sleep.

gold

At the time the yen declined Gold surged in price from 1553 to 1579 just over 2 hours. It should be mentioned that unlike other asset markets this metal didn't hit any new local lows on Thursday. Well, have the markets remembered the protective function of Gold? Or have the funds, which have been actively selling the metal, decided to lock in profits? Since we don't expect further QE from the Fed, the second option is more probable.