EUR/usd
Wanted important news? Here it is. Yesterday Mario draghi sparked off the rally on stock markets by the announcement about issuing three-year loans on bonds of troubled countries to banks. Now large hedge funds are placing their stakes on the new kind of carry trade: borrow money at a 1% interest from the ECB and purchase “risky” bonds. As a result the euro has started to grow from 1.30 and is now trading above 1.31. It looks like a significant shift after several sessions of listless trading. On this news yield on three-month Spanish bills has collapsed from 5.11% to 1.74%. To some extent Draghi was forced to announce such measures in order to avoid the credit crunch and the collapse of banks in the region. EU states and banks are to raise €720bn over the first quarter of the coming year. Thus, the ECB shifts the risks from other banks to its own shoulders. The same was done by Fed in 2008 when it purchased toxic mortgage securities. Some have already called this the Martingale strategy. Perhaps they are right, but this strategy has one important drawback: limited finances. The Central Bank that prints money is less restricted on this issue. As a result of the ECB's decision the market sentiment may improve by the end of the year bringing the currency up to the 1.35 level.
GBP/USD
The sterling has also breached its consolidation against the dollar and yesterday jumped two big figures up, from 1.55 to 1.57. In the empty New Year's market the pair may well go to the 1.60 area. Speaking about today's news on the currency, the publication of MPC meeting minutes is of interest. From them it is possible to gather how close the BOE is to expanding its QE program. Data on governmental borrowings will be also released today. They are expected to be 3 billion less than in November of last year. This result is very likely to be reached and the current situation feeds these expectations. These months Britain has been able to gradually reduce the budget deficit, though not on the scale expected earlier.
USD/JPY
The sale of the dollar, which is currently considered to be the most popular funding currency, caused the reduction of the usdjpy rate. That upward trend, which tried to form over the last two weeks, has become flat. Unlike trends of other currencies reacting to risk this trend may hold till the end of the year. Generally news from Japan is ignored by the markets, but today it was different. The Japanese rating agency R & I, until recently maintaining the highest credit rating for Japan, lowered it to “AA +”. The main reason was the country's inability to reach fiscal consolidation. In addition, the government assessed the economic sentiment in the business circles lower than expected and estimated this year's economic growth at -0.1% against 0.5% a month earlier. However, next year the real economy is expected to increase by 2.2% against the earlier expected 2.7% -2.9%. Today BOJ's representative Shirakawa made a speech where he pointed out that the best way to reach fiscal consolidation is to maintain the growth. Well, when will he at last realize that instead of being idle in this situation it is necessary to actively enhance competitiveness through the currency depreciation?
AUD/USD
The aussie is currently undergoing a real rally in the stock markets. Bulls have quickly realized that they should take it up. The Australian dollar has not only exceeded the parity to the dollar, but has also gone two big figures above it. It is now trading near 1.0190. If the positive sentiment in the markets holds, the Aussie will have another chance to try the resistance at the 1.03 level. Was breaching of the 1,02-1,03 channel false? And is the market now ready to start a long-term upward movement? For now it doesn't look so.
