EUR/usd
The single currency was purchased against the news yesterday. It means that the initial reaction to the poor ZEW quickly turned into purchases of the euro. As a result, the market is now consolidating between 1.3170-80, while a day ago it was close to 1.3040. Apparently, the market is focused on selling the dollar rather than on buying the euro. Indirectly risk demand was maintained by the recovery of markets after the drop a day before. Speaking about the German indicator of economic sentiment, in April it makes just 36.3 against the expected 41.5. It is a cyclic indicator and such drops are usually followed by a series of other ones, which we expect in the coming months. The decline of CPI also points at the decreasing activity in the region. The final Eurostat statistics for March confirmed the decline of the annual price growth rate to 1.7%, the lowest one since August 2010. This slowdown somehow expands the space for the ECB's maneuver regarding the rate cut and /or fresh asset purchases to its balance sheet. Inflation slowdown is also observed in the USA. According to yesterday's statistics, prices fell by 0.2% and the annual rate shrank to just 1.5%. It perfectly shows that pumping of money into the economy doesn't lead to higher inflation if it goes parallel with the debt burden reduction by households and /or corporations. Yet, it's hard to say how long this period will last (here we mean reduction of the debt burden) as the US housing market keeps getting stronger. The number of housing starts in March exceeded 1 million ( the annual season-adjusted rate) for the first time in almost 5 years – since June 2008.
GBP/USD
The sterling also received an impetus for growth in the mid of the US session yesterday. It's a little bit surprising as in earlier this year positive statistics from the USA provoked only purchases of the dollar instead of selling. It's worth considering the further reaction of the market to strong statistics from the USA. Probably, purchases of risky assets on positive news will again dominate the market. Unlike the USA and Eurozone, Britain has quite a steady and high inflation. According to the March stats, the annual inflation remained unchanged at 2.8%. Of course, it is hardly to the liking of the country's residents as it makes their living standards poorer, but at the same time it can't be excluded that this situation doesn't impede employment growth (which Europe is missing).
USD/JPY
usdjpy keeps appreciating, now being as high as 98.37. Against the background of growing purchases of risky assets and a bounce in gold, this time the growth impulse may prove to be enough to break through ¥100/dollar. In the mid 90s, when the government and the CB reversed the market in pretty much the same way, the level of 100 was no obstacle – then growth lasted for two years without any considerable retracements and eventually reached 60%.
AUD/USD
The aussie is struggling hard, trying to save its face. It's not that easy when the markets got another hint at the RBA's readiness to cut the rate and Gold ( with it the Aussie has a high correlation) lost 15% for less than two days. The result is as follows: the Aussie failed to break through 1.06, reversing at 1.0580, plunged below the 200-day MA and has been here already for two days. From the current level of 1.0350 audusd is likely to test 1.02 rather than to go up.
