EUR/usd

The single currency demonstrated a fairly good growth on Friday due to the stream of positive news out of the region. The German IFO figures moderately exceeded the expectations. The US stock markets also brought in some favourable news, which helped to maintain the demand for risk. Eventually EUR/USD climbed above 1.32 by the end of Friday's trading, however this week has been opened with the sinking down to 1.3160. Such caution over the common currency is caused by Hollande's victory in the first round of French elections. Of course, this is not the end, but markets feel nervous as the victory of Sarkozy's opponent may lead to a complete reconsideration and change of the country's stand on the so-hardly-reached agreements with the EU. The markets try to estimate the consequences of the possible victory of Hollande, whose standpoint is diametrically opposite to that of Sarkozy's. Apart from the elections, there is other poor news out of France. The Business Confidence Indicator and the Flash Manufacturing PMI for April have sharply gone down. The latter has fallen from 50.1 straight to 46.4. Data from other countries are expected to come in later, but there is a feeling that they won't be very reassuring. Probably, the current week won't be very favourable for the euro and the bounce from 1.30 may prove to be just a short-term gathering in the stops before a trip down. It's quite possible that bears will test the 1.30 support level soon.

GBP/USD

The British pound climbed very high. On the market optimism and fairly strong data on the local retail sales the currency managed to rewrite the local highs and go up to 1.6147 on Friday. This is the best performance vs. the dollar since the end of October. Against the euro the movement also looks excessive. The euro/pound is trading below 0.82 at 0.8170. The pair has been that low only for three weeks since November 2008. For this reason we consider these levels to be unstable despite the strong data on retail sales. In February the sales grew by 1.8%. But this was the result of nice weather and discounts from retail stores. So, the strong figures are unlikely to persist for long in the future.

AUD/USD

Australia keeps disappointing with its inflation statistics. Following the news on the import and export price drop, the data on producer prices have come in today. Instead of the expected 0.5% growth the index has demonstrated a 0.3% decline. In addition, the annual inflation rate dived straight down to 1.4% y/y. Please don't think that it will necessarily entail weak data on consumer prices and the rate cuts from RBA in May. The matter is about the time lag between the producer prices and headline inflation. On the release of PPI the aussie has fallen down to the lower boundary of the fluctuation range set over recent days, i.e. to 1.03. For all that, bears still don't dare to attack the support level.

USD/JPY

The downward pressure in the markets led to new yen purchases. USD/JPY is again at 81.0 against 81.70 on Friday. It looks as though everybody had forgotten why the yen was sold at the end of the last week. Then, the upward movement in the pair occurred on the expectations of further support measures from the BOJ. Well, if the BOJ doesn't manage to surpass expectations, will we see another test of the 80 level?