EUR/usd

Though we cannot talk about the absolutely smooth run of events in the USA yet, one factor definitely speaks in its favour. This is the slowdown of inflation. Such disposition leaves space for the Fed to maneuver in regard to the further QE. Frankly speaking, inflation has never held back from taking decisive measures, yet the pressure on the part of economists has always been high. Let's turn to the facts. According to the preliminary estimates, in the first quarter the US economy was developing with the annual rate of 2.2%. It is a bit weaker than the expected 2.6%, but not very bad especially when compared with the first quarter of 2011 when this rate made only 0.4%. For more vivid comparison let's convert it to the method of European data calculation. We'll get the economic growth at 0.5% in the first quarter against the forecasted rate of +0.6%. But this is just the beginning as the economy started to malfunction only at the end of the quarter, so the worst is still ahead. It's interesting that the GDP index shouldn't have come as high as it was expected, i.e. against the forecasted bounce up to 2.3% it grew just by 1.5%. Besides, in the fourth quarter the growth rate totaled 0.9%. With such rates the Fed's doves can overlook the statements of critics claiming that the soft monetary policy generates inflation risks. Moreover, in contrast to Britain the USA will in no way face stagflation (stagnation of economy against the background of high inflation). Today is the last trading day of April. On the whole, for most part of April the single currency has remained in a slightly upward trend, but still hasn't managed to recoup the decline of the first four days of the month. EUR/USD is now trading around 1.3250 and may try to test the resistance at 1.33. But as we are entering May, which is likely to bring with it low volumes and slowdown of economic growth in Europe and the decline in employment growth in the USA, it's hard to believe in success of the euro next month.

GBP/USD

The strength of the British pound keeps surprising. Since morning the sterling has been trading at 1.6280, which is the highest level since last August. The rate looks even more surprising as it has come despite the unfavourable data on the GDP decline in the first quarter. The sterling has survived this unpleasant news with dignity. Can it be true that the currency's traders really expect that the BOE won't extend its asset purchase programme in May? Aren't they concerned about the decline in the lending activity of Britain, which was announced at the end of the last week? There are more questions than answers. But it appears that the problem is connected not only with the British state of affairs, but mainly with the weakness of the Euro-Zone, against the background of which Old Lady looks pretty spry, especially when compared to the European banking sector, where the region has to meet new tough capital adequacy requirements. By the way, this idea suggests that in the coming weeks the single currency may be in demand. Besides, being at the multi-month highs, the rates of the euro against the pound and the franc look quite attractive for buying now. Thus, the further growth of the pound above 1.63 hardly seems to be possible in the coming days.

USD/JPY

The market doesn't like unaccomplished affairs and untaken levels. As has been commented earlier, USD/JPY has the potential to correct from 84 down to 80.0. The attempt to do it in the middle of the month failed when the pair bounced from 80.30 up to 81.80. Now, despite the extension of the asset purchase programme by the BOJ the pair keeps falling. Though in the recent days we've observed a growing tendency to sell the dollar (partly due to the inflation perspectives described above), we still believe that the rate won't be allowed to fall far below 80, as it would ruin all the hopes for the economic recovery and work to curb deflation.

AUD/USD

So, for the aussie April has proved to be not as bad as was expected at the beginning of the month. Then after the February sideway trend the pair sank from the high of 1.0845 down to 1.0225. But afterwards the bears couldn't do anything despite the expectations that the RBA will cut the rate down to 4% at the meeting tomorrow. Some even spoke about the possible decline of the rate by 50bp down to 3.75%. Yet, though we agree that it's the beginning of the cycle of cuts and that the rate will be definitely lowered, still we believe that it's quite possible that the RBA may prove to be more cautious in its actions.