EUR/usd
The stock markets were trading sideways while Forex faced a slight retracement yesterday. The single currency was depreciating against the dollar and travelled the way from 1.3116 down to 1.3030.This decline is better treated as a good opportunity for those who missed the uptrend to buy the euro cheaper. The impressive growth of the euro in the previous week or two (depending on the pair you are considering) required a retracement and profit-taking and that is what we saw yesterday. Though, of course, some newsfeeds contained messages which attributed that performance to the concerns around Spain's unwillingness to accept a bailout from the eurozone. If it had been so, the nervousness would have told on the peripheral bond yields as well. Instead the Spanish auction generated good investor interest (bid-to-cover made 3.56), and the yields of the 18-month bonds in August dropped from 3.98% to 3.07%. The 12-month bond yields decreased from 3.07% to 2.84%. The German ZEW also went beyond expectations, rising from -25.5 to -18.2 despite a bit worse estimate of the current situation. Thus, the retracement we saw in the markets yesterday took place against the background of rather positive news, which only emphasizes the technical nature of the move. The States also published some good statistics yesterday. The current account indicated a deficit of 117bln in the second quarter. Imports exceed exports by 11% and the asset outflow is over 33bln, which widens the gap to 16% of the whole export. It's huge and if we exclude the short-term fluctuations (in the first quarter there was a deficit of 133.6bln), it will correspond to the levels of the whole post-recession period. The European rebalancing is happening due to the growth of exports, while America is recovering using its inner resources – the improvement in household balances. The positive shifts are especially obvious in the housing sector. Almost all the indicators have marked a significant progress lately. The NAHB index, published yesterday, confirmed this encouraging tendency. Anyway, the recent news can hardly be treated as favourable for the dollar. As was pointed out by two members of the Fed yesterday, the CB may extend the current asset purchase programme from the current 40bln to 85bln a month on completing Operation Twist in 2013. But unlike the current 40bln, this 85bln of long-term mortgage-backed securities will be freshly printed.
GBP/USD
The British pound is flat. Even the retracement in some markets, which have demonstrated a sharp growth lately, can't produce any influence on fluctuations in the pair. GBP/USD was fluctuating between 1.6260 and 1.6225 all day long yesterday. And today it's quite probable that after an accurate consolidation the pair will continue the former bullish trend. Anyway, there is a risk of high volatility as the market is waiting for the minutes of the BOE's September meeting to be released.
USD/JPY
The Japanese CB has eventually extended its programme. During its September meeting the CB agreed on the extension of the asset purchase programme from 70trln yen to 80trln (1trln dollars). On such news USD/JPY rose above 79 and hit its 4-week high. Anyway, it's very little, especially when compared to the Fed's and the ECB's balance sheets, which exceed $2.8trln and €3trln respectively.
gold
Gold is ready to test new highs. Being the first to recover from the retracement, Gold has got down to testing its multi-month highs at $1780 per ounce. At the time when the currency printing presses of the four world's largest CBs (the Fed, the ECB, the BOJ and the BOE) are operating actively, investors can't but be willing to find ‘a hard currency' to keep their money safe.
