EUR/usd
The positive performance in the stock exchanges contributes to the dollar's retreat. On Friday the euro/dollar made a successful attempt to reach 1.3650. Thus, the uptrend, formed in the last three weeks, still holds. The risk demand, observed in the stock exchanges, supports the single currency. It is remarkable that in the stock exchanges we see positive performance, which is treated as an inclination to disregard weakness of the GDP stats for the first quarter. Here the markets are supported by Bullard, St. Louis federal reserve President. He supposes that already before the end of the year the economy will grow by 3% annually. Also he believes that unemployment will go below 6% and inflation (on the basis of personal consumer spending) will return to the target 2%. All the three indicators will be at the levels, customary not only for normal times, but also for the periods of tightening of the monetary policy. Besides, if Bullard proves to be right with his forecasts and the markets – with their own, we will have to wait for tightening of the monetary policy for another half a year. Under such conditions the dollar finds it hard to grow as the monetary policy looks too mild for the current economic situation. To add to this, more and more countries of the developed world are likely to raise their major interest rates with time and in these countries this process is going on with smaller deviations from the path, than in the USA. Thus, QE tapering and tightening of the Fed's policy now looks much more continuous than in other countries. Accordingly, the dollar is now at a loss. Unfortunately for dollar bulls, the Fed is properly responding to the situation, which is seen by the GDP statistics and quite restricted growth of retail sales. In the short term, softness of the ECB's monetary policy may still produce its impact on the pair's rate, lowering it, yet the decline won't be as strong as expected earlier.
GBP/USD
Friday's intraday sluggishness didn't prevent the cable close above 1.70 weekly. In the end there appeared some buyers, who defended that barrier, making the technical picture of GBP purchasing against the dollar even more favourable. By the way, the current close of the pair, 1.7036, proved to be the highest one since 2008. Today we expect data on consumer lending in May. It will be interesting to learn how strong credit demand was on the release of such impressive retail sales and industrial production data.
USD/JPY
The yen keeps appreciating against the dollar. Now trading is at 101.30. Yet the yen is growing against other currencies as well. It is a result of the demand for JPY after going below the 200-day MA. At the present moment usdjpy is in the area, where it was purchased during the day. If it doesn't happen by the end of Monday, we can well expect further decline in the pair.
USD/CAD
The pair reached our target when hitting 1.0650 at the end of the previous week. It will be interesting to see further development of affairs. Among risk factors there are the Canadian GDP statistics for April and also pending home sales. Weakness of the former and strength of the latter can provoke profit taking.
