EUR/usd
Yesterday afternoon the market was trying to recover after the morning negative. The major incentive to purchase the euro was given by the news that Cyprus would like to reconsider the levy for investors with smaller deposits (up to €100K). A bit later we learnt that the EU also didn't have anything against it. The only thing that worries the officials now is not to allow the total amount of money that Cyprus will allocate to keep its own domestic banks afloat go above the estimated 5.8bln. Besides, it is widely believed in the markets that Cyprus cannot be treated as an example for further austerity measures due to the absence of any developed debt market. So unlike the case with Greece, it wouldn't have been a successful idea to tax bond holders. The single currency managed to recoup one of the two figures lost in the first trading hours. eurusd at some point tried to go up to 1.30, but stumbled over the wall of sales. Now trading is held at 1.2950. Yesterday the parliament failed to vote on this issue (the vote was postponed till today 14:00 GMT). Cyprus has much in common with Greece, so here as well the parliament prefers to postpone taking decisions till the deadline. Besides, already now foreseeing the bank run, the Cypriot banks have prolonged their “holidays” at least till Thursday. Actually, with its Saturday decision the government has brought its domestic banks closer to the default. As we know, the bank runs may ruin any, albeit very reliable, financial institution. It will be bad for the euro if the withdrawn funds will flow into other currencies. For now the situation is not that bad as it could be. A year ago it was much worse. But even now it is only the beginning. It remains to wait for real action from Cyprus.
GBP/USD
The British inflation stats (CPI, PPI), published today, haven't produced any particular influence on the sterling. These data are no longer of the primary importance as lately they haven't affected the BOE's policy. We've seen it before, however the last inflation report gave us almost documentary proof when the Bank stated that in the medium-term it wouldn't be able to reach the target level of the CPI growth. Yet in February the annual CPI has grown to 2.8% as expected and the Core CPI remained at 2.3% y/y, though it was forecasted that it would slow down to 2.2%. Producer prices have exceeded the expectations, but the annual inflation rate still lags behind the CPI.
USD/JPY
The correction in the Japanese currency was not long. The impulse purchases of the Japanese yen on the concerns about Cyprus have pushed usdjpy down to the levels attractive for buying. Today the management team of the BOJ will be changed. It produces some agitation among the players. Yet, besides statements and intentions it's also necessary to look at the actual facts sometimes. The published indices of the leading and coincident indicators show growth against the preceding levels, but have been revised down in comparison with the initial estimate. By the real sector we can judge that the country succeeds only in maintaining the current growth rate of retail sales. The retail sales have grown by 0.3% y/y against 0.2% y/y a month before. Let's wait for real action.
AUD/USD
The RBA's minutes, published today, have showed that the Bank leaves the open door for the further easing of the policy. Yet, the risks that it will be required in the near future are mainly coming from the outside. The situation in Australia itself is gradually getting better as the previous QEs have just started to affect the economic indicators. The aussie has been on the decline since the beginning of the week, but is still above its 200-day MA.
