EUR/usd
Last week abounded in heavyweight economic events, and the current one promises to be even more nervous. draghi pledged to do his best to protect the euro. Already on Thursday he will have this opportunity when announcing the decision on the ECB's monetary policy. Now the most probable turn of events is that the CB will buy bonds of ESM/EFSF. However, there are a few forecasts that suggest the rate cut. It's worth mentioning that the cut of the official bank rate will lead to the negative rate on the ECB's deposits. This means that the banks will have to pay the ECB for keeping their assets. For the banks it is an unknown area, while the markets favour such incentives. On Wednesday the Fed will voice its decision on the further policy. Before the release of the GDP data for the second quarter the general consensus inclined to larger economic incentives through QE3. However, the data published on Friday proved to be rather good. But in our opinion, the market reaction was a bit strange. It looked as though traders had supposed that the economic improvement could go together with the further easing of the policy. The markets were growing with redoubled energy. The most interesting thing about the US GDP was a serious revision of the previous data. The statistics for the fourth quarter 2011 and the first quarter 2012 were revised up. As a result, now it turned out that at the start of Operation Twist, when it seemed that without help from the outside the economy would sink into the ground, the GDP growth made 4.1%. Then, though, there was a drop down to 2% in the first quarter and the current 1.5%. Due to high activity in the fourth quarter the economy is now by 2.2% bigger than a year ago. At that time the growth made 1.9%. We consider QE3 to be unnecessary, though there may be some change in the fomc's rhetoric.
GBP/USD
The British sterling feels rather good. While the single currency was still falling from the peak of 1.2390 to 1.23 at the end of Friday's trading, GBP/USD managed to close the day positive. However, today the markets are in a more ‘protective' mode, the pound fell down to 1.57. Nevertheless, these were the highs of the two-month trading channel. Now the future of the channel depends on the decisions of the CBs: first of the Fed, then of the BOE and further of the ECB. Yet, probably already the Fed's decision will be enough for the upward break of the channel, if the Fed all of a sudden decides to pursue a preemptive tactic and launches QE.
USD/JPY
On the wave of optimism in the markets USD/JPY went up to 78.70 after a steady trading around 78.0. But already now the markets are playing a more cautious game, gradually taking profits, which in the near future may drive the pair again to the area around or below 78.0. It is really interesting that even the ECB has already come to acting as effectively as possible. The bank of japan, though carrying out its own variant of quantitative easing, is doing that at a much lower scale.
The S&P 500 index was growing so heavily on Friday that managed to rise from the lower boundary of the upward channel straight to the upper one, going beyond the previous local low. The index future reached the level of 1380 on Friday, however further that movement was followed by a more measured trading. The next target, 1400, is pretty far away. It can well be the case that the markets will see a slight correction today.
