New week was marked by changes in movements in the price range of almost all currency pairs. The dollar strengthened against the euro and decreased slightly against the pound and the yen. Weakening of the yen was caused by political risks connected with the situation in Europe, where the Prime Minister was blamed for corruption, and also increased threat that elections to the Italian parliament might form absence of majority. Pound and yen rising was most likely caused by technical factors. There were a few US economic statistics, and they did not influence the market. Business activity in New York kept rising in January, but it slowed down, the business conditions index decreased to 56.7 after 57.7 earlier, but the index for December was reviewed to increase. According to information about the US production orders, volumes of production increased in December by 1.8% m/m, this result is worse-than-expected, as + 2.2% m/m was expected. The US employment rates index, researched by Conference Board, decreased in January, but only because of reviewed data for the previous month to positive zone – the index of employment tendency fell in January to 109.38 from 109.47 in December, when according to preliminary results it might be at the level of 109.02. The index increased by 2.7% per annum. Today there will be a few important economic statistics. The most important information will contain ISM report about the rise of non-manufacturing PMI for January, which is expected to slow down to 55.0 after 55.7, and the IBD/TIPP data, which presents the economic optimism index, which is also expected to weaken to 46.1 after 46.5. Concerning the perspectives, the mood will unlikely change in the current trading session, and the tendencies will remain. But it is too early to talk about the general mood. The market will be under the influence of political events and expectations of the results of the European Central Banks meeting.
Euro decrease in trading session yesterday was caused by technical factors and political intensity in Europe. Prime Minister of Spain M. Rajoy was blamed for corruption, and in Italy popularity of Berluscony is rising, in the coming elections it might lead to appearance of incapable parliament, where a lack of majority would be observed, it would cause difficulties in decision making. As a result bonds profit making capacity of these countries reached new record high, and a single currency came under pressure against all opponents. It is possible that weakening of the currency was supported by remaining disputes concerning financial aid to Cyprus e and also expectations of the results of the ECB meeting , which might hint on the fact that euro zone cuts interest rate, as short term money rates rises in interbank market, and economic indicators do not bring optimism. There were a few euro zone economic data – according to Spanish employment statistic, a number of unemployed increased in January by 2.7% m/m, and producers prices index in Eurozone remained unchanged -0.2% m/m, 2.1% y/y. Of course this indexes could not influence investors’ mood. Today news package is rich in important data – the final estimate of the service sector PMI for January is expected to rise in comparison with the previous month, 48.3 after 47.8, as the composite PMI, which is expected to fix 48.2 after 47.2 earlier, but it might remain in negative zone, under the level of 50.0, and it do not bring optimism. What is more, euro zone retail trade for December is also expected to decrease, -0.5% m/m after +0.1% m/m in November. Demand in euro will unlikely return at the former level in the nearest future. It is possible that a single currency selling will continue, but it will be less aggressive.
British pound increased in trading session on Monday. It is obvious that after durable decrease of British currency, fixation of profit from short pound position is still popular. What is more, this week very important event is expected, it is meeting of the Bank of England on interest rate, and there is a reason to correct the positions. Nevertheless, the market is rather careful buying the pound, as this week announcement of the future head of the BoE M.Carney, which has already managed to announced about adherence to quantitative easing, is expected. Economic statistics of the Land of the Rising Sun contributed to fear of the fact that British economy at risk of renewed recession. Construction sector showed weak results at the beginning of the year – the Construction sector Purchasing managers Index (PMI) didn’t change in January in comparison with December and fixed 48.7, when some improvement, to 49.7, was expected. But, commentaries to the report were encouraging, which announced that expectations concerning industry for the next months are quite optimistic, as there is news that government is going to invest large infrastructure projects. Today the last indicator, which forms the whole picture of business activity in Britain will. Be published – it is the Service sector Purchasing Managers Index (PMI), which is expected to increase in January to 49.5 after 48.9 earlier, if this index does not come up to expectations, the pound would renew falling, as service sector hold the lion’s share of the UK GDP, and its weak results increase the possibility of recession.
Japanese currency strengthened slightly against the dollar on Monday. It is possible that a break in rhetorical attack of Japanese government and increased political risks in Europe decreased optimism and supported the yen. Yesterday there were no important news Japanese economy news. Economic statistics will be not released this week also. It is obvious that demand in the yen will remain, as unpleasant political events in Spain and Italy might cause decrease in carry trade and return to shelter.