Market Review for March 20

Despite the fact that the foreign exchange market suffered much unrest, the general pattern of recovery is clearly seen. As a result, EUR/USD ended the day in the 1.2930 and GBP/USD — in the region of 1.51.

EUR/USD was relieved, because the market is growing confidence that the Government of Cyprus has come up with something to replace the predatory tax deposit. The pair opened at 1.2879 and then during the day, slowly but surely, to go forward and upward, reaching during the U.S. session high 1.2977 and pulled back to 1.2930 area into the close. Bernanke’s speech did not make a couple of proper impression.

GBP/USD has shown the most dramatic fluctuations during the European session, actively responded to the report of the last meeting of the MPC. Pair from the opening level 1.5095 first down to a minimum 1.5026 in anticipation of news, and then immediately made the jump to 1.5147. On this experience did not end at the moment of publication of the annual budget again caused by a fall, and then restore the pair. As a result, the high of the day was recorded at 1.5185 and closed the trading day in 1.51.

USD/JPY has reacted quickly to calm the markets recovery from the lows. Once the flow of fleeing from riskier assets in yen fell, a couple from the opening level of 95.14 could get close to the maximum of 96.13, a little short of the projected us 96.20. Closing pair occurred in 96.00. His contribution to the recovery of the U.S. currency has made the Fed meeting. Despite the fact that the range of forecasts for growth were reduced with the probability of the weaker levels of inflation, the labor market should continue its recovery, and faster than expected, according to the members of the FOMC.

Forecast for Thursday, March 21, 2013

Today can be called «the day of verification activities.» For the euro area we understand can we expect any decision on Cyprus until the end of the week, and yet look at the state of the manufacturing industry in Germany, the UK — are right if members MPC, assuming that the economy does not need additional stimulus, and the United States — in it true that the labor market recovery continues at a good pace.

Meanwhile, we should not ignore the Asian session, and in particular release of China, which can confirm that business activity in the country continues to fall. Projections show an increase of the index of 50.8 from 50.4 in the previous month. But there is some doubt about this. First, in February, the official PMI (not HSBC launched today) slipped to 50.1 — too close to the area of ​​the recession. At the same time, industrial production growth slowed down 9.9% compared to 10.3% in December. The March figure could confirm a gradual slowdown in the industry, which in the current environment can reinforce the demand for USD.

Add to that the ongoing turmoil with Cyprus and the planned publication of business activity in the manufacturing and services sector in the region. Of particular interest is Germany and its industrial sector, as in the last year, the index remained in recession and only in February across the 50-point mark. If it was just a burst of emotion against the aggressive speech Draghi, the index will be back below this level, thereby causing the EUR/USD back to test 1.2860 targeting 1.2780.

Minutes of the last meeting of the Bank of England surprised us that have as a principal cause of constant size QE hazard to the pound sterling. This is how the government hinted that there is still fear of inflation, which continues to hold above the key level of 2%. GBP/USD was a good foothold in connection with an event, and now only need the lever — retail sales data may well fill that role. Recall that the labor market remains fairly stable (the latter came out better than expected performance), and the service sector is still in the mode of growth, so that the figure may well go above forecasts. Thus, not excluded new breakthrough pair up with the immediate goal at 1.5160 and then 1.52.

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