Market Review for May 2

ECB introduced the markets to a screeching halt in the first half of the day, which was quite predictable. However, the results of the meeting did the trick. At the end of the day, EUR/USD ended the day near 1.3060 and GBP/USD — in the area of ​​1.5530.

European data published in the first half of the day, pleased: the index of business activity in the manufacturing sector grew slightly to 46.7 from 46.5, although it remained below the key 50 mark. But then came the meeting at which the ECB cut its refinancing rate by 25 basis points, the benchmark lending rate — by 50 basis points and extended accommodation at a fixed rate until July next year. In addition, Draghi said that the central bank is open to negative interest rates on deposits, and more than once used the epithet of «weaker» on the state of the economy. On these reports EUR/USD fell to 1.3036 minimum and only recovered to 1.3060 at the close.

GBP/USD showed only grudging easing in response to the softness of the ECB’s monetary rate, but the EUR/GBP showed a more impressive response of 60 points. British data, moreover, continue to please. Activity in the construction sector is still in recession, but recovered from 47.2 to 49.4, almost back to the level of 50. As a result, GBP/USD 1.5549 from the opening level of 1.5495 came down to a minimum and back to 1.5530 to close.

The fact that the USD/JPY could not go below 97.00 after three attempts to break, gave a hint of the probability of the impending reversal. And he did not have to wait long — a couple from the opening level of 97.37 to a maximum of 98.39 grew and completed trades near 98.00. Help her to have strong data on the U.S. labor market: the number of applications for unemployment benefits fell to the lowest in the last 5 years, which means that non-pharma can and happy.

Forecast for Friday, May 3, 2013

In my opinion, no one was left in no doubt about the fact that the ECB is really very much concerned about the prospects for the euro zone economy. However, this market is still digesting the following week, and so far ahead of release of data on U.S. employment levels. Yesterday’s index number of applications from unemployed engendered hope that the labor market is not all that bad. Moreover, the fact that members of the FOMC completely ignored the recent signals from the sector during its meeting also tempting to think that the figure will not disappoint. To date, the projected increase in jobs for 143,000 from the 88,000 recorded in March. Even match the expectations can reassure USD and push the EUR/USD in the region of 1.30. However, the only significant excess can stimulate the breakdown of such support.

Britain can be proud of: the manufacturing sector and the construction serves the positive signals, which can cause a sigh of relief from the Bank of England. It remains to wait for the index of the service sector, which also can remain above $ 50. If all three reports will talk about the restoration, it is unlikely we will see the easing of monetary policy in the near future, and, therefore, GBP/USD has a good growth potential. In the first half of the day at 1.5580 target, and then leave the trenches in front of non-Farm.

USD/JPY is necessary impetus for further recovery, and NFP report may become the catalyst. In case of coincidence with the weather a couple come to 98.40, and in excess of the target the 99.00. Pay attention to the data for the previous period — can be reviewed on the rise, which could also reassure traders.


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