Daily Market Review - 04/16/2014

EUR/USD

The pair continues to appreciate form the area of 1.3793. Next resistance on the upside is at 1.3861. In broader outlook the crucial resistance is at 1.3902.

USD/JPY

The pair is up from 101.39. The near term bias is bullish. Resistance is at 102.60. If it is broken the upward trend might extend to as high as 104 in the long run.

GBP/USD

The Pound is now facing a crucial resistance on the upside. After some period of consolidation we can see an impressive rally in an attempt to challenge the aforementioned level. The ability to breach it will determine further trend.

Market Review

The Euro bears continue to receive support from the news. On weekend Draghi pushed markets to the start of decline by making a statement about the possibility of stimulating measures launch in case the Euro will appreciate against the US Dollar, what might put additional pressure on inflation. Subsequently a few members of executive committee of the ECB also supported the shift of the regulator to active policy.

Monday statistics only strengthened bears’ positions. Industrial production in the Euro zone showed growth by 0.2%, what was below market expectations. Against the background of ECB claims weak statistics only exacerbated anticipations of launch of European variant of QE. The biggest drop was seen in manufacturing of consumer products.

Consequently in spite of low inflation the demand in the Euro zone continues to stagnate. If recovery of the economy, which is embedded in various plans of European officials, is going to stagnate again the reduction of deficit of national budgets is going to be disrupted again. For instance in France the government is demonstrating an aspiration reduce the deficit by 2015 to 3% (a European norm).

By results of 2013 French deficit comprised 4.3%, while the level of debt load grew up to 93% of the GDP. In order to bring deficit to 3% in conditions of absense of more or less significant economic growth, authorities will again have to undertake unpopular measures and to cut expenditures. Subsequently it can lead to recession, what is obviously not desired in Paris, and more and more often we can hear claims for reforms start.

If France is going to improve business climate and is going to diminish at least part of the taxes, then there will be no talks about deficit reduction. Earlier Eurocommission has given French two delays and now Brussels is encountering German pressure, which objects any indulgence of that kind. It is not ruled out that Paris will find an ally in Italy, where authorities are concerned about creating conditions for growth.

Economic Calendar

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