Daily Market Review - 09/03/2014

EUR/USD

The Euro has been consolidating since the beginning of the current month. The pattern suggests the resumption of the general downward trend. The reversal symptoms are not seen at the moment.

USD/JPY

The pair is again above 105 for the first time since the last month of 2013. The level is obviously a challenge for the pair to rise past successfully. Right now we see a retracement, which is likely to turn into downward trend in the midterm.

GBP/USD

Current break in Pound’s decline is only a short pause in the major trend. Most likely it is just a bounce, so the depreciation of the Pound will continue in the foreseeable future.

Market Overview

Coming ECB meeting triggers a lot of debates on effectiveness of potential beginning of the European variant of QE. Opponents of stimulating program state, that the ECB has been postponing the program for too long and now the impact of mass assets purchase won’t be that significant as in the USA, where unemployment has stabilized and economy has come back to growth.

Adherents of QE start insist on the fact, that deflation and poor GDP dynamics don’t leave the choice for the European regulator to influence on the situation. Inflation is approaching the zero point. Without a double it exacerbates the pressure on the ECB. At that the main consequence of QE is a growth of demand, while stagnation of demand remains one of the key issues of the Euro zone.

But economy won’t be satisfied with just liquidity pump. The thing is that the QE solves only short term economic problems and creates conditions for structural reform conduct. Draghi has called for more activity of national governments in his speech on the FRS conference. Again the recovery of the EU is embedded in deregulation and simplifying of conditions of doing business.

For example France and Italy the second and the third economies of the EU respectively and are on 38th and 65th places respectively in the rating of Doing Business Report. Belorussia and Kazakhstan somehow managed to outscore Italy, where regardless of all recent reforms burocracy continued to blossom, and labor market didn’t wait for important reforms.

It is not ruled out that in order to somehow get out of the troublesome situation the ECB will announce the beginning of the program of securities purchase, but the terms of its beginning might be significantly shifted to the future. Besides, there might be a remark, that in case of statistics improvement the regulator might refuse to start QE, which will most probably consist of credit portfolios purchase and not bonds.

Economic Calendar

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