Daily Market Review - 09/30/2014

EUR/USD

The Euro continues to consolidate. The fluctuation range is narrowing down, suggesting the end of consolidation. So the bias is bearish and the general trend is expected to resume soon.

USD/JPY

The trend is in the stage of upward trend correction. The asset didn’t manage to reach 110, as the height was a too tough challenge for the pair. So now retracement extends to as far as 108.5.

GBP/USD

The Pound is down. There might be a formation of the downward channel. Anyway regardless of peculiarities of further trend the outlook is bearish.

Market Overview

The week for the Euro has started with quite superficial positive sentiment. In spite of the fact, that Spanish inflation is still in the area of negative figures, statistics has softened up: instead of last month -0.5% we saw only -0.2%. The more so Madrid has started to revise forecasts on economic growth. This year positive dynamics of the GDP is expected on the level of 1.3% and next year already 2%.

It is not likely that in coming years the level on unemployment is going to be below 20%. In addition to that plans on deficit decrease are disrupted. By results of the year the figure is going to stabilize at 5.5%, and only next year its decline is expected at 4.2%.

In France deficit shrink is stagnating and up to 2016 its targeting to European norm of 3% of the GDP is not expected. More over Paris and Rome still insist on softer approach to spending cuts. The other stage of them might lead to a new decline. The head of the ECB Draghi has emphasized the necessity of investment expenditures in his recent speech. Those expenditures have been cut for a few years.

The program of assets purchasing will go along with earlier launched mechanism of banks crediting (TLTRO). By the end of 2016 it is planned to pump around 1 trillion Euro into banks with a necessary condition of real sector crediting.

Most of the questions are aroused by the ECB plans of purchasing securitized assets. Since the regulator can’t accept risky assets on its balance, Draghi referred to national governments with the idea of getting guarantee on possible losses. But Berlin and Paris have rejected it already. If there is no chance to make a deal, the ECB will have to buy only the most reliable securities; the volume of the market is not big, what of course will reflect on the effectiveness of the program in general.

Economic Calendar

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