The U.S. economic data proved to be much worse than the preliminary forecasts - 7.3.2014

The U.S. economic data turned out much worse than the preliminary forecasts. The ECB and the Bank of England left interest rates unchanged, making a series of positive statements. The combination of these factors caused the fall in the U.S. Dollar Index (USDIDX) to 4-month low. The ECB President, Mario Draghi said that the EU economy is recovering and the rates do not need to be reduced as the deflation risk is limited. The CPI will rise by itself in 2016, but it will not exceed 2 %. The Eurozone GDP this year will grow by 1.2%. In addition, the growth in factory orders in Germany for January added positive by 1.2%; it was more than expected. As a result, the Euro (EURUSD) has increased significantly. It also caused the closing of these short positions on the Euro against the U.S. Dollar by the market participants, who were counted on the rate cuts or signs of tightening in the monetary policy in Mario Draghi speech .

Today, at 13-30 GMT, we will see the important labor market data from the United States for February. They are expected to be positive for the U.S. Dollar. Number of people employed in non-agricultural sector (Non-farm Payrolls) will increase by 150 thousand people. Unemployment will drop to five-year low at 6.5%. In our opinion, if the Non-farm Payrolls turn out above at least 120 thousand people, the probability of decline in redemption of government bonds by $10 billion from the Fed meeting on March 19 may continue. This may support the Dollar. Recall that the employment rate increased by 113 thousand people in January.

As it was expected, the strengthening of the Australian Dollar (AUDUSD) and the weakening of the Japanese Yen (USDJPY) continued. We wrote about those currencies in the previous report. It looks like a growth on both charts. The RBA head, Glenn Stevens said he did not see any need to reduce the discount rate.

The Canadian Dollar (USDCAD) strengthened (fall on the chart) due to the positive macroeconomic indicators. The number of building permits issued in January increased by 8.5%. This is much higher than expected. Today at 13-30 GMT, there are the labor market data striking out in Canada. The preliminary forecast is neutral.

Yesterday the Bank of England and the ECB kept interest rates at 1%. However, unlike the Euro, there was no significant GBP strengthening observed. Investors believe that the UK should raise the rates to prevent a possible "bubble" in the real estate market. Index of home prices from the Halifax agency in February rose to the maximum since May 2009. Note that it is still 10% below its price peak of August 2007.

The Coffee prices went up by 75% with the beginning of the year. The recent auctions have been held with intraday volatility (5-7%) and that attracted a large number of speculators. The International Coffee Organization does not exclude the deficiency of coffee in the international market for the first time during the last five years. Meanwhile Colombia expects large crop of about 11.3 million of 60 kg bags.

As it was expected, the agricultural futures such as soybeans (Soyb), Maize (Corn), wheat (Wheat) actively become expensive. Probably, a part of the U.S. Federal Reserve Dollar emission began to flow to the commodity markets. However, volumes are also growing. According to the USDA, corn exports from the country for last week amounted to 1.5 million tons. This is significantly higher than the preliminary forecasts. Note that on Monday, at 17-00 GMT, the USDA will release the overview for March, which may affect the futures quotations.