Weekly Market Review 14 of May
OVERVIEW

Last week the biggest impact on the rates was caused by the elections in France and Greece. The political instability in Greece and the probability of Greece leaving the EU monetary union were important factors as well. The EU approved of allocation of 5.2 billion Euro aid to Greece. The economy of the USA continues to display signs of improvement. The British economy also shows better results than the European one and the Bank of England didn’t modify its monetary policy at the last meeting on rates.  Japan didn’t take any measures to make its currency cheaper though before that the government had made a statement about it. The Chinese statistics was worse than the forecasts and it suggests slowing of the economy growth.

The EU leaders recently could see enough proof of the statement that practice is very different from theory.  It is possible to try to adjust the economy of the monetary union member in the tough European demands to particular inflation and deficit levels. Nevertheless soon all those attempts will prove to be in vain and the country will move with its economy to the way of least resistance. And Greece is the best example of it. Recently they had elections with no party succeeding to gain the majority of votes and that means the forming of coalition government… Reached agreements with EU about the programs of austerity measures and fiscal consolidation might very soon be forgotten. That’s why the future of Greece remains unclear and analysts are assessing risks of Athens leaving the monetary union. But that is only a part of the problem. After Greece there are Spain, Portugal and others who are ready to leave the union.

CURRENCIES

EUR/USD

Last week the Euro depreciated against the US Dollar from. From technical point of view as the gap at the beginning of the week near the level of 1.3080 - 1.3065 remained not closed the EUR has more chances for continuing of the downward trend in the direction of 1.2805, 1.2750, and even 1.2550.  All that is happening against the background of expectation of rates’ lowering by ECB and anticipation of political collapse of Europe.



GBP/USD

Last week the Pound depreciated against the US Dollar. The British currency turned out to be too over purchased and the current situation suggests strong correctional downgrade. The closest correction goal is the area 1.5901 - 1.5970. But this is only the beginning. The full correction is expected in the area 1.5605 - 1.5650.