Time for new sales
by Yuri Vishnevetsky
IMF Analytical department has revised its estimations of the US economy growth rate, lowering it from 3.6% to 3.1% for 2015 and from 3.3% to 3.1% for 2016. Strictly speaking, even the reduced numbers seem quite exaggerated, given the speed the destructive processes are gaining momentum with.
The producer price index increased by 0.2% in March, disregarding the seasonal adjustment, but there is clearly not enough positive in order to be able to speak about the prices stabilization yet. We would like to remind you that the decline in February was 0.5%, in January - 0.8%, while the general trend for the past 12 months is obviously directed downwards:
Some activization is observed in retail sales as well, where growth in March amounted to 0.9%, which is below analysts' expectations of 1.1%, but it should be taken into account that the two previous months have shown a decrease.
Today, Germany and France will present reports on consumer prices in March, at 9:00 and 9.45 GMT+3 respectively. Forecasts are neutral, changes compared to February are not expected, which by itself is a positive sign for the euro, and the release of the data not worse than forecast can support the single currency.
ECB will have another meeting today. Changes in the monetary policy are not to be expected: the interest rate is at the minimum level of 0.05%, the incentive program was launched just over a month ago, consequently, the major attention of the market will be focused on the ECB President Mario Draghi press conference who will have to answer a number of awkward questions.
An extensive incentive program should have a positive effect at an early stage already, because otherwise the capital flight from the eurozone might accelerate. Issue and repurchase of government securities exert significant pressure on the debt sector, when the treasury bonds yields are reduced, and already more than a half of all bonds have a negative yield. If the trend continues, it will be extremely difficult to keep the capital within the eurozone, and in this case, we can forget about the positive effect of the incentive program for a very long time.
EURUSD rate, following a more complicated path than I forecasted last time, is still going down, while the emotional growth on the weak data on US retail sales has been used for sales, as expected. The most likely scenario is another testing of the 1.0554/57 support , followed by a movement to 1.0435.