The Dollar Index made significant fluctuations on Friday, but, as a result, remained almost unchanged - 10.3.2014

The Dollar Index remained almost unchanged. The U.S. labor market economic data in February proved to be controversial. The number of jobs in the non-agricultural sector (Nonfarm Payrolls) increased by 175 thousand people. This is better than expected. At the same time, unemployment still rose to 6.7%, which is worse than the forecast. According to futures quotations on interest rates, the probability of their improvement is 54% by June next year.

This week we expect the most important economic data from the U.S. to be released on Thursday, as well as (retail sales) in the EZ and (an industrial production) on Wednesday. Since most of market participants expect another decline in the U.S. government bonds redemption at the end of the Fed meeting on March 19th, we do not exclude the growth of the Dollar Index in case of good economic performance.

Exports from China in February unexpectedly fell by 18.1% compared to February of the last year. Since most of market participants expected its growth, the influence on the quotations was rather significant. Imports increased by 10.1%. As a result, the trade deficit in China totaled $23 billion in February. This information caused the strengthening of the Japanese Yen (USDJPY), the weakening of the Australian Dollar (AUDUSD), and a marked drop in Copper prices.

The important economic data will be released in Australia on Tuesday, Wednesday and Thursday. In particular the business confidence index for February is coming out tomorrow at 00-30 GMT.

Note that there was a noticeable weakening of the Japanese Yen (rise on the chart) on Friday due to weak macroeconomic information. The GDP growth in the fourth quarter was worse than expected and amounted to 0.7% in annual terms. The current account deficit was also weaker than it had been expected. This is especially negative for export-oriented Japanese economy. However, the data from China have caused a change towards the Yen and it strengthened its position today (fall in the chart). Investors see the Yen as a safe heaven currency in the case of economic problems in China. This week macroeconomic data will be brought from Japan everyday, so the Yen can be quite volatile. Now market participants are focused on the results of the BOJ meeting, which will be announced on Tuesday. It is expected to continue easing the monetary policy aimed at weakening the exchange rate: emission 60-70 trillion Yen per year to redeem Japanese government bonds and the sales tax increase from 5% to 8% since April 1st.

Because of the fall in Chinese exports, the Copper price in Shanghai on Friday fell by 5% to its lowest level in more than four years. Meanwhile, imports of Copper to China in January-February 2014 increased by 41.2% to 915 thousand tons compared to the previous year. Therefore, we believe that falling prices may be short-lived. China consumes 45% of world's Copper production. It is not excluded that the quotations were also affected by the first corporate default on the bonds in China in addition to weak exports. The solar energy equipment manufacturer, Solar Shaori did not pay any percentage on its debt securities. The Copper is actively used in the industry.

The Gold (XAUUSD) comes cheaper for the second consecutive day. Investors believe that the U.S. labor market data is acceptable for further economic growth. The political situation has been stabilized around Crimea partly on anticipation of a general referendum of its residents on March 16th. It will decide the future status of the peninsula. An additional factor of reducing the Gold price are the signs of a slowdown in Chinese economy. Meanwhile, according to the U.S. Commission on Commodity Futures Trading (CFTC), the number of net long positions on the Gold (net-long) last week increased by 3.8% to the highest level since December 2012, 118.2 thousand contracts. In this regard we can not exclude the resumption of growth in the Gold prices after the correction.