Forex

Currency market weekly review (February 22 – 26, 2010)

By Forex-Metal

In the beginning of the previous trading week the speculations regarding the bail out plan for Greece by the EC had the dominant influence on the euro dynamics. The EC did not confirm any agreement to provide Greece with credits and guarantees by the European countries. And the euro, which managed to consolidate at the beginning of the trading day due to the stock markets growth, started to loose its reached positions. Therefore, the pair EUR/USD dropped from the reached maximums of  $1.3650 to $1.3600. At the same time, the positive US fundamentals, which were published on Monday, could not render support to the US dollar. The Chicago Fed Nat Activity Index for January turned out to be above the forecast and above the previous level as well: its factual level of 0.02 against the expected level of – 0.19.

The negative Euro-zone data, which was published on Tuesday, strengthened the pressure on the euro. The IFO-Business climate and IFO-Current assessment indicators on Germany for February turned out to be below the previous levels and worse than the forecasts. The concerns regarding the situation with Greece continued to render negative influence on the investors. Consequently, the EUR/USD pair dropped to the $1.35 mark. The negative Euro-zone fundamentals increased the demand for the US dollar, as for a shelter-currency. The unexpected drop of the US consumer confidence for February, which was released on Tuesday, increased the demand for the shelter-currencies.

On the same day against the background of the statement of the head of the Bank of England, Mervin King, regarding the weakness of the UK economy rehabilitations process, the sterling rate decreased. And the GBP/USD dropped to the level of $1.5390.

The Euro-zone fundamentals, which were published on Wednesday, rendered temporary support to the euro. In particular, the unexpectedly positive volume of the monthly and yearly Euro-zone industrial new orders for December managed to provide the euro with its growth. In addition, the GfK consumer confidence survey in Germany for March happened to be above the forecasts. The negative influence on the euro dynamics was received from the new wave of concerns regarding the situation with Greece and other EC countries after the announcement of the rating agency Standard & Poor's about the possible reduction of the Greece rating. And the EUR/USD pair dropped to $1.3515 after the reached maximums at the level of $1.3625.

The US dollar also demonstrated its decrease against the euro due to the publication of the negative US fundamentals. The new home sales dropped for January to 309 thousand against the forecasted 353 thousand.

According to the results of the statement of the head of the FRS, Ben Bernanke, the rehabilitation of the American economy needs low interest rates.

On Thursday the speculations regarding the fact, the rating agencies Standard & Poor's and Moody's could reduce the rating of Greece, had a negative influence on the euro dynamics. In addition,  Germany denied the information, that the bail out plan for Greece actually exists. The demand for the high-risk currencies continued to drop, and the investors were interested to acquire the shelter-currencies. The EUR/USD pair showed minimums in the range of  $1,3450.

At the same time the negative US unemployment data, which was released on Thursday, has a disappointing influence on the market participants. In particular, the initial jobless claims increased and turned out to be above the forecast: the factual level of 496 thousand against the expected 460 thousand. 

 
The unexpected and rather significant drop of the monthly and yearly total business investment volume in Great Britain pressured the sterling. And the GBP/USD pair established its minimums at the level of $1,5190.

During the whole week the Japanese yen consolidated as the mostly stable shelter-currency. The USD/JPY rate dropped to the Y88.78 mark.