Currency market weekly review (April 15 - April 19, 2013)
Euro: The PMI data of France and Germany economies were mixed, so the euro did not try to follow any direction and remained trading within the narrow range of $1,2950-$1,3095. The market participants, in addition, reduced their activity, waiting for the outcome of the ECB meeting scheduled on Thursday, May 2.
In details: The euro rose against the dollar after the current president of Italy, Giorgio Napolitano, was re-elected for a second term. After the Italian parliament failed for the fifth attempt to elect the new president, Mr. Napolitano a 87 -year-old man agreed to once again participate in the elections. On Tuesday sessions, the euro fell on the publication of the results for PMI of Germany. The PMI of manufacturing activity in April decreased to around 47.9 compare with 49 in March. The result was weaker than the market forecast of 49. The other data showed an ease of the recession in France in April has overshadowed the sharp drop in business activity in Germany. The rate of the euro currency against the dollar grew on Wednesday to the $ 1.3034 level after the report showed that the level of business confidence in German fell in April for the second month in a row. The experts pointed out that despite some improvement in performance of French economy, the German reports came out again disappointed which may lead the ECB to lower rates by 25 basis points in May, and consider to lower it even more in June. The German Chancellor Merkel on Thursday expressed a desire that the holders of banks’ shares will also take some of the responsibility for the future, and said that the government does not favor the general insurance system of deposits. After, these words the EUR / USD pair snapped back to almost Wednesday’s lows. The speculations that the European Central Bank may cut its key interest rate to a record low level at the next meeting in order to support the region's economy put pressure on the euro exchange rate and it weakened against most major currencies.
US Dollar: The U.S. dollar has almost not changed its position relative to major competitors. The Dollar Index closed the second half of the day on Friday’s sessions at 82.54 with a slight 0.08 % fall.
In details: The weak report on the U.S. housing market has helped to reduce the mood of investors of holding risky assets. According to the report released on Monday by the National Association of Realtors, the sales of existing homes in the U.S. in March unexpectedly fell by 0.6 % to 4.92 million homes a year. The dollar strengthened against its rivals on Monday. Published on Wednesday, the trade report reflected much stronger than expected a drop in new orders for durable goods in March and was able to influence the trading dynamics of the U.S. dollar in slightly negative way. The currency weakened against its most major rivals on Thursday amid the fact that the U.S. Labor Department reported that the number of Americans who first applied for unemployment benefits fell last week to near five-year low, which was a sign that the demand for employers has been increased. According to the report, for the week ended by April 20, the number of initial claims for unemployment benefits fell to the lowest level since early March, to a seasonally adjusted 16K, reaching the level of 339K. The average forecasts of experts were at 352K which meant remain unchanged.
British Pound: The British pound strengthened its position significantly after the release of positive data on GDP for the first quarter of 2013. For the week, it added 1.55% and closed at around 1.5480 against the U.S. Dollar on Friday, April 26.
In details: The Monday’s news published by the international rating agency Fitch Ratings on downgrading of the sovereign rating of UK by one stage from the highest " AAA" to "AA +" with the rating outlook - "stable," did not influence much the trading dynamics of the currency.
British Pound: The currency fell on Tuesday, however, recovered after on the results of the April’s CBI published by the Confederation of British Industry. The presented data showed that the number of new orders in the three months ended in April fell slightly, while the index, which measures expectations for the next quarter orders, grew. During the European session on Wednesday the currency retreated from highs after disappointing report of the Confederation of British Industry (CBI) on retail sales. The British pound rose significantly on Thursday, supported by the British publication of the report on UK GDP for the first quarter. The results recorded a growth of the rate by 0.3 %, which was above the average forecast of analysts 0.1 % and showed that the UK economy managed to avoid falling into "third" recession. The reason for the unexpected growth of the economy was the services sector, which expanded by 0.6%, while the strongest sectors were transport and communications which grew by 1.4 %.
Japanese Yen: After making another attempt to overcome the psychologically important level of resistance of 100 yen to the dollar, the Japanese yen strengthened against the Dollar.
In details: The yen weakened again and approached the level of 100 yen to the dollar, after the recent meeting of the representatives of the G20 revealed that the actions over the soft monetary policy of the Bank of Japan have not been criticized. The head of the Central Bank, Haruhiko Kuroda, moreover, has already hinted about expanding the monetary stimulus at the second meeting under his leadership, which will take place this week. Tuesday’s release of negative statistics from China has increased concerns about the future prospects of growing of the Asian economy and increased demand for safe-haven assets. The yen rose against all major currencies against and USD / JPY pair fell to Y98.47.The USD / JPY pair tried again to hit the important level of Y100 on Wednesday. The yen fell against the majority of the most traded currencies amid growing signs that the Japanese investors are transferring their assets towards foreign assets, which considers as the probability of National currency depreciation. On Thursday, the yen fell against most major currencies after the release of the information on fact that the Japanese investors sell foreign bonds for the sixth week in a row.
Canadian Dollar: The Canadian dollar reached its highest level in more than a week against the U.S. dollar after the head of the Bank of Canada, Governor Mark Carney in his speech to the Canadian Senate committee said that the Bank of Canada may raise interest rates after the pass certain "period of time.
Australian dollar: After the release of inflation data reported by Sydney Bureau of Statistics, the Australian dollar fell against all major currencies. The level of inflation in the first quarter slowed by 0.3% compared with the previous period of time. The economists had forecasts at 0.5 %. The slowdown in growth of prices in Australia was seen as a negative sign for the Australian dollar, since the last meeting of the Reserve Bank of Australia has hinted that further easing is possible.
New Zealand dollar: The New Zealand dollar rose on the decision of the central bank of New Zealand to keep the interest rates unchanged. The Reserve Bank of New Zealand left its key interest rate unchanged at 2.5%, which was in line with economists' forecasts and informed that such a situation is likely to persist until the end of the year as inflation remains at low-key level, despite the growth observed in the housing market.
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