Forex

Currency market weekly review (August 27 - August 31, 2012)

Euro: The support for single currency on Monday was provided by the speech of German Finance Minister Mr. Wolfgang Schaeuble who said that Germany and France will create a working group, which will prepare the solutions for banking alliance to improve the financial and monetary union in the region. The EUR / USD pair has reached $ 1.2535area, which was its high of this day. The positive Tuesday’s background based on the facts that Spain sold three-month and six-month treasury bills for a total of 3.607 billion euros against the planned 2.5-3.5 billion euro and a yield of bonds sharply declined helped the euro to grow during all day. The currency also grew after the European Union President, Mr. Herman Van Rompuy noticed that the rescue fund in the region is ready for quick action in order to help to Spanish banks. Meanwhile, the Prime Minister of Spain said that Spanish banks will need less than 100 billion euros for resolving the most important problems of the bank sector. The investors’ confidence increased on Tuesday due to the fact that the ECB initiated a new program for supporting the European bond market. The information revealed that no one of the ECB management members will attend the economic symposium in Jackson Hole on August 31 spread rumors that the European Central Bank is preparing to announce new initiatives at its meeting on September 6. The support that the euro received on Thursday was provided by the statements of the President of the European Central Bank Mr. Mario Draghi who justified his believe in the ECB's "exceptional measures" within the overall obligation to maintain price stability in the euro area. Also, the single currency rose against major currencies amid falling yield in today’s auction for bonds of Italy. Italy sold a ten-year treasury bills in the amount of 4.0 billion euros with a target of 3.0-4.0 billion and the maximum yield of securities was 5.82 %, against 5.96 % in previous placement. The EUR / USD pair rose to a high of $ 1.2570 during the European session. The euro rose to near two-month high against the dollar on Friday on the background of speech of Mr. Bernanke who said that the Federal Reserve will take steps as necessary to support the economic recovery.

US Dollar: The demand for the dollar was limited ahead of today's speech the president of the Federal Reserve Bank of Chicago, Mr. Charles Evans and anticipations of the Friday’s speech of Mr. Bernanke regarding further actions of the Federal Reserve for easing its monetary policy. On Wednesday, the dollar rose against most major traded currencies after the report on Personal Consumption in 2nd quarter showed that the level consumption in the U.S. rose more than expected. Also, the report on the number of pending home sales which reached a two-year high by rising in 15% in July helped the currency to grow. On Thursday, the data on Personal spending, which rose in July for the first time in three months by 0.4%, supported the dollar during the American session.  After the Federal Reserve Chairman Mr. Ben Bernanke said that he would not exclude further bond purchases and reducing unemployment for boosting growth, the dollar index fell to a more than three-month low.

British Pound: The GBP / USD pair strengthened to the highs of $ 1.5853 in the last hour of the European session on Wednesday ahead of the release of the consumer price index in Germany. The pound continued to grow against most currencies on Thursday after the report of Mortgage Approvals showed that the number of approved applications for mortgage loans increased in July thus indicated a recovery from the recession in June. In details, the records showed an increase of the number to the level of 47,3K. The GBP / USD pair rose sharply to a level of $1.5841 with all potential to grow higher than the high of previous day.

The Friday’s report showed that UK house prices rose by 1.3 % m / m in August thus easyed fears that the recession worsens. The report provided support for the Pound.

Japanese Yen: The yen strengthened against most major currencies after for the first time in 10 months the Japanese government has downgraded estimates for its own economy. The USD / JPY pair declined under the level of Y78.50.

Australian dollar: The Australian dollar touched its lowest level in a month, $1.044 area on the background of concerns that global economic growth will continue to be weak. The report on new home sales in Australia also provided some negative due to the drop in the number of new dwellings sold in the past month. The Australian dollar fell after the negative statistics which informed that the volume of construction completed in Australia during the previous month decreased by 0.2%, after rising 7.8% in the previous period and forecasts of analysts of 0.5%.The number of approved applications for housing construction fell in July by -17.3%., as it was revealed by the government report of Building Approvals. The Australian dollar broke through the 1.0400 support and fell against most major currencies after publication of the report about the economic situation in China the weak result of which renewed fears about World’s economy progress.