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Currency market weekly review (December 09 - December 13, 2013)

December 16, 2013, Monday, 19:37 GMT | 14:37 EST | 00:07 IST | 02:37 SGT
Contributed by Forex-Metal

Euro: The Euro grew in the first half of the week against the U.S. dollar on positive reports on Germany. As it became known, the surplus of the current account balance Germany in October fell less then it was expected.

In details:

Monday: The euro rose slightly against its competitors, which was helped by positive data on the balance of payments in Germany. As it became known, the surplus of the current account balance Germany in October did not fell as much as it was expected. It declined to €19.1 billion against revised €20.0 billion in September. It's also was more than economists forecasts on €16.8 billion. Nevertheless, the positive part of this was offset by other data, which showed that the trade surplus with adjustments for seasonal and calendar factors in October fell to €16.8 billion compared with €18.7 billion in September. It was also less than economists’ forecasts on €17.4 billion. It should also be noted that the euro reacted very weak on the report on industrial production, which showed a decrease in volume by 1.2 % in October, although the growth by 0.8% was expected. The EUR / USD pair rose to $ 1.37230 during the European session.

Tuesday: The euro fell slightly against the dollar retreating from a session high influenced by weak report on industrial production in France. Data from the National Bureau of Statistics Insee, published earlier today showed that industrial production in France unexpectedly fell in October, registering with the second monthly decline in a row, which was another sign of a weak start to the last quarter of 2013 in the euro area. According to the report, industrial production in the second largest economy in the euro zone fell in October by 0.3 % on a monthly basis, which followed after a similar drop in September. Analysts had expected growth in October by 0.2%. Reduction in October confirms steady downtrend issue in the industrial sector. Falling for the three months to October was 0.6 % compared with the previous three-month period. In addition, data showed that production in the manufacturing sector of the industry - a key component of the overall figures for the manufacturing sector rose by 0.4 % in October, due to increased production of vehicles and electronic equipment. The EUR / USD pair rose to $ 1.3769 during the European session.

The euro strengthened to a six-week high against the dollar due to the reduced likelihood of tighter monetary policy. Even if Fed officials decide to start reducing asset repurchase at a meeting in December, it will probably be a small change, in order to avoid the sale of the bond market, which could increase the long-term interest rates and to strike at the U.S. housing market.

Wednesday: The euro exchange rate rose slightly against the dollar, retreating from session lows, helped by a report on Germany. Final data, which were presented by the Federal Statistical Office showed that inflation in Germany, agreed to the procedure of the EU increased markedly in November, and confirmed preliminary estimates. According to the report, inflation in accordance with the harmonized consumer price index rose to 1.6% in November from 1.2% in October. November figure corresponded to preliminary estimates. On a monthly basis the harmonized index of consumer prices increased in November by 0.2%, compared with a decline of 0.3% in the previous month. The result was in line with a preliminary estimate. Meanwhile, the Department of Statistics reported that the consumer price index rose in November by 1.3 % per annum, and confirmed earlier estimates and forecasts of experts. This followed growth of 1.2 % in October. On a monthly basis, consumer prices rose by 0.2 %, which corresponds to the initial estimates, and the expectations of economists. Recall that in October, prices fell by 0.2 %. The EUR / USD pair fell to $ 1.3740 during the European session.

Thursday: The euro traded mixed as the reaction to the publication of the monthly economic report from the ECB and the statements of the head of the ECB Draghi .The ECB confirmed that due to the prevailing downside risks, the monetary policy will remain accommodative as much as needed to support the economy in the euro zone. This year, the euro zone’s GDP is expected to reach 0.4%, and in 2014 and 2015 at around 1.1 % and +1.5 %, respectively. According to the Central Bank, the euro zone could face a long period of low inflation, followed by acceleration to a level close to the target, namely 2%. The EUR / USD pair fell to $ 1.3760, but later came back to $ 1.3785 during the European session.

US Dollar: This week, the U.S. dollar strengthened due to heightened expectations on start of the rolling program of bond purchases by the Federal Reserve System of the USA.

In details: The U.S. dollar rose against major currencies on the back of strong retail sales data in the U.S. The key to the U.S. economy holiday sales season started on a positive note: in November retail sales rose by 0.7% compared with the previous month, which is slightly higher than economists' forecasts for a rise of 0.6%. Compared with the same period last year, the retail sales in November rose 4.7 %. According to experts, the published data supplemented piggy encouraging news regarding the U.S. economy, which contributed to enhanced solutions for speculation the U.S. Federal Reserve next week to start folding bond-buying program, which now consumes 85 billion U.S. dollars monthly. At the same time, the latest data from the Department of Labor showed that the number of people who applied for the first time unemployment benefits rose sharply last week. However, experts note that the Thanksgiving Day holiday could distort the data. According to the report, the number of initial claims for unemployment insurance rose to a seasonally adjusted 68,000 in the week ended Dec. 7, at the same level reached 368,000. Add that it was the biggest jump in this indicator over a year. Economists forecasted that the number of complaints rise to the level of 321000 to 298000 , which was originally reported last week.

British Pound: The British pound came under the pressure when the industrial production in the UK rose in October, while the figures for international trade continued to disappoint, highlighting the challenges facing policy-makers who are eager to see a rebalancing of the British economy on the export of consumer spending.

In details:

Tuesday: The pound traded mixed against the dollar, which is primarily due to the release of data on Britain. The Office for National Statistics reported that industrial production in the UK rose in October, while the figures for international trade continued to disappoint. The report showed that production in the manufacturing sector rose by 0.4 % between September and October, which helped increase the total volume of industrial production by 0.4%. The production in the manufacturing sector turned in October by 2.7 % higher than the same period a year earlier, which allowed fixing the largest annual growth rate since May 2011. The GBP / USD pair traded in the range of $ 1.6415 -$ 1.6465 during the European session.

Wednesday: The pound declined significantly against the dollar, despite the fact that Britain's economic calendar is empty today. Many market participants were waiting for the speech of the representative of the Bank of England Mr. Will. The recent rise in inflation expectations among Britons is not a cause for concern, said Will. In August, representatives of the Bank of England had promised not to raise key interest rate until the unemployment rate in the UK has been reduced to 7% threshold, which, according to representatives of the Bank is unlikely to be achieved until 2015, although the condition of these guidelines was that inflation expectations are stable. He also said that only if the recent rise in inflation expectations would be sustainable, it will come to the conclusion that the reference did not load. The course of the pound continued to be influenced by yesterday's statement of the Bank of England Governor Mark Carney , who noted that the UK economy needs further political support and promised to remain vigilant about the risks for the housing market . "We need to provide more incentives but these incentives can create risks" - Carney said. "We have to take other measures to reduce these risks. If we do not, we can create a big problem in the future, or we will have to pull back too soon from the current monetary policy, which we planned to spend. "

Thursday: The pound rose sharply against the dollar, helped by data from the Conference Board, which showed that the leading indicator for the British economy grew in October, registering with the fourth monthly increase in a row, but in a lesser degree than in the previous month, indicating moderate economic growth in early 2014. According to the report, the leading economic index increased in October by 0.4 % on a monthly basis, thus reaching the level of 108.4 points. At the same time the index, which measures current economic situation, rose 0.1 % to 105.2 points, after increasing 0.2 % in September. The GBP / USD pair rose to $ 1.6420.

Japanese Yen: Yen fell seventh week against the U.S. dollar on the eve of the U.S. and Japan Central banks meetings which will be held next week. Expectations as to what the Federal Reserve may soon curtail the program to stimulate the economy continued to dominate the financial markets, pushing the Japanese yen to reach a new five-year low against the U.S. dollar.

In details:

Monday: The yen traded cautiously against the dollar, despite the fact that the published figures were worse than expected. Report from the Cabinet Office showed that the Japanese economy in the third quarter increased by 0.3 %. According to preliminary data, the growth was at 0.5%. The capital investments were lower than the original estimate, due to weak foreign demand. Compared with the first half of the year growth has slowed considerably - when he was about 4.0 %, which overtook the U.S. growth. The USD / JPY pair traded in a narrow range of Y102.85-Y103.35 during the European session.

Tuesday: The yen rose against the U.S. dollar, which was associated with the publication of data on Japan. The orders for machinery and equipment in Japan rose by 15.4 % y / y in November, nearly doubling the October value of 8.4 %. Meanwhile, it became known that the level of consumer confidence in Japan improved in November, but less than economists had forecasted. The unadjusted consumer confidence index was 41.9 points, compared with 41.2 in October. Economists expected the index to rise to the level of 44 points. Sub- index of overall confidence rose to 39.1 in November from 37.7 a month earlier. At the same time, the sub- index, which assesses the expectations regarding the growth of household income rose to 39.1 from 38.1. We also add that consumers' willingness to buy durable goods was less positive in November - the corresponding indicator fell to 42.4 from 42.9 in October. Employment sub-index rose to 47.1 from 46.1. The USD / JPY pair dropped to Y102.75 during the European session.

Canadian Dollar: The index for new homes rose in Canada in October was weaker than expected. The index on the primary market rose in October by 0.1 %, while economists had expected prices to rise 0.3%. . The USD / CAD pair rate raised more than half the figure, updating the session high, which was a reaction to this weak report.

The Australian dollar showed a two-day growth after publishing a report on China's trade surplus. It turned out that in the past month, the trade surplus of China has increased to the maximum value of more than four years. This means that global demand helped to maintain the recovery of the second largest economy in the world. The data from the General Administration of Customs in Beijing revealed that the surplus of 33.8 billion dollars grew because the exports grew by 12.7 % compared with a year earlier , while imports gained 5.3% .

Swiss franc: The currency strengthened against the dollar, responding thus to solve the SNB and statements of the head of SNB Jordan." The Swiss economy is still facing problems due to lack of growth momentum in the euro area, and the growth is likely to decline in the last quarter of this year," said the president of the Swiss National Bank Thomas Jordan today. "The economy has developed favorably in the third quarter, but given the weak economic situation abroad, the risks continue to dominate in Switzerland” - Jordan said at a news conference. The Swiss central bank reiterated its earlier position to prevent the Swiss franc falling below 1.20 francs per euro, promising to buy foreign currency in unlimited quantities, and to take additional measures if necessary. The Swiss National Bank as it was expected by most economists, kept its key interest rate in the range of 0% - 0.25 % for 10 - consecutive quarter.