Currency market weekly review (December 16 - December 20, 2013)
Euro: The Euro lost in the week 150 basis points or 0.4 % against the dollar ignoring the generally positive statistics on the indexes of business optimism in Germany.
Monday: The euro rose against the dollar after strong data on business activity in the euro zone and Germany. The Eurozone private sector actively grew in December more than it was expected by economists. On a seasonally adjusted composite index of production, which measures the performance of the manufacturing sector and the services sector rose to 52.1 December from 51.7 in November. Economists had expected a modest increase to 51.9. Activity index for the manufacturing of Germany rose in December to its highest level in thirty months, indicating a much more rapid increase in activity. The seasonally adjusted purchasing managers' index (PMI) for the manufacturing rose to 54.2 in December from 52.7 in November. Value in December was the highest in thirty months. The economists had expected the index to rise to 53.1. The EUR / USD pair rose to $ 1.3790 during the European session.
Tuesday: The euro fell against the dollar after failing to keep the conquered positions early in the session. The published data on inflation in the Eurozone, revealed that consumer prices in the euro zone fell in November compared to October due to lower energy prices and labor costs. Despite the decline in prices in November compared with October, the annual inflation rate rose to 0.9 % from 0.7%, according to a preliminary estimate. However, even after this increase the inflation remained far below the target level of the European Central Bank 2.0% and the slowdown in labor costs indicated that in the coming months a significant growth is unlikely. One more report showed that the economic expectations for Germany improved by 7.4 points in December 2013. The ZEW indicator of economic sentiment in Germany now stands at 62.0 points (historical average: 24.2 points). This is the best result of the indicator since April 2006. The EUR / USD pair rose to $ 1.3785 and then fell to $ 1.3745 during the European session.
Wednesday: The euro fell against the dollar amid weak data on changes in the volume of construction in the euro zone. The production in the construction sector of the euro zone declined sharply in October, and this development added questions about the sustainability of economic recovery in the region. The production in the construction sector fell by 1.2% compared with September, which was the strong decrease of this index since January. The reduction observed for the second consecutive month. As it was followed from the previously published Eurostat data, there was a decline in October in industrial production and retail sales, which increased the likelihood of the recovery process of the euro zone economy in the last quarter of the outgoing year. The euro zone economy returned to growth in the 2nd quarter after falling over each of the previous six quarters. However, despite the growth in the 2nd quarter by 0.3% in the 3rd quarter of the region's economy grew by only 0.1%. The EUR / USD pair fell to $ 1.3745 during the European session. The euro currency regained some ground against the dollar, on the eve of the announcement of the outcome of the meeting of the Federal Reserve System. Also, the market participants disregarded data on the business climate of Ifo. The business climate index rose to 109.5 in December from 109.3 in November. The economists expected the index to rise to 109.7. The current conditions index fell to 111.6 in December from 112.2 in the previous month, while expectations were at the level of increase to 112.5. The expectations index improved more than expected to 107.4 from a revised 106.4 in November. The consensus was at a slight increase to 106.5.
Thursday: The euro rose slightly after the release of data on the balance of payments in the euro zone. The current account surplus of euro zone rose to a seasonally adjusted 21.8 billion Euros in October from 14.9 billion Euros in September. The surplus on goods, services and income increased in October, while the deficit in current transfers declined from September. The surplus on trade in goods rose to 17 billion Euros from 13.7 billion Euros in September. In turn, the surplus on services increased to 9.4 billion Euros from 8.8 billion Euros. In addition, profit rose to 4.7 billion Euros from 2.6 billion Euros. At the same time, current transfers showed a deficit of 9.4 billion Euros, compared with a deficit of 10.2 billion Euros a month ago. The EUR / USD pair rose to $ 1.3695 during the European session.
US Dollar: The U.S. dollar strengthened its positions in the period from 16 to 20 December as market participants assessed the outcome of the last meeting of the Federal Open Market Committee Federal Reserve.
Tuesday: The dollar has risen considerably, reaching almost a session high as market participants' attention more and more switched to the announcement of the Fed meeting. It would be the last meeting for Fed chairman Bernanke in this post - in the next month, he will give his powers Janet Yellen. The markets expected the Fed may decide to small decrease in monthly program to purchase assets, which currently stands at $ 85 billion per month. Also, as it became known, the U.S. current account deficit, which was the sum of the balance of trade in goods and services, income, and net unilateral transfers, declined in the third quarter to 94.8 billion compared with the revised downwards from 98.9 to 96, $ 6 billion deficit in the second quarter. The deficit decreased to 2.2 % of GDP, compared to 2.3% of GDP in the second quarter.
Thursday: The dollar rose against most major currencies after the Federal Reserve's decision to reduce the purchase of assets by $ 10 billion to $ 75 billion a month, and improving economic outlook for the United States. So, after a meeting of 17-18 December the Fed has reduced its quantitative easing program and kept the target range of the base interest rate of zero to 0.25 % per annum. The U.S. Dollar dropped against its competitors, which was helped by the weak U.S. reports. The first is to provide data on the number of applications for unemployment benefits. In the Department of Labor reported that the number of people filing for first time applications for unemployment benefits rose by 10,000 and totaled a seasonally adjusted 379,000 in the week ended Dec. 14. This was the highest level since March and well above 336,000 new claims which was expected by economists. The number of applications from the previous week revised up to 369,000. New applications jumped by 74,000 in the past two weeks after moving to six-year lows in late November. The four-week moving average of claims rose by 13,250 to 343,500. Also, as it became known , the existing home sales fell by 4.3% compared with the previous month to a seasonally adjusted annual rate of 4.90 million home sales fell 1.2 % compared with a year earlier, the first time in 29 months this index decreased compared to the same period last year. The economists forecasted a decline of 2.0% from October to November to an annual rate of 5.04 million.
British Pound: The British pound increased as the data on unemployment in the United Kingdom in November published on Wednesday December18, were much better than expected.
Monday: The pound rose against the dollar, recovering from the lows. An economic calendar for Britain today presented only data on the housing market. According to Rightmove real estate agency, the average asking price for homes for sale on the website Rightmove, was 1.9 % lower in December compared to November, but remained 5.4% higher than at the end of 2012. In November, house prices fell by 2.4% m / m and raised 4.0 % y / y. The GBP / USD pair fell to $ 1.6290, and then rose to $ 1.6353 during the European session.
Tuesday: The pound fell against the dollar, retreating from highs. Annual inflation in the UK fell in November to its lowest level in four years, official data showed. Deceleration must persuade the Bank of England to keep interest rates at a record low until unemployment falls. Office for National Statistics reported that the annual inflation rate fell to 2.1% in November from 2.2% in October, with at least November 2009. The decline was due to falling prices for utilities and food, which grew more slowly than in the previous year.
The UK inflation fell from 5.2% y / y in September 2011 to nearly 2% of the target level of the Bank of England in November 2013. The Central Bank predicted that the annual inflation rate is likely to rise in the short term, and then fall below 2% in early 2015 .The GBP / USD pair rose to $ 1.6340, and then fell to $ 1.6260 during the European session.
Wednesday: The pound rose sharply against the U.S. currency after upbeat data on the labor market, according to which the number of unemployed in the UK in November 2013 fell more than expected, and the unemployment rate was the lowest since April 2009. According to the Office for National Statistics, in November, the number of Britons who received unemployment benefits fell 36.7 thousand, although the analysts expected the fall by only 35.2 thousand. The unemployment rate in August-October, calculated in accordance with the methodology of the International Labour Organization, fell to the lowest level since April 2009 and was 7.4 %. Earlier, the Bank of England has promised that it will keep its key interest rate at a low level until unemployment falls below 7 % .The GBP / USD pair rose to $ 1.6370 during the European session.
Thursday: The pound also traded in a range against the U.S. currency on background data on retail sales in Britain. Sales, including automotive fuel rose 0.3% on a monthly measurement in November, recovering from a revised 0.9% drop in October. The result was in line with economists' expectations. Excluding automotive fuel, sales increased by 0.4% on a monthly measurement in November. It was a little faster than the expected increase of 0.3%. In October, retail sales fell by a revised 0.7%. The GBP / USD pair traded in a narrow range of $ 1.6365 during the European session.
Monday: The yen strengthened, departing from the five-year low, in anticipation of the meeting of the Open Market Committee Federal Reserve, which will be held December 17-18. Investors' opinions on the possible solutions to the Central Bank following this meeting differ. About 34 % of those surveyed analysts expect the American Central Bank will begin to curtail quantitative easing program at the upcoming meeting. Against this background, a volatility of currency trading was sharply increased. The USD / JPY pair rose to Y103.20 during the European session.
Tuesday: The Yen fell against all major currencies after the negative report on the trade balance of the country. As it was reported today in the Ministry of Finance in Tokyo, in November, Japan reported the largest trade deficit, which amounted to Y1, 29 trillion. In accordance with the average estimate of economists, the index should make Y1350 billion yen. Imports rose by 21.1 % compared with a year earlier, with the support of the upcoming increase in demand due to the sales tax in April. The exports rose by 18, 4% .The USD / JPY pair traded in a narrow range Y102.80 - Y103.05.
Thursday: The Yen lost some positions recruited against the dollar today after the beginning of the two-day meeting of the Bank of Japan. According to the median forecast of economists on the basis of a two-day meeting, which ends on December 20, the Bank of Japan would decide to keep the volume to stimulate the economy of the country at the same level. However, they expect quantitative easing program in Japan in 2014. The USD / JPY pair rose to Y104.35 during the European session.
Canadian Dollar: The Canadian dollar was trading lower against the U.S. dollar, but has regained some of the previously lost positions. The moderate impact on the couple had the data that showed that investments in securities of non-residents of Canada in October totaled $ 4.4 billion and mainly occurred in corporate debt instruments. The Canadian dollar declined significantly against the U.S. dollar, responding thus to the U.S. balance of payments data.
Swiss franc: The currency fell against the U.S. dollar, which was associated with the release of unexpectedly weak data on Switzerland. As it became known, the trade surplus narrowed in November, Switzerland, contrary to expectations of improvement. The trade surplus fell to 2112 million Swiss francs from the downwardly revised 2282 million Swiss francs in October. The economists forecasted a surplus of 2.57 billion Swiss francs. The exports rose for the second month in a row in real terms, after rising by 1.2% year on year, after growth of 0.3% in the previous month. Imports grew by 1.6% per annum, after falling 2.7% in October. Jewellery exports hit a record high in November, while exports of chemicals and pharmaceuticals showed the biggest decline in two years.
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