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Currency market weekly review (February 03 - February 07, 2014)

February 10, 2014, Monday, 15:33 GMT | 10:33 EST | 21:03 IST | 23:33 SGT
Contributed by Forex-Metal

Euro: The German Constitutional Court has questioned the constitutionality of the program OMT, conducted by the ECB, however, has not designated it as illegal, handing the decision to the Court of the European Communities in Brussels. News sent the EUR / USD pair down to a minimum 1.3550, but further news from the U.S. helped the pair to recover the loss and celebrate the week's high 1.3645.
In details:
Monday: The euro was traded slightly higher against its competitors. Positive data for the euro area had considerable support Eurocurrency, but even they were not enough to hold near session highs. As it became known, the manufacturing sector grew in the eurozone last month a little more than originally expected. This was stated in the data that were presented today Markit Economics. According to the report, the final purchasing managers index, which assesses activity in the manufacturing sector rose to 54 points in January, compared with the initial assessment at the level of 53.9 points, and the final reading for December at 52.7 points. The last value was the highest since May 2011. Manufacturing PMI increased in each of the last four months and demonstrates an extension to July last year. The EUR / USD pair rose to $ 1.3520, and then dropped to $ 1.3498 during the European session.
Tuesday: The euro returned some of the previously lost ground against the dollar, but, despite this, still trading slightly lower. Little impact on the dynamics of trade had the PPI report. It is learned that producer prices rose in December, registering with the first increase in the last three months, which was slightly eased fears about the fragility of recovery in Europe. It became known from the report, which was introduced earlier EU statistical agency. According to the data, in December producer prices rose by 0.2% compared with the previous month, but, nevertheless, were 0.8% lower than in December 2012. Recall that prices fell in October and November - by 0.5% and 0.1%, respectively. Data released last week by Eurostat showed that consumer prices rose 0.7 % in January, compared with an increase of 0.8 % in December, reinforcing fears that a prolonged period of low inflation will be difficult for the eurozone to address its economic imbalances and reduce the large debt. Therefore, the growth of producer prices will be welcomed by politicians of the European Central Bank. The EUR / USD pair rose to $ 1.35340 during the European session.
Wednesday: The euro traded in a narrow range against the U.S. dollar, as many participants gradually shift its attention to tomorrow's ECB meeting. Little impact on the European currency had data for the euro area, which showed that the euro zone's private sector waked up in January, while reaching the highest levels in the last two and a half growth, rapid growth of production eclipsed the more modest expansion in the services sector. 
According to the report, the final composite purchasing managers’ index from Markit, which measures business activity in the manufacturing sector and in the service sector, rose to 52.9 in January from 52.1 in the previous month. It was the highest result since June 2011. Nevertheless, the final assessment was at - 53.2. In Markit said that growth in the eurozone PMI observed broad-based and led was lifting by Germany. The data also showed that the index of business activity in the services sector rose to a four-month high in January - to the level of 51.6 from 51.9. However, this result was below the pre-assessment at the level of 51.9. The EUR / USD pair traded in the range of $ 1.3500 -$ 1.3529 during the European session.
Thursday: The rate of the euro fell sharply against the U.S. dollar, while losing all positions receive immediately after the announcement of the ECB rate decision. The ECB decided to leave the refinancing rate at around 0.25 %. Meanwhile, add that to the announcement of the decision at a rate little impact on the euro was a report on Germany, which showed that the number of manufacturing orders unexpectedly fell in December, while orders from the euro zone have increased significantly, potentially signals of recovery. According to the data, the results of December industrial orders fell by 0.5% (seasonally adjusted), which was followed after increasing 2.4% in November (revised up from 2.1 %). Many experts expected increase in the number of orders by 0.3%. Earlier this week, an industry group VDMA also reported a disappointing year for the completion of the major machine builders, but some experts still predict an increase in total orders. The EUR / USD pair fell to $ 1.3485 during the European session.
US Dollar: The dollar was under pressure, even though the U.S. companies for the second consecutive month have demonstrated a moderate willingness to hire new workers: the employment rate rose by 113K instead of planned 185K, but pleased with the level of unemployment, which is now even closer to of 6.5% target level from the Fed. Index fell from 6.7 % to 6.6 % in January.
In details:
Monday: The dollar fell after weak U.S. data on manufacturing activity in the United States. The index of business activity in the U.S. industry from Markit in January, according to final data, fell to 53.7, below the 11 -month high of 55.0 in December. January's value was the lowest since October, but the index remained above the level of 50.0, which is neutral. These points supported continued improvement of business conditions. In turn, data from the Institute for Supply Management (ISM), published on Monday, suggests that manufacturing activity in the U.S. in January has stalled due to lower inventories. According to the report, the Purchasing Managers Index (PMI) for the manufacturing the United States in January fell to 51.3 from 56.5 in December. Index value above 50 indicates growth in the sector of activity. The economists had expected the index in January at 56.2 .
Wednesday: The dollar fell amid mixed statistics. In the U.S. went out report that the activity in the U.S. non-manufacturing sector continued to grow in January. This was evidenced by data released Wednesday by the Institute for Supply Management (ISM). Purchasing Managers Index (PMI) for the non-productive sphere the U.S. in January rose to 54.0 against 53.0 in December. Economists had expected the index to rise last month to 53.8. Values above 50 indicated growth in activity. As it was shown by recent data that were presented Automatic Data Processing (ADP), in January, private sector employment increased markedly, although not enough to confirm the evaluation of many economists. According to a report last month, the number of employed increased by 175,000 people, compared with a revised downward indicator for the previous month at 227 million (initially reported growth of 238 thousand jobs). Add that, according to the average forecast of this indicator would grow by 191000.
British Pound: The British Pound experienced a slight disappointment in the European session, as British reports showed conflicting results. The trade balance showed a significant recovery as the deficit fell to 7.7 billion instead of the forecast 9.3 billion; however, industrial production results were not pleased, and missed expectations and once again confirmed market fears of a slowdown in the British economy. The GBP/USD pair was able to recover and consolidate above 1.64, thanks to poor data from the U.S.
In details:
Monday: The pound declined significantly against the dollar, which was caused by the publication of weak data on Britain. Recent research results that were announced earlier today by Markit Economics and Chartered Institute, showed that UK manufacturing index fell slightly last month , beating forecasts while most experts . Nevertheless, despite the recession, the manufacturing sector continued to expand in January, reflecting the improvement in output and new orders growth. According to the report, the seasonally adjusted purchasing managers' index for the manufacturing sector fell last month to a level of 56.7 points, compared with a revised figure for December at the level of 57.2 points in December. Economists expected the index to decline to 57.1 from 57.3 points in December, which was originally reported. Although PMI is now and is at its lowest level in the last three months, it is still significantly higher than the average - at the level of 51.3 points. The GBP / USD pair fell to $ 1.6325 during the European session.
Tuesday: The pound has risen considerably against the U.S. dollar , which helped the publication of positive report on Britain. Recent data from Markit / CIPS showed that activity in January in the UK construction sector has grown substantially, continuing its promotion of the territory expansion, and reaching its highest level since the financial crisis. According to the report, with the seasonally adjusted index of business activity in the construction sector grew in January to a level of 64.6 points compared to 62.1 points in December. The index remains above the neutral mark of 50.0 points, which separates expansion from contraction, for the ninth consecutive month. Also, note that the latter value was the highest since August 2007. According to experts, this indicator should be reduced to the level of 61.6 points. The GBP / USD pair rose to $ 1.6345 during the European session.
Wednesday: The British pound fell sharply against the U.S. dollar, which was associated with the release of unexpectedly weak data on Britain. As it became known, the growth in the services sector in Britain, which is dominant, unexpectedly slowed last month, but activity remained high, suggesting that the economy will gain momentum in the first quarter of 2014. The survey also showed growth companies price pressure for the service sector, but not to a level that could be a problem for the Bank of England, and encourage it to raise interest rates. According to the report, the index of services PMI fell to 58.3 in January from 58.8 points in December, reaching its lowest level since June. Add that according to the average forecasts of experts, the value of this index would grow to 59.1 points. However, despite the decline, the index remained well above 50 points, which separates growth from contraction. 
Meanwhile, it became known that the composite indicator of the three indices PMI (manufacturing, construction and services sector) fell to 59.1 in January from 59.4 in December, dropping to its lowest level since June. The GBP / USD pair fell to $ 1.6263 during the European session.
Thursday: The British pound retreated from a session low against the dollar, however, continued to trade slightly lower. Pound had little support that the Bank of England left interest rates at 0.5% as expected. Program of asset purchases was also left on the 375 billion accompanying statement was not, but the head of the Central Bank Governor Mark Carney said earlier that he was not going to raise rates earlier, and that the target level of unemployment rate in the 7.0 % is not a factor that triggers the policy tightening . It was expected that the minutes of the meeting reflect the increased emphasis on the bank's inflation. Recall that the inflation report last month reflected the value at the target of 2.0 % for the first time in the last 4 years. 
Little impact on the currency also had a report that showed that the rise in house prices in the UK slowed slightly in the last month, and confirmed the average forecast of experts. This was stated in the report of Halifax. According to figures for January house price index rose by 7.3 % per annum, compared with an increase of 7.5% in December. In monthly terms, the house price index rose 1.1% in January, while offsetting the 0.5% decline in the previous month, which was revised downward from -0.6%. Expectations were at the level of 0.4%. The GBP / USD pair fell to $ 1.6265, and then recovered to $ 1.62865 during the European session.
Japanese Yen: The Japanese Yen showed an interesting dynamic in the last trading the week. The USD / JPY pair initially responded to the weak employment figures within the NFP, rolled down to a minimum 101.45 , it is then rolled to a maximum of 102,58 , focusing on reduce the rate of unemployment and the closing trading at 102.29 .
Australian dollar: The Australian dollar raised almost two figures against the U.S. dollar, which was associated with the decision of the RBA rates. The Reserve Bank of Australia today decided to keep its benchmark interest rate at a record low - 2.5 %, and noted that a period of stability in interest rates may be "the most sensible course” at the moment. Monetary policy bank “appropriately configured to ensure sustainable growth in demand and inflation in accordance with the purpose," said the head of Glenn Stevens said in a statement today. “Based on current evidence, the most prudent course would be a period of stability in interest rates," he added. The Board of Directors expects that inflation will be slightly higher than stated in the forecasts three months ago, but will be in line with the target of 2-3% over the next two years. Higher inflation, currency devaluation and rising house prices may be causing the Reserve Bank decision to refrain from further easing of monetary policy. Recall that the RBA will cut interest rates by 225 basis points since November 2011 to help the economy to support demand in areas outside the resources sector, taking into account the damping mining boom.
Canadian dollar: Data from Statistics Canada showed that Canada's deficit in trade in goods has increased to 1.7 billion Canadian dollars in December, despite the forecasts of experts on growth. Last reading was the highest since November 2012. Meanwhile, it was reported that the deficit for November was revised up to 1.5 billion Canadian dollars from the initial assessment at the level of 0.9 billion Canadian dollars. Many analysts expected in December will be recorded surplus in the amount of 1.0 billion. The USD / CAD pair rose sharply, setting a maximum level CAD1.1120, which is associated with this release of disappointing data on the trade balance in Canada.

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