Forex

Currency market weekly review (February 04 - February 08, 2013)

Euro: The EUR / USD pair started this week with correction falling into $ 1.3504 on Monday. It dropped sharply causing a decrease in demand for the European currency after the yield of Italian and Spanish bonds has grown on the background of instability of the Eurozone’s economy. Moreover, the published by the Barclays Plc. forecasts negatively influenced the trading dynamics of the asset. The forecast projected that the EUR / USD pair could fall to $ 1.32 in six months and up to $ 1.28 during the whole year, which was higher than the previous estimate of $ 1.26 and $ 1.22. In addition, the euro fell against most major currencies amid a corruption scandal in Spain which raised on speculations that the Prime Minister of Spain, Mariano Rajoy may resign after Spanish media reported that he was accepting illegal payments. The growing uncertainty of the results of the parliamentary elections in Italy also was a bad factor for the dynamics of the currency. The recent news from Italy informed that conducted public opinion polls showed that the former Prime Minister Silvio Berlusconi has narrowed the gap between the candidate Pier Luigi Bersani, even though his litigation related to tax evasion.  Mr. Berlusconi is gaining sympathy to the parliamentary elections which will be held on February 24-25, because of his statement that he will terminate the real estate tax which was imposed under austerity programs of the current cabinet of Mario Monti. There were also some important economic releases published before the meeting of the European Central Bank; the Eurostat agency confirmed that the annual increase in producer prices in the euro area remained unchanged in December at 2.1 % instead of forecasts of economists who projected this index to rise to the level of 2,2% . The euro rose with association of the release of data that showed that the final purchasing managers’ index for the euro area services sector rose in January more than was originally reported. The big announcement, which the euro has suffered nasty spill from falling more than 200 points against the dollar was the statement of the European Central Bank President Mario Draghi who said that the recent strengthening of the currency raised fears that inflation in Eurozone will slow down. He mentioned, also, that the forecast showed the slowdown in inflation below 2% in the coming months. The Friday’s final push dropped the EUR / USD pair into the $ 1.3380 area.

US Dollar: On the background of correction in prices of risky assets, after their substantial strengthening in previous few weeks, the U.S. dollar has reinforced its position in the period from 4 to 8 February.The pressure on the dollar currency, however, was provided by the statistics from the U.S. ISM Non-Manufacturing Composite index that came out higher than expectations in January, up to 55.2 versus expectations of 55.0. At the same time, the index of economic optimism IBD / TIPP rose to 47.3 in February from 46.5 in January, against the forecasts of 46.1.The U.S. dollar got support on Thursday by the published today economic statistics for U.S. country, which disappointed many investors. Accordingly preliminary data, the labor productivity in the fourth quarter of 2012 decreased by 2.0 % after rising 2.9% in the third quarter. Also, the last week’s number of initial claims for unemployment benefits amounted to 366K, while the market had expected it at 360K mark.

British Pound: The pound increased its relative attractiveness and retreated from its recent deep lows amid the political instability in the Euro region and the growth yield of Spanish and Italian government bonds. The Monday’s data showed that the number of new orders in the sector continued to decline in January showing the slowest decline since October 2012 and registered the 8th month of fall. On Tuesday, the published report showed that the activity in the services sector in Britain unexpectedly expanded in January, indicating at the same time that the economy can avoid a triple recession. However, despite the positive results of the report, the pound fell sharply and the GBP / USD pair fell to the lowest  level of $ 1.5708.The published on Wednesday data showed that the Halifax house price in Britain registered in January its first annual increase since October 2010, rising by 1.3%. However, despite an improvement of house market situation, the value of this indicator was below analysts' expectations of 1.6 %. Also, the Halifax Plc House Prices on a monthly basis fell by 0.2% more than it was expected by the estimates of experts. The pair demonstrated a monster move up to the area of $ 1.5770, which was associated with the statements of Mark Carney, who in the near future is going to lead the Bank of England. Accordingly his statements, the central bank should close unconventional policies, maintain the integrity of the sterling, and be more flexible with regard of inflation targeting. Also, this day the pound was supported by the announced decision of the Bank of England to leave key interest rate and keep the target level of bond-buying program unchanged, saying that while the UK economy showed  willingness to slow growth, however this growth may be influenced by the Eurozone’s problems. Toward the close of the week the British currency added 0.4% against the dollar, compared with the closed price on the last week’s Friday.

Japanese Yen: During Monday’s European session the USD / JPY pair rose to the level of Y93.22 and then dropped to a new low of Y92.70 as some technical indicators especially the Relative Strength Index RSI (14) signaled that the recent decline of the Japanese currency was too fast. On Wednesday, the yen then fell against all major currencies when the governor of the Bank of Japan Governor Masaaki Shirakawa informed about his earlier retirement at March 19 rather than planned on April 8. The USD / JPY pair rose to a new high of Y94.05 level for the first time since May 2010. On the next following days, the currency grew as the demand for safe haven assets has increased due to correction on stock markets. The USD / JPY pair fell to the new low of Y92.70.

Australian dollar: After the Reserve Bank of Australia kept its benchmark interest rate unchanged at 3%, which agreed with the forecast of analysts, the Australian dollar fell against all major currencies. The Australian dollar fell against most currencies after the publication of negative data on retail sales of the country as  well. According to statistics, the volume of retail sales in Australia fell in December by 0.2 % compared to the previous month with expectations of growth by 0.3%.

Canadian dollar: The Canadian dollar rose after data showed that the January’s Ivey PMI improved to 58.9 from 52.8 versus forecasted 53.9. The USD / CAD couple fell to $0.9958 area this day.

New Zealand dollar: The New Zealand dollar fell against most major currencies after the publication of the weak data on employment in New Zealand. The data adjusted for seasonal variations in the 4th quarter recorded fall by 1.0 % compared with the previous quarter and decreased by 1.4% compared with the same period last year. Accordingly the forecasts of economists, employment should have been grown by 0.4% compared with the previous quarter and by 0.3 % compared to the same period of the previous year.