Currency market weekly review (January 13 - January 17, 2014)
January 20, 2014, Monday, 13:48 GMT | 09:48 EST | 19:18 IST | 21:48 SGT
Euro: The European currency tried to hold its positions. Published this week reports showing figures for car sales in December were very strong and wasn’t ignore by participants in the FX market. It reached the highest level in the last three years, and therefore strengthened confidence in the recovery of consumer demand in the eurozone.
Tuesday: The euro rose against the U.S. dollar after strong data on industrial production in the euro area. Eurozone industrial production in November rose at the highest rate in three and a half years, indicating that the currency GDP at the end of 2013 increased in the third consecutive quarter . Unexpectedly strong growth in eurozone’s manufacturing reduced doubts about the sustainability of economic recovery. Although the results of the poll in the business world in the last quarter of 2013 were positive, the official data were weak. The industrial production, production in construction and retail sales fell in October.
The statistical Office of the European Union reported that industrial production in November rose by 1.8% compared to October, and by 3% compared with the same period last year. These data were better than forecast. Also, the October data were revised upward. The Eurostat reported that industrial production in October fell by 0.8 %, whereas the previously reported 1.1% decline. The growth in industrial production in November compared with the previous month was the highest since May 2010, when it rose by 2%. Annualised growth was the highest since August 2011, when industrial production rose by 5, 5% .The EUR / USD pair rose to $ 1.36700 during the European session.
Wednesday: The euro fell against the U.S. dollar under pressure data on the GDP of Germany. The Federal Statistical Office Destatis reported on Wednesday that German economic growth slowed in 2013 due to uncertainty stemming from the eurozone crisis. Germany 's gross domestic product adjusted for inflation increased by 0.4 % in 2013 after rising 0.7 % in the previous year, said Destatis.
"It seems that the crisis in the euro zone slowed the German economy," - said President Roderick Destatis Egger at a press conference, adding that domestic demand could not fully compensate for the slowdown.
The household consumption in the euro zone’s largest economy in 2013 increased by 0.9 %, while the government consumption rose by 1.1%. Export growth was 0.6 % in 2013, compared with 3.2 % in the previous year.Also, was published data on the trade balance of the eurozone. Eurozone exports fell for the first time in four months in November, showed on Wednesday data published Eurostat. Exports fell by a seasonally adjusted 0.2 % in the month dimension, followed by zero growth in October. At the same time, lowering the import deepened to 1.3 % of 1 %. While imports fell more than exports, the trade surplus rose to a seasonally adjusted up to 16 billion euros from 14.3 billion euros in October. On the basis of unadjusted trade surplus amounted to 17.1 billion euros, compared with a surplus of 16.8 billion euros in October. Expected surplus in November totaled 16.5 billion euros. The EUR / USD pair fell to $ 1.3601 during the European session.
Thursday: The euro traded sideways against the U.S. dollar on the background of the final data on inflation in the euro area which was in line with the preliminary estimates. Annual inflation in the 17 countries of the euro zone declined in December, showing that the inflation was still below the European Central Bank's target level. The Eurostat on Thursday confirmed its preliminary assessment of the dynamics of prices in December, published last week. According to the report, the consumer price index (CPI) in December rose by 0.3 % compared to November and 0.8% compared to December 2012.The data indicated a weakening of annual inflation compared with November, when it stood at 0.9 %, and this figure was still below the target level, the ECB near 2.0%. The Eurostat also confirmed that the increase in core consumer price index (Core CPI), which excluded volatile food prices and energy prices, slowed to 0.7 %, showing the lowest growth since the beginning of such statistics in 2001.
Today was also published a monthly report by the ECB. In its January newsletter Governing Council of the ECB had to maintain rates at current or lower level for a long period of time. Authorities said that accommodative monetary policy rate will be maintained long as it needed. The EUR / USD traded in the range of $ 1.3593 - $ 1.3629 during the European session.
US Dollar: The U.S. dollar increased along the foreign exchange market during the period from 13 to 17 January, as its members were laid on the fact that the U.S. economy is recovering quite active and can provide an opportunity for the Fed to continue to reduce the quantitative easing program.
Monday: The dollar rose slightly on the bidding comments influenced by the Atlanta Fed President Dennis Lockhart, who said that if the economy will confirm his expectations, so, probably it is expected that reducing the bond buyback program during the next months will continue.
Tuesday: The support for the dollar was from the U.S. data, which showed that retail sales rose 0.2 % last month, in line with expectations. Car sales fell 1.8 %, pulling down the broader indicators. For the automotive industry, this was a record year, and the slowdown in December is considered more a reflection of poor weather conditions and calendar amendments than the beginning of a new trend. Excluding autos, the retail sales rose by December confident 0.7%. Values of retail sales for previous months were revised down to an increase of 0.5 % in October and in November, rising by 0.4%. Total retail sales for 2013 increased by 4.2 % compared with the previous year, slowing the pace of 2012 to 5.4% and 7.5% growth in 2011.
Wednesday: The U.S. dollar strengthened against the major currencies against the fact that the World Bank raised its forecast for global economic growth in 2014-2015. According to forecasts, this year, the world economy will grow by 3.2% compared to the June forecast growth of 3%. The Bank expects that in 2015 global growth to reach 3.4 % compared with 3.3% projected in June. Prediction for the richest countries was revised to 2.2% from 2%. In the U.S., growth will accelerate to 2.8 % this year, while Japan's GDP will be 1.4 %. This year, the eurozone economy is expected to increase to 1.1% compared with 0.9 % reported by the World Bank in June.
Thursday: The dollar index close to four-month high, as investors believe that the U.S. economy is strong enough to survive without loss possible reduction incentives Fed. The economic activity in all regions of the U.S. grew in December, “moderate " pace due to an increase in consumer spending in the festive season , the improvement in the labor market and recovery of industrial production , released on Wednesday showed a regional overview of the Fed.
British Pound: The British pound was under pressure in till Thursday. However, it strengthened on shockingly strong retail sales data for December, released on Friday, which became an occasion for its massive growth.
Monday: The pound continued to suffer losses on the background of the revaluation of the UK economy in Q, which doesn’t work in pound’s favor. The recovery of UK tells that for now the growth will continue, but at a slower pace, limiting further strengthening of the GBP/USD couple. The pair from the opening level of $1.6489 slipped to week low of $1.6340.
Tuesday: The British pound rose against the dollar on U.S. data on slowing inflation in Britain. The inflation in the UK fell unexpectedly in December and reached the target level of 2 per cent of the Bank of England for the first time since 2009, the Office for National Statistics reported.
Consumer prices rose by 2 % year on year, after rising 2.1 % in November. According to forecasts, inflation was to remain stable at 2 %. On a monthly basis, the consumer prices rose by 0.4 %, which is faster than the growth of 0.1 % posted in the previous month. Excluding energy, food, alcoholic beverages and tobacco products, core inflation declined marginally to 1.7 % in December from 1.8 % in November. In a separate statement, the ONS said inflation producer prices accelerated to 1 % in December from 0.8 % a month earlier. Compared to November, the prices for products remained unchanged. Purchase prices, at the same time, decreased the second consecutive month in December. Prices fell by 1.2 % per annum, after easing to 1 % in November. On a monthly basis the purchase prices increased by 0.1 %. The GBP / USD pair rose to $ 1.64450 during the European session.
Wednesday: The British pound rose against the U.S. dollar despite the data from the Conference Board. A leading indicator of the UK economy grew fifth consecutive month in November, suggesting that the economy will continue to expand in the coming months .The index of leading indicators rose 0.5 % on a monthly measurement to 108.3 in November after rising 0.4 % in October and 1.6 % in September. Index currently registered positive growth for the fifth month in a row.
At the same time, the coincident index, this measures the current situation in the economy, increased by 0.2 % sequentially to 105.7 in November. This followed growth of 0.1 % in October and 0.5 % increase in September. During the six months ended in November, the index of leading indicators recorded a growth of 4.5 %, while the coincident index remained unchanged.
"Widespread increased production and job growth, along with steady support from monetary policy will contribute to the restoration," said Conference Board Chief Economist Bart van Ark. The GBP / USD pair fell to $ 1.6370during the European session.
Thursday: The pound fell slightly against the U.S. dollar , as data showed that expectations regarding the future growth of British housing prices have increased again last month, which was due to the lack of new homes on the market . It became known from the last survey, which was published today by the Royal Institution of Chartered Surveyors (RICS). The RICS experts said that 61 % of respondents predict that home prices will rise over the next three months, compared with 59 % in November. We add that the last result was the highest since September 1999. The survey also showed house prices rose in every region of Great Britain in the last month. Nevertheless, the main house price balance fell to 56 % in December from 58% in November. Many experts predicted that the value of this index will rise to the level of 59%. It is worth noting that it was the first decline in the index over the past four months. The economists also said that the UK housing market was underpinned by falling unemployment, low interest rates and government programs to make mortgages cheaper and easier to obtain. The GBP / USD pair fell to $ 1.6310 during the European session.
Japanese Yen: The Japanese yen again came under pressure as the dollar felt very confident. The driver movement was still loose monetary policy of the Bank of Japan and the Fed 's intention to withdraw from the quantitative easing.
Monday: The yen has risen considerably against the U.S. dollar, which is probably a reaction to the publication on Friday employment report in the U.S., which came after the close of Asian markets last week. Many analysts pointed to a lower Treasury yields after data on employment as a sign of a deeper decline of the dollar against the yen. The USD / JPY pair rose to Y103.59 during the European session.
Tuesday: The yen fell against all major currencies after the publication of a report on the current account deficit in Japan. In November, this figure Japan widened to a record value, as imports grew. This again highlighted the problems for Prime Minister Shinzo Abe, who is trying to achieve sustainable economic growth. The USD / JPY pair rose to Y103.79 during the European session.
Australian dollar: The Australian dollar reached a one-month high against the dollar after the volume of mortgage lending in Australia increased in November. The Australian Bureau of Statistics reported on Monday that the total number of mortgages in Australia rose to a seasonally adjusted 1.1% in November compared with the previous month and was 52 912.The main indicators coincided with economists' forecasts, after rising 1.0 % in October.
Total number of loans for the construction of new homes rose by 2.3 % to 5686. The credits for the purchase of new homes fell 4.3 % to 2856, while loans to purchase housing on the secondary market rose by 1.4 % to 44,370. The volume of loans rose to 1.7 %, remaining unchanged from the previous month and totaled 26.934 billion Australian dollars. Investment lending rose by 1.5 % for the month and amounted to 10.383 billion Australian dollars, slowing from growth of 8.5 % in October. The Australian dollar fell to its lowest level since August 2010 against the U.S. dollar after the publication of a negative report on employment in Australia. According to the National Bureau of Statistics, the number of jobs in the country in December fell by 22.6 thousand, while economists had expected growth of 10 thousand for the year Australia's economy lost 67.5 thousand jobs, which was the worst figure since 1992.