Currency market weekly review (January 14 - January 21, 2013)
Euro: On Monday, the EUR / USD pair for the first time in 11week hit the $ 1.3403 level against the market participants' anticipation of the positive results of the upcoming publication of the data on industrial production in the euro area. However, when the results were published the currency retreated from a significant weekly high against the dollar. The weak statistics showed that the industrial output of the manufacturing and energy sector in November fell by 0.3% compared to the previous month and by 3.7 % compared with the same period last year. Once again the weakness of the industrial production raised negative expectations that the euro zone economy is experiencing difficulties and is likely to demonstrate the lack of growth of the third quarter in a row. The euro experienced further correction on Tuesday and Wednesday. It started falling against the dollar and other major currencies after the publication of number of economic data of the Euro union countries. So, the results of German GDP were quite pessimistic: index rose by 0.7 % in 2012 versus 0.8 % forecasted and 3.0 % for the previous period. Italian CPI rose only by 2.3% in December against 2.5 % the previous month and the forecasted 2.4%. In addition, the data on the November trade surplus in the Eurozone showed an increase from € 10.2 billion to € 13.7 million versus € 10.0 billion. The currency continued downwards under the influence of European Union officials’ comments. It dropped when the head of the Board of the Eurozone finance ministers Jean- Claude Juncker said that the rate of the single European currency is too high. Mr. Juncker was warning during the past half year that the strengthening of the single currency can bring a new threat to the European economy, which has just started to recover from the debt crisis. During the Thursday’s sessions the euro tried to recover after a two-day decline against its rivals. The EUR / USD pair was trading around the level of $ 1.3300. The successful results of Spanish auction and expressed hopes by Van Rompuy about the growth in 2013 offset the negative of weak data on the construction industry. In details, the Ministry of Finance of Spain reported that the yield of 3-year notes dropped today to 2.713 % from previous 3.358 %, and the yield of 5 -year notes to 3.770 % from 3.988 %. The negative came after the release of the results volumes of construction with the seasonal adjustment which decreased by 4.7% in November on yearly bases, after falling revised 3.3% in October. The construction of dwellings fell by 5.3%, and the civil engineering fell by 3.3%. However, the positive results of U.S. and European corporates’ profits supported the single currency. The EUR / USD pair updated its sessions high moving to $ 1.3375 area and made ??an attempt to resume the uptrend on Friday. However, the couple unsuccessfully tested the resistance of 1.3402, bringing into question its ability to continue to rally in the coming week, without the support of news background.
US Dollar: The U.S. dollar has strengthened its position in the past week as the released economic data for U.S. received during this period, signaled a further improvement of the world’s largest economy. The currency fell under pressure on Monday when the speech of the President of the Federal Reserve Bank of Chicago, Mr. Evans revealed the need to maintain and importance of keeping the existed monetary policy by the FRS of United States. On Tuesday, the dollar rebounded from the lows against its rivals and broke a three-day decline against the euro amid the weakness of the Asian stock indices, which indicated a decreased demand for risky assets. The speech of Federal Reserve Chairman Ben Bernanke in Michigan, where the Fed chief made it clear that he is in favor of maintaining loose monetary policy to support economic growth did not help to risky assets to grow and did not provide any pressure on the American currency. The market participants were buying the greenback this day as a safe asset on the background of still pending decision on the issue of limits of government debt, the resolving of which in negative way can seriously harm the economy. Note that the U.S. Treasury Secretary Timothy Geithner has mentioned lately that the debt limit which was reached on December 31,2012, and the amount of “emergency funds ", which are now used by U.S. country to pay the bills, will last only until the beginning of March. The currency rose on Wednesday due to positive expectations from the U.S. companies earning statements. Markets optimistically expected positive data from JP Morgan Chase, Goldman Sachs and other institutions. The upcoming news gave support for the growth of the dollar. The dollar was supported by released data which showed that Housing Starts in the U.S. grew by 12.1 % last month; the result beat expectations of analysts. In addition, another report showed that the number of initial claims for unemployment benefits fell last week to 335K thus confirmed the lowest level since January 2008.
British Pound: The currency fell against almost all rivals at the last week. It started on Monday against the background of the comments of the opposition leader Mr. Miliband who called the strategy of Prime Minister David Cameron for the EU as an "incredibly dangerous." In his interview with BBC Radio 4 Mr.Cameron said that the attitude of the citizens of Britain to British membership in the European Union has changed and he intends to bring the issue to the national referendum. On Tuesday, The GBP / USD pair dropped after the publication of the data on inflation, according to which the annual inflation rate in December demonstrated unchanged 2.7% for the third month in a row. The result of CPI once again confirmed the fears of the Bank of England on the fact that the price pressure still exist despite the weak economy. The monthly consumer price index rose by 0.3% to 0.5 % in December which corresponded to the forecast of economists. On Wednesday, the pound fell against almost all major currencies after the World Bank has lowered the forecast for global economic growth. All these forecast’s results came out that negative amid the issue of implementing the austerity measures, high unemployment, and the low level of confidence in the business, which put pressure on the development of economics of developed countries. The forecast of the growth of the global economy was expected to grow by 2.4% this year, after rising by 2.3% in 2012. The GBP / USD pair fell to the new monthly low of $ 1.5974 during the European session.
Japanese Yen: The yen continued to fall on expectations of appointment of the new head of the Bank of Japan. Recently, the Prime Minister Shinzo Abe has said that he expects the promotion of the new and "sharp monetary policy" from the new head of the Central Bank. The yen strengthened on Tuesday as investors used current technical overbought situation as a good opportunity to lock some profits after last two months of the application of the new government provoked monster move of the yen by more than 10 % against the U.S. dollar. The currency rose against all major currencies after the comments of the Japanese economy minister Akira Amari, who considered further decline of the yen as “dangerous” for to the Japanese economy. The support for the Japanese currency on Wednesday was provided by the released data on Machine Orders in Japan. The best leading indicator of business capital spending showed the biggest increase since July, and rose by 3.9% in November from the previous month. The USD / JPY pair fell below Y87.80 continuing its two-day down move in response to concerns that the outcome of the January meeting of the Bank of Japan, which will take place, next week, would betray the expectations of many investors. The pair return to its recent uptrend on Friday rising to a new intraday high of Y89.55 amid comments of the Minister of Economy of Japan Mr. Amari who said the yen will continue its adjustment after the excessive growth and his previous comments had been incorrectly interpreted.
New Zealand dollar: The “kiwi” rose against all its major counterparts after the report of Business Opinion Survey showed positive results for the 4th Q of 2012.
Swiss franc: The investors put some selling pressure on the currency which they were using before as a safe haven currency in times of financial crisis on the comments of the European leaders who said that the worst days of the crisis of sovereign debt in the region may have ended. The Swiss franc reached the level of €1.24 for the first time since December 7, 2011.
Australian dollar: In December the Employment Change in Australia has decreased by 5.5K as it was shown by the government data released. The Australian dollar reacted negatively falling against all major currencies due to the economists expected to see the see growth of 4K.
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