Currency market weekly review (January 20 - January 24, 2014)
January 27, 2014, Monday, 18:50 GMT | 13:50 EST | 23:20 IST | 01:50 SGT
Euro: The Euro currency got under pressure after the published data on the index of economic expectations from the Economic Research ZEW, however, it moved up sharply after the PMI indices on Thursday 23 January signaled on a significant increase in business confidence in the euro zone. The composite index for the region recorded the highest level for the last thirty-two months. The EUR / USD pair, literally grew up at the end of the week, trying the strength of resistance at $1.3750, ending up adding 1.2%
Monday: The moderate growth rate of the euro against the U.S. dollar was seen on the background data on producer prices in Germany. Recent data from the Statistical Office Destatis showed that producer prices in Germany fell again last month, while fixing the fifth consecutive monthly decline.
According to the report, producer prices fell in December by 0.5 % compared to the same period last year. Recall also that in the month of November, prices have fallen more significantly, namely by 0.8 %. Also, according to the average forecast of experts for this indicator was down by 0.6 % per annum. The cost of energy and intermediate goods decreased by 1.8 % and 1.1 %, respectively. Meanwhile, the consumer prices rose by 1.5 %, while prices for durable goods rose 1.1 %. Capital goods prices rose by 0.7 %.
In Statistical Bureau also reported that in a monthly basis, producer prices rose in December by 0.1 %, fully offsetting a decline of 0.1 %, which was recorded in the month of November. In addition, the data showed that in 2013, the producer price index for industrial products fell slightly - by 0.1 % per annum. Recall that the results of 2012, the index rose by 1.6 %. The EUR / USD pair rose to $ 1.3568 during the European session.
Tuesday: The euro exchange rate fell moderately against the dollar, which was associated with the release of weak data on Germany. The results of recent studies, which were presented by institute ZEW, showed that German economic expectations fell in January, contrary to forecasts for growth. But, despite the recession, mood is still elevated. According the report, the sentiment index fell in the business environment in the current month to the level of 61.7 points compared to 62.0 points in December. It is worth noting that many economists predicted that this figure will rise to the level of 63.4 points. Nevertheless, we add that the index remained well above long-term average at 24.4 points. The data showed that 254 analysts and institutional investors were optimistic about the current economic conditions. We add that the ZEW indicator on current conditions rose in January to a level of 41.2 points, compared to 32.4 points in December. We also learned that the economic expectations for the euro zone rose in January. The corresponding figure improved by 5.0 points to 73.3 points. Indicator of the current economic situation in the euro area rose by 6.2 points to minus 48.2 points level. The EUR / USD pair fell to $ 1.3510, and then recovered slightly during the European session.
Wednesday: The euro exchange rate rose substantially against the U.S. dollar on data for the business activity in the euro area private sector, which increased significantly in January, having shown the highest growth in the last 31 months. This was stated in the study results, which were issued by Markit Economics. The data showed that the composite PMI, which assesses the effectiveness of the manufacturing sector and the services sector rose to 53.2 in January from 52.1 in December, reaching its highest level since June 2011. Pleased also another report which showed that the current account surplus of the euro zone rose unexpectedly in November, registering with the second monthly increase in a row, which primarily was due to a significant increase in exports. According to the report, the current account surplus rose to a seasonally adjusted level of 23.5 billion euros in November, compared with 22.2 billion euros in October. The EUR / USD pair rose to $ 1.3647 during the European session.
US Dollar: The U.S. dollar has mixed trading dynamics this week, which was based on the revision of prospects for monetary policy in some developed countries.
Tuesday: The dollar fell after the fact that the IMF raised its forecast for U.S. GDP growth this year by 0.2 percentage points to 2.8%, although it has lowered the forecast for 2015 by 0.4 percentage points to 3%. This was due to the ongoing battles in Congress over federal spending and balance.
Thursday: The U.S. dollar weakened across the board after the published statistics. Manufacturing activity in the U.S. this month weakened. This wss evidenced by the preliminary report of Markit, presented on Thursday. Nevertheless, one of the factors weakening activity can be extremely cold weather. Preliminary Purchasing Managers Index (PMI) for the manufacturing the United States in January fell to 53.7 from December's final value of 55.0. In Markit reported that the January preliminary value that is based on approximately 85 % of the normal monthly number of responses, “signaled the slowest in three months improving the business environment." Another report showed that the index of economic activity for the region of Chicago gave markedly smaller increase in December, as the sub- indices related to employment and production figures have decreased compared to the previous month. With regard to labor market data, the number of applications for unemployment benefits rose slightly last week, although the overall level indicates a marked improvement in the labor market. According to the report, the seasonally adjusted number of initial claims for unemployment benefits rose for the week ending January 18, 1000, reaching a level with 326 thousand.
British Pound: The British pound strengthened steadily from Monday to Thursday. The labor market data were better than expected and recorded a decline in the unemployment rate to 7.1%. However on Friday, the GBP / USD pair came under massive pressure, when the Bank of England Governor Mark Carney during a speech at an economic forum in Davos made ??it clear that the discount rate in the country will be maintained at a low level for a long period of time . Closer to the end this week, the pair prevailed upon the 0.7 %.
Tuesday: The pound was able to recover from the lows against the dollar, reaching levels at this opening session. Noticeable influence on the bidding had data that were presented today by the Confederation of British Industry. They showed that the balance of industrial orders fell sharply in January, but the index that assesses the prospects for the next three months was at the highest level over the past two years. According to the report, the January balance of industry orders dropped to -2 points, compared with 12 points last month. Many experts expected that this figure is only slightly worse, but it was up to 11 points. In addition, it was reported that the balance of demands for the next three months rose to 22 points from 14 points, and reached the highest level since April 2012. We also add that new orders in the three months to January, showed the largest increase in nearly three years. The data also showed that the quarterly balance of prospects for the companies declined to 21 in the three months to January 24 in the three months to October (the highest since April 2010). Recall that the British manufacturing sector is gradually recovering from the financial crisis, but remained below its peak in 2008, underscoring the problem re- rebalancing the economy to reduce dependence on domestic consumption. The GBP / USD pair fell to $ 1.6400 level.
Wednesday: The Pound rose sharply against the U.S. dollar , which was helped data that showed that the unemployment rate fell to its lowest level in nearly five years , while approaching to the 7 % threshold at which the Bank of England officials may begin to reconsider the amount of the asset purchase program . According to the report, the unemployment rate, as measured by the standards of the International Labour Organization, fell to 7.1 % in the three months to November, compared with 7.4 %, which were recorded in the previous three-month period (October). Meanwhile, the report showed that the number of unemployed fell by 167,000 to 2.32 million in the three months to November compared with the previous three-month period. It was the biggest decline since October 1997 and the second largest since records began in 1971. The GBP / USD pair rose to $ 1.6565 during the European session.
Thursday: The pound continued its yesterday's gains against the U.S. dollar, while setting a new yearly high. Increased risk appetite supporting sterling today. Positive so far for a pound a week contributed to the continuation of its strengthening levels above $ 1.6600, where the couple was not since August 2011. A recent report to the Bank of England combined with data on employment contributed to the development of the current bullish bias. The GBP / USD pair rose to $ 1.6615 during the European session.
Japanese Yen: The yen strengthened by 1.9% against the dollar, taking advantage of the general weakening of the "greenback", observed on Thursday and Friday. There were not any significant events that could have affected the prospects of the Japanese currency this week.
Monday: The yen rose against most major currencies following the collapse of the Asian stock markets on data about the weakening economic growth in China, increasing its attractiveness as a safe-haven currency. The USD / JPY pair rose to Y104.26 during the European session. However, later the pair fell sharply, continuing its decline after a significant correction.
Wednesday: The yen fell against most major currencies amid rising Japanese stock market after the Central Bank refrained from expanding the program of monetary stimulus. The Bank of Japan left unchanged targets expansion of the monetary base in the range of 60 trillion yen to 70 trillion yen ($ 671 billion) a year and confirmed forecast that core inflation in 2015 fiscal year, which begins in April, will be at 1.9 %. The USD / JPY pair rose to Y104.72 from Y103.98 during the European session.
Canadian Dollar: The Canadian dollar fell after the Bank of Canada left interest rates unchanged and said to increase the economic growth projections. The Canada's central bank left its benchmark interest rate unchanged, at 1%, stating that the importance of the downside risks to inflation has been increased. However, it raised its forecasts for GDP growth, expecting increased demand from the U.S. and a lower Canadian dollar’s rate will boost exports.
Australian dollar: The Australian dollar continued to decline, despite the fact that data on consumer price inflation recorded a strong growth in prices in December results. The AUD / USD pair at the end of the reporting period has lost 0.7%.
Swiss Frank: The Swiss franc has risen sharply against the U.S. dollar against the backdrop of the Swiss National Bank raised its capital buffer requirements for banks , they should have to mortgage lending. Note that the SNB is supported by the Government now requires mortgage lenders have to have a 2% higher weighted assets in relation to mortgage risk to maintain their lending , against 1% , introduced in February 2013 . New rules on capital reserves associated with a mortgage come into force on June 30 this year.