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Currency market weekly review (January 27 - January 31, 2014)

February 3, 2014, Monday, 15:45 GMT | 11:45 EST | 21:15 IST | 23:45 SGT
Contributed by Forex-Metal

Monday: The euro fell to its maximum value against the dollar, while back below the levels of the session. Early growth of the euro was fluff associated with the release of strong data from the institute IFO, according to which the business climate index in January rose to 110.6 from 109.5 values unrevised December, reaching its highest level since July 2011 and exceeded economists' forecast. In turn, the index of current conditions rose to 112.4 compared to 111.6 in December. The figure was slightly higher than expected 112.2. The expectations index also improved more than expected to 108.9 from 107.4. The expected result was 108. The EUR/USD pair rose to $ 1.3718, but then fell to $ 1.3655 during the European session.
Tuesday: The euro exchange rate against the U.S. dollar fell against the background data on import prices in Germany. As it was shown by the data published by the Federal Statistical Office, import prices in Germany fell twelfth consecutive month in December, but in a lesser degree than in the previous month. The import price index fell by 2.3 % in December compared with the corresponding month in 2012. This followed a 2.9 % drop in November. Prices are already falling regularly since December 2012. Economists had forecast a slower decline by 2.2 % in December 2013. Index was influenced by a 5 % fall in energy prices as well as falling to 15.5 per cent in the cost of non-ferrous metals. Prices for the products of iron, steel and alloys were 5.4 % lower than a year earlier.
On a monthly basis, import prices were unchanged in December, after an increase in November to 0.1 %. Expectations were level rise by 0.2 %. Overall, in 2013 the import price index fell by 2.6 per cent per annum, after rising 2.2 % in 2012. The decrease was due mainly to a fall 7 % in energy prices.
Department of Statistics also reported that in Germany, export prices decreased at a slower annual rate of 1 % in December compared with a decline of 1.1 % in the previous month. On a monthly measurement of export prices fell by 0.1 %, after being unchanged in November.
At the beginning of the session, some support for the single currency was data on consumer confidence in France. The consumer confidence index rose to 86 in January from 85 in December and 84 in November. Economists had forecast the index to remain unchanged at December. Estimation by consumers of their past financial situation was essentially unchanged in January compared with the previous month. Meanwhile, their expectations of personal finances in the coming months were more optimistic, corresponding sub-indicator rose to -18 from -20 in December.
The survey showed that the number of households that said in January the best time to make major purchases and savings increased. Similarly, their expectations about future ability to save were more optimistic. Measure attitudes households past state of the French economy grew by 2 points to -71 in January. At the same time, their expectations for the future state of the economy showed further improvement. Prospects indicator rose to -45 from -49. The EUR / USD pair rose to $ 1.3690, but then fell to $ 1.3625 during the European session.
Wednesday: The euro fell against the U.S. dollar, amid reducing lending to the private sector in the euro area. According to the European Central Bank lending to the private sector in the euro zone fell in December compared with the same period of the previous year as well significantly, as in the previous month. According to published data, in December, as well as in November, lending to the private sector decreased by 2.3%.
Last spring, the housekeeper eurozone emerged from a protracted recession, which was particularly severe in Southern Europe, where the cost of credit for small businesses is much higher than in other regions of the eurozone. Nevertheless, the economic recovery remains slow and insufficient to curb unemployment, which is held at record high levels. According to economists, the economic recovery may not be sustainable if the banks start to lend more actively firms and households.
The report also showed that the M3 broad money supply grew by only 1 % in December, after expanding by 1.5 % in November. Economists had expected the index to rise 1.7 %. During the period from October to December M3 money supply grew by 1.3 % compared with the same period last year. Such growth rates are far below the “reference value “of the ECB 4.5 %, which, according to the central bank, consistent with the mandate of price stability.
Earlier, the euro rose, supported by data on the index of consumer confidence in Germany. German consumer confidence index improved for the fifth month in a row in February amid recovery of the growth momentum in the country. These are the results of a survey conducted by a group GfK. Expected consumer confidence index rose to confidently 8.2 points from a revised 7.7 points in January. The latter figure is the highest level since August 2007. Economists had expected the index to rise only to 7.8.
Income expectations index rose to a 13- year high of 46.2 points in January from 39.5 in December. Measure of economic expectations jumped to 35.3 from 23.3. The result is the highest since July 2011. Readiness Index to purchase rose to 50 from 46.1, noting the highest level since the end of 2006. The EUR / USD pair rose to $ 1.3685, but then fell to $ 1.3619 during the European session.
Thursday: Euro fell against the U.S. dollar despite the strong data on the labor market in Germany sentiment in the eurozone economy. German unemployment fell in January, more than forecast, as companies were more confident in the strength of Europe's largest economy. Number of people out of work fell by a seasonally adjusted 28,000 to 2.93 million, after falling by 19,000 in December, reported the Federal Labour Agency. Economists had forecast a drop of 5000. Adjusted unemployment rate was 6.8 %, almost unchanged from December, and remained near the minimum of twenty years. Unemployment fell by 16,000 in West Germany and 12,000 in the eastern part.
In turn, in the euro area level of economic confidence rose ninth consecutive month in January, data showed on Thursday a survey from the European Commission.
Economic sentiment index rose to 100.9 in January from 100.4 in the previous month. But at the same time the reading was slightly lower than expected level of 101.Confidence in industry fell unexpectedly by 0.5 to -3.9 in January, as a consequence of the management worsened assessment of stocks of finished products. The result was predicted to improve to -3.0. Confidence in the services sector grew by 1.9 points to 2.3, resulting in improved estimates of expected demand and past business situation, while the assessment of the past demand has not changed much. In addition, consumer confidence has improved markedly to 11.7, being in accordance with a preliminary estimate, compared with 13.5 in December. The increase was primarily due to improved expectations about future unemployment and the general economic situation. The result was above its long-term average for the first time since July 2011. Confidence in the retail sector increased to -3.4 -5, due to improvements in all of its three components, namely the present and expected business situation and the assessment of stocks.
Meanwhile, confidence in the construction sector fell strongly to -30.1 from -26.4 as a result of a marked deterioration in ratings portfolio managers’ orders and deteriorating employment expectations. In January, the business climate indicator for the euro area almost unchanged at 0.19 compared to 0.20 in December. Economists had expected the result 0.34. Production expectations leaders, their assessment of past production, and general and export order book remained broadly unchanged. At the same time, the level of stocks of finished products was evaluated more negatively. The EUR / USD pair fell to $ 1.358 5 during the European session.
US Dollar:
Monday: The dollar traded slightly higher, though lost some previously won positions. The growth of the U.S. dollar was due to the expectations that the Federal Reserve will continue to minimize the quantitative easing program at the January meeting. More and more people are inclined to believe that the Fed will simply continue to reduce QE. In general, the economic recovery is strong enough, despite the recent negative statistical data from the United States. According to the median forecast of economists at the next meeting of the FOMC, which will be held January 28-29, the Central Bank again reduce monthly asset purchases to $ 10 billion. The pressure on the currency had a report, which showed that sales of newly built homes fell by 7% to a seasonally adjusted annual rate of 414,000 in December from 445,000 in November. Result November was revised down to 19,000. Economists had forecast an annual rate of new home sales at 457,000 in December, although many of them noted that the unusually cold and windy weather may have contributed to the sales activity. New home sales in December were the weakest since the summer months, when mortgage rates jumped in response to reports that the Federal Reserve plans to reduce its bond-buying program.
Tuesday: The dollar traded higher against the euro which was influenced by the data on orders for durable goods as well as consumer confidence, which helped regain some positions. As it became known, new orders for durable goods fell 4.3% in December from November to $ 229.3 billion these are the data of the Ministry of Trade. This second drop in three months, and was marked the steepest decline since July. The decrease was due to a decline in demand for civilian aircraft, which is a volatile category. But even excluding the transportation sector, orders for durable goods fell by 1.6 %, showing the biggest drop since March. Economists had forecast an increase of 2 % of orders for durable goods in December. The data indicated that consumers and businesses are still spending cautiously, despite signs that the U.S. economy is gaining strength in recent months of 2013. Another report showed that consumer confidence index from the Conference Board, which rebounded in December, increased again in January. The index is currently 80.7 compared to 77.5 in December. The current conditions index rose to 79.1 from 75.3. The expectations index rose to 81.8 from 79.0 last month.
Wednesday: The dollar got some support after the Fed's decision to lower the amount of QE. The Fed reduced the amount of asset purchases by $ 10 billion - to $ 65 billion and kept the interest rates, at 0.25 % with 0.25 % forecast.
Thursday: Dollar got support with regard to U.S. data , was showed that the gross domestic product , which is the broadest measure of goods and services produced in the economy , rose to a seasonally adjusted annual rate of 3.2% in the fourth quarter . Economists had expected in the fourth quarter activity will grow by 3.2%. Overall, in 2013 the economy grew by 1.9%. The last time the economy grew by more than 3 % per annum before the recession, when it reached 3.4% in 2005. In 2012, GDP grew by 2.8%. Recent GDP data show that the economy expanded by 3.7 % in the second half of 2013. This rate was much higher than the growth of 1.8% in the first half of this year. This is the highest growth rate in the second half of 2003, when the economy expanded by 5.8%.
British Pound:
Monday: The pound has risen considerably against the U.S. dollar, offsetting more than half the losses incurred in the last session. Add that traders continue to actively speculate that the Bank of England may be the first of the leading CB who will raise the interest rate. In addition, for the growth of currency helped expectations of tomorrow's publication of GDP data for the fourth quarter. Recall that in the third quarter of the UK economy grew at an annualized rate of 1.9 percent, while fixing the third consecutive quarterly increase and rising hopes that the UK economy has moved to let the recovery. It is expected that the GDP data for the fourth quarter show that the UK economy has continued to expand. Experts note that even if the pace of growth will be slightly slower, it probably will not affect the monetary policy of the Bank of England. The GBP / USD pair rose to $ 1.6575 during the European session.
Tuesday: British pound reacted negatively to the preliminary data on GDP. Economic growth in the UK fell in the last quarter of 2013, and it was a slight slowdown can strengthen the authorities' determination to continue to promote, to support further growth. British National Bureau of Statistics (ONS) said on Tuesday that the gross domestic product in the 4th quarter increased by 0.7 % compared to the 3rd quarter, after rising 0.8% in the previous two quarters.
Compared with the same period of the previous year, the GDP grew by 2.8%. Downturn in the construction industry in November was a major factor slowing, reported ONS, which estimates that production decline in the sector for the quarter was 0.3 %. In other sectors, there was an increase. The GBP / USD pair rose to $ 1.6623, but then fell to $ 1.6535 during the European session.
Wednesday: The British pound rose against the dollar earlier after the release of U.S. data on the growth in housing prices. In the UK house prices rose at the fastest pace in more than three and a half years in January, supported by strong growth in employment, record low mortgage interest rates and increasing confidence. Such a survey conducted nationwide housing society. The housing price index rose by 8.8 % per annum in January, marking the fastest increase since May 2010, when prices rose by 9.8 %. Prices were by about 4% below the peak in 2007. Economists had expected prices to rise in January by 8.1 % . In December, the index recorded an increase of 8.4%. Housing prices rose a seasonally adjusted 0.7 % compared to December, when they rose 1.4 %. Expectations were at a gain of 0.7 %. The average house price in the UK has now reached 176,491 pounds, which is more than 175,826 pounds, registered in December. GBP / USD: during the European session, the pair rose to $ 1.6608, but then fell to $ 1.6542
The Yen and the Swiss franc fell against major currencies after the Turkish central bank took steps to stop the further devaluation of the lira, which reduced demand for safe-haven currencies.
Thursday: The British pound fell against the dollar after the number of approved applications for mortgage loans in the UK in December rose less than forecast, but this figure was the highest in the last six years. These are the data published by the Bank of England on Thursday.
The number of permits for house purchase rose to 71,638 in December from a revised 70,820 in November. Economists had expected the figure to rise to 72,500 by November initial 70,758.
The latter figure is the highest since January 2008, when the number of mortgage approvals was 71,999.
Loans secured by housing increased by 1.7 billion pounds, while economists expected an increase of 1.2 billion pounds. Consumer loans increased by 0.6 billion pounds, while economists had expected growth to 0.7 billion pounds. The GBP / USD pair fell to $ 1.6440 during the European session.
Japanese Yen:
Monday: The yen touched a seven-week high against the dollar on sales of assets in the stock markets in Asia and developing countries, leading to increased demand for safe-haven currency. The yen lost previously won positions after the release of data on the trade balance of the country. Japan's trade deficit reached a historic high. The deficit amounted to 11.5 trillion Yen ($ 113 billion), which is almost two times more than last year's figure 6.9 trillion Yen, according to the Finance Ministry in Tokyo. In December, imports increased by 25% compared with a year earlier, and exports gained 15%, resulting in a monthly deficit of $ 1.3 trillion Yen. The reasons for this were the growth of energy supplies and the weakness of the Yen. The USD / JPY pair rose to Y102.65 during the European session.
Tuesday: The yen fell to a decline in demand for safe-haven currencies. The reason was an emergency meeting of the committee on monetary policy of the National Bank of Turkey, dedicated to a sharp drop in the national currency - the Turkish lira against the dollar and euro. Currently, market participants insist that the Central Bank of Turkey to set it raised the interest rate. The USD / JPY pair rose to Y103.26 during the European session.
Canadian Dollar:
The Canadian dollar declined significantly against the U.S. dollar, reaching at this 4.5 -year low on expectations of further Fed folding and further commitment of the Bank of Canada's policy weak currency. The Fed today begins 2 -day meeting. It expected to further minimize the quantitative easing program. Despite the weakness of the labor market, according to the consensus forecast is expected that the Central Bank will refrain from sharp folding, cutting 75 -billion program gradually, until the end of this year.