Forex

Currency market weekly review (January 28 - February 01, 2013)

Euro: European currency continued its winning streak based on optimism about the prospects for the Eurozone economy in the second half of 2013, and the undervaluation of the euro to other currencies. On Monday, the euro moved slightly down against the U.S. dollar after the published today data which recorded decline in volume of the issued credits for the private sector and, in particular, for corporate one. The EUR / USD pair fell to a new low of $ 1.3424 during the sessions. The euro was also under pressure on Tuesday’s morning sessions and fell against the major currencies against the bunch of bad news that came out of Europe. First, the statements addressed by the Moody's rating agency to the Irish were not too positive; the negative outlook on the country's banking system has remained unchanged since 2008 and the French labor minister called the country bankrupt, second: Mr. Wren’s offers to reduce the deficit targets of Spain were ignored by Madrid. Also, the published this day data showed that the volume of retail sales in Spain fell in December by 10.7 % in yearly versus -7.8% in the previous report. Meanwhile, import prices in Germany in December fell by 0.5% in monthly term, and French consumer confidence index was at around 86 in January, confirming the forecast. The positive today was provided by the report of Gfk, recording that the February’s German consumer confidence index improved to 5.8 against 5.7 in January. The EUR / USD pair fell to a new low of $ 1.3410, but then recovered to $ 1.3450 area.  It continued up and finally broke the important technical level of 1.3470 the strongest level since December 2011due to an increase in risk appetite among investors. The single currency also strengthened against the background of rising of the European stock markets that reached the highest level in the last two years. On Wednesday, the level of $ 1.35 was overcame for the first time since December 2011, after the report showed that the level of economic confidence in the region has improved in January more than the analysts had forecasted. The index of economic sentiment in the euro zone showed the third consecutive monthly increase rising to 89.2 from 87.8 in December and approached to the highest level since June 2012. After reaching a 13-month high against the dollar the euro fell on Thursday amid results showed by the report on German retail sales which fell last month compared with the same period last year. The release of data that showed that the unemployment rate unexpectedly fell in German in January, down to the level of 6.8% from 6.9% supported the currency. The number of unemployment people fell by 16K to 2.92 million, while the projected growth was at 8K. On this positive news the EUR / USD pair strengthened to a new high of $ 1.36 and continued its longest winning streak in nearly a decade hitting the $1.37 mark on Friday adding 1.45% this week as risk appetite improved on speculation that the worst days of the crisis of sovereign debt in the euro area are over.

US Dollar: The dollar rose on Monday against its rivals and the dollar index grew to the level of 79.97 on results showed that the orders for durable goods in the U.S. rose in December by 4.6 % after increasing 0.7% in the previous month. The forecast of many experts was at increase of only 2%. Investors were also awaited the results of a two-day meeting of the Federal Open Market Committee of the Federal Reserve the beginning of which was scheduled for Tuesday. The dollar index fell on Wednesday on positive news about the European consumer confidence. However, the support for the currency was provided by the negative result of the report on the U.S GDP for the fourth quarter which showed that the U.S. economy has declined. The market reacted not in dollar’s favor after the decision of Federal Reserve to leave the interest key rate at no change and support its commitment to monetary stimulus measures. The Fed also said it will continue on a monthly basis to buy longer-term Treasury bonds and mortgage-backed securities for the amount of $ 85 billion. The dollar index fell on Thursday as the report showed that the number of applications for unemployment benefits rose more than expected. The pressure on the index had Wednesday's announcement of the Federal Reserve. Accordingly to the announcement, the Fed would continue to buy Treasury and mortgage bonds to stimulate the US economy and reduce unemployment rate.

British Pound: The British pound was down against its counterparts this week against the fears that the next governor of the Bank of England may introduce new stimulations for weak economic growth in the UK, allowing a higher level of inflation in the country. The market participants were selling the pound throughout as a consequence of Friday’s release of data on the reduction of the UK's GDP in the last quarter of 2012 which was associated with the risk that the UK economy in the third since 2008 would fall into recession. The pound fell also after the publication of data from Home track, which showed that house prices in England and Wales remained unchanged in December, after declining in the previous six months. The pound was supported on Tuesday by the Bank of England's representative David Miles who said that the economic growth in the United Kingdom in the next 18 months might increase to about 2-2.5 % pace. The currency tried to recover on Wednesday when the number of approved applications for mortgages rose to 55.8 million from54.00 million in November and the volume of net consumer credits increased to ? 0.6 billion from the previous value of ? 0.1 billion. The GBP / USD pair gradually moved up primarily due to growth in the euro and weakening of the dollar, but came under pressure on Friday and finished this week at 1.5775 areas.

Japanese Yen: The technical situation shows an oversold of the currency against most of the 16 most traded currencies and many investors suggest that the currency will stop it’s longest series of 11 weeks decline. However, the currency continued to lose grounds this week too. The currency tried to recover, though, on released data, that showed that the industrial production in Japan rose in December from the previous month, which added a sign that the country emerges from recession along with the world’s economy gradual recovering. Also, it grew when the cabinet of Prime Minister Shinzo Abe approved a draft budget for the 2013 fiscal year to a record $ 92.6 trillion yen ($ 1 trillion). The new administration is trying to quickly stimulate the economy instead of reducing the deficit of the country.

New Zealand dollar: The New Zealand dollar rose recovering from a three-day decline, after the publication of positive data on the trade balance of the country. The Bureau of Statistics said that the annual trade deficit narrowed to NZ $ 1.208 billion ($ 1 billion) for the 12 months ended in December, compared with a revised deficit on at NZ $ 1.393 billion a month earlier. The projected by economists deficit was at NZ $ 1.87 billion. The published positive news which recorded a rise in the number of building permits in November by 9.4% to 1,566 to it’s the highest level since May 2008 and the statements of the Reserve Bank of New Zealand of leaving its key interest rate unchanged at 2.50% pushed the New Zealand dollar to new highs against its competitors.