Forex

Currency market weekly review (March 04 - March 08, 2013)

Euro: The euro grew on Monday amid the mixed regional statistics which were published during the sessions. The Euro zone’s confidence significantly decreased among investors in March recording its first decline in six months and topping analysts' forecasts. Also, the Sentix investor confidence indicator fell this month to the lowest level since December 2012, the level of -10.6. The annual rate of producer price inflation, at the same time, fully corresponded with the experts’ forecasts showing slow down in January to the level of 1.9%, compared with 2.1 % the previous month. However, the uncertainty in euro trading dynamics existed against the uncertain situation occurred due to obstacles of Italian politicians to form a coalition. The EUR / USD pair grew to highs of $ 1.3073, and then fell to $ 1.3013 after the publications of releases showed that the both euro zone PMI of services and composite came out better then forecasts. According to the report, the index of business activity in the services sector and composite rose last month to the level of 47.9, up from 47.3 in January. In addition, it was reported that retail sales rose by 1.2% on a monthly basis, and compensated the decline of 0.8% in December and beat the average experts’ estimates of growing only by 0.3%. The Euro-Zone Retail Sales in yearly basis increased in January by 1.7%, compared with forecasts of improvement only by 0.1%.The important news on Wednesday was the data presented by the Eurostat Statistics agency which showed that in the fourth quarter of 2012 the GDP in the euro area fell by 0.6 %, compared with the fall of 0.1% in the third quarter. The result, actually, was in line with forecasts recording the largest reduction of the rate since the first quarter of 2009, however, forced many market participants to sell the currency against its rivals. The EUR / USD pair fell to the low of $ 1.2988 during the European session. Other reports demonstrated decrease of the costs of household consumption by 0.4% in the end of last quarter, and the Government Expenditure which dropped by 0.1%. In addition, the Gross Fixed Capital of Euro zone decreased even more rapidly, thus showing decline of 1.1%. The strong results of the auctions in Spain and France in selling their government bonds supported Thursday’s positive move of the asset. The only negative point this was the report from the Ministry of Economy of Germany, which showed that the volume of industrial orders in Germany fell unexpectedly stressing that the country's economic recovery remains fragile. The euro showed the maximum increase in eight weeks against the dollar moving to the level of $1.3116 after the President of the European Central Bank Mario Draghi stated that the recent economic data suggested that the European economy will stabilize in this year. The statements of the ECB President were considered that the lowering of the rates in the euro area in the short term will not occur. Friday’s release of positive data on the labor market from the U.S. pushed the dollar which also strengthened against Euro and the pair tested the strength of last week's lows of 1.2980.

US Dollar: On Monday, the dollar was supported by the published last weekend news on final negotiations between Republicans and Democrats on the budget sequester. The long-awaited decision of the meeting ended on Saturday, which ultimately was made, unfortunately, did not found any compromise and Mr. Obama had to sign the bill of reducing the government spending by $ 85 billion by the end of this year. However, the president immediately tried to come down all markets saying that the apocalypse will not happen after that. After the service indicator in the U.S. rose in February, at the fastest pace in a year, adding signs of economic acceleration in the United States the dollar index went to the highest level in almost six months. The data published by the Institute for Supply Management (ISM) today showed that the Non-Manufacturing Composite Index of U.S. rose in February to 56.0 from 55.2 last month. The employment in the U.S. country, according to data of ADP, grew by 198K, exceeding analysts' expectations. After recent economic and budgetary challenges showed failed debates in Washington, the positive data on the U.S. labor market, which pointed to continuation of the growth in employment, added more optimism to investors. In addition, the revised data on factory orders in January was better than the first estimates and showed that the index fell by 2% while estimates were at 2.2% fall. This news supported the “greenback” on Wednesday. The rising in employment growth may prompt the Federal Reserve to cut earlier the incentive programs which were originally planned for much longer period of time. Friday’s U.S. Labor Department report which showed that the number of initial claims for the week ending March 2, decreased by 7K to a seasonally adjusted 340K, compared with expectations of an increase by 8K to 355K pushed dollar index down by almost 0.5%. Other important releases recorded that the U.S. trade deficit widened more than expected and the level of labor productivity in the non-manufacturing sector contracted less than it was expected in the fourth quarter.

British Pound: The pound strengthened on Monday against almost all its rivals amid concerns that the formation of the Government of Italy may be delayed, and the issue will have a negative impact on the recovery of 17 countries of the Euro currency union. In addition, the house prices report for UK in February released today showed that the prices grew, registering the first increase in nine months. The business activity index fell, however, to the level of 46.8 in February compare with 48.7 in January and versus the average analysts’ estimates of growth of the value to the level of 49.2. The report also recorded that the total production has fallen sharply, demonstrating the highest rate of decline over the past 3 years. The number of new orders declined accelerating its pace. The GBP / USD pair grew to $1.5118 during the European session. During the Tuesday’s fell to $ 1.5145 area after the published this day Purchasing Manager Index Services report showed the UK service sector expanded in February, showing a more rapid pace than analysts had forecasted. The issue, however, raised some speculations that the Bank of England will increase its easing programs.The pound weakened against the majority of currencies on Wednesday, which was associated with the beginning of the two day meeting of the Bank of England. The question in regarding of the additional stimulate the economy is on the agenda of this meeting. The pound has significantly grown against the dollar on Thursday restoring the losses which it suffered in a while ago. This sharp increase in rates was caused by a statement from the Monetary Policy Committee, which confirmed that the size of the program to purchase assets will be remained unchanged - at 375 billion pounds. In addition, the Bank of England's remained the current interest rate unchanged at the level of 0.5 %. However, the GBP / USD pair retraced back to around 1.50 after testing the resistance of 1.5080 which was broken amid the release of data on the labor market in the U.S. At the close of the week, the pair was quoted at 1.4948, losing more than 0.3%.

Japanese Yen: Due to the falling of the major stock markets of Asia, caused by the release of negative statistics for the euro area published last week the yen strengthened against its rivals. It continued even after the next candidate for the Governor of the Bank of Japan, Mr. Kuroda promised a more ease monetary policy in order to overcome deflation in the economy. Mr. Kuroda also said in parliament that the Bank of Japan will do everything possible to end the 15- year period of deflation in Japan. The currency, in addition, was supported after the Chinese CSI 300 Index fell to the lowest in two years. On Tuesday, the yen fell against the dollar as the demand for safe haven assets after the jobs report, which showed that in February the U.S. companies added more jobs than it was expected, has been decreased. The USD / JPY pair rose to Y94.10 during the sessions.The Central Bank’s decision confounded the expectations of economists in keeping the asset purchase program unchanged at Y76 trillion yen ($ 809 billion), and monthly purchases of government bonds at Y1.8K billion. The USD / JPY pair went up to Y94.74 level during the European session. All in all, the pair grew this week; the USD / JPY couple was quoted at 96.10 levels before the closing.

Australian dollar: The Australian dollar fell as well after the release of this negative statistics of the construction sector, the average economists’ forecasts of which were at gain of 2.8 %. It was also pressed by the data presented showed that the number of Building Approvals for the construction or reconstruction of homes and apartments fell in January by 2.4 %, compared with a revised downward fall of 1, 7 % in December???? situation has changed when retail sales data recorded growth in January by 0.9 %, exceeding analysts' average forecast of 0.4%. There were also signs of growth in house prices as the pace of housing construction in Australia, after nearly three years of decline, also gained momentum at the end of last year. The positive impact for the currency, in addition, had the decision of the Reserve Bank of Australia to leave its key interest rate unchanged at 3%. The currency also grew after the Australian Bureau of Statistics informed that in the fourth quarter of the last year the GDP of Australia increased by 0.6 % compared to the third quarter of growth to 0.7%. The annual GDP improved by 0.1% to the 3.1% beating the estimate forecast of economic growth of 3.0%. Last year's growth in the Australian economy was the highest in five years. The AUD / USD pair has added 0.65% on this positive background by the end of the week.

Swiss franc: The Franc fell against all major currencies, as the currency with safe haven status, on the optimism of the investors after positive move of the Dow Jones Index, which this week recorded historic high amid the growth of the U.S. economy, the world's largest economy.

Canadian dollar: The Bank of Canada left its key rate unchanged at 1.00 %, pointing that it will not going to raise interest rates soon. The released statement of the authority revealed that the quite mild monetary stimulus is likely to be appropriate for an indefinite period of time. The Purchasing Managers Index (PMI) Ivey, was 51.1 in February, falling well below the expected growth to 56.2. The Canadian dollar weakened on these negative releases. However, amid the positive data on Canadian trade report which was better than expected recording that the trade deficit narrowed to 0,2 billion CAD in January from a deficit of 0,3 billion CAD a month earlier the Canadian dollar went higher against the U.S. dollar. Another report showed that the number of building permits issued in Canada rose by a seasonally adjusted 1.7% in January, well below the expected growth of 5.3%, however, were much better than the previous value of -10.4%.