Currency market weekly review (March 10 - March 14, 2014)
The region's economy delivered mixed signals. Frustration caused industrial production in France, which was not short of expectations, as well as later published a similar report on the euro area as a whole. The report on the trade balance of Germany was also weak. Closer to the end of the week, the Euro currency was supported by pretty strong inflation data of France and the growth in retail sales in Spain. In addition, the European currency was not slow to take advantage of strong enough statistics from the U.S.
Monday: The euro exchange rate is trading sideways against the U.S. dollar in the absence of meaningful statistics. Slight pressure on the euro was the French industrial production data. French Industrial Production fell in January; contrary to the forecast of economists expect a noticeable increase showed on Monday the latest data statistical office Insee. Industrial production fell by 0.1 % year on year in January, succeeding increase by 0.3 % and 1.5 % in December and November respectively. Economists had expected a 1.3 % expansion in January. On a monthly measurement of industrial production fell by 0.2 % in the beginning of the year, after falling 0.6 % in December. Expectations were at a gain of 0.6 %.
In Insee also said that in January production in the manufacturing sector grew at a faster annual rate of 1.4 % than the 0.5 % in December. Annual growth rates were projected to reach 1.5 %. In monthly terms, production in the manufacturing sector grew by 0.7 %, compared with expectations for a gain of 0.4 %. In December, production showed zero change.
The euro retreated from lows after data from Sentix. Investor confidence in the eurozone reached its highest level since April 2011, supported by notable progress in the assessment of the current situation. The results of a survey conducted by the analytical center Sentix were published today, on Monday. The composite index of confidence rose to 13.9 in March from 13.3 in February, while, according to forecasts, the index had to grow to 14.3. However, it was the highest since April 2011. Assessment of the current situation rose to 4.8, the highest level since July 2011, from 1.8 in February. Nevertheless, expectations fell to 23.5 in March from 25.5 in February. The EUR / USD pair rose to $ 1.3895, and then dropped to $ 1.3866 during the European session.
Tuesday: Euro fell on the background data on the trade balance of Germany. In January, German exports grew more than expected, after a decline in December showed Tuesday, official data agency Destatis. Exports rose by 2.2 % on a monthly measurement in January, rebounding from the 0.9 % drop in December. Exports were projected to grow had 1.5 %. In addition, imports expanded by 4.1 % after falling 1.4 % a month earlier. Growth rate significantly higher than the increase of 1.4 % was expected by economists.
Because of markedly increase import, the trade surplus fell to a seasonally adjusted to 17.2 billion euro in January from 18.3 billion euros in the previous month. In annualized export growth slowed to 2.9 % from 4.5 % in December. Similarly, imports increased by 1.5 %, which is slower than the growth of 2.4 % in December. On an unadjusted basis the current account surplus was 16.2 billion euros in January, compared with 10.6 billion euro surplus, which saw in the corresponding period last year. EUR / USD: during the European session, the pair fell to $ 1.3833
Wednesday: The euro exchange rate rose sharply against the U.S. dollar, despite weak data on industrial production in the euro area. Official data showed Eurostat, in the euro zone industrial production fell unexpectedly in January, largely due to reduced production of energy. Industrial output fell 0.2 % on a monthly basis in January, showing the second consecutive fall. Economists had expected growth of production by 0.6 % after falling by a revised 0.4 % in December.
Production of energy decreased by 2.5 %, and the production of durable consumer goods fell by 0.6 %. Intermediate goods decreased by 0.1 %. Partially offset this decline is that the release of capital goods rose by 0.9 %, while production of consumer non-durable goods increased by 0.4 %.On an annual basis, industrial production growth accelerated to 2.1 % from 1.2 % in December. Economists forecasted that output will grow by 1.9 %.
In light of these release analysts ING Bnak NV commented: “The main reason for poor outcome again was to reduce energy production by 2.5%, but intermediate goods and consumer durables also pointed to the decline in production. While the benchmark did not meet expectations, weak energy component probably overshadowed a slight improvement in the overall indicator. However, to strengthen the eurozone recovery process still requires export growth. “ The EUR / USD pair rose to $ 1.3908 during the European session.
Thursday: The euro exchange rate has risen sharply against the U.S. dollar in the absence of significant macro-statistics. Secondary data came from information on inflation. In France, French measure of inflation, agreed by EU standards, accelerated in February, slightly faster than expected, data showed on Thursday statistical office INSEE. Harmonized index of consumer prices, or HICP, rose 1.1 % year on year, after rising 0.8 % in January. Economists had expected the rate of inflation will be 1 %. On a monthly measurement of the harmonized index of consumer prices rose 0.6 % in February, replacing a similar decline in January. Monthly data were in line with expectations of economists.
In turn, the consumer price index rose by 0.9 % a year in February, after a 0.7 % gain in the previous month. Economists forecast the inflation rate of 1 %. Core inflation rose to 0.7 % compared with January unusually low level of 0.1 %. The monthly increase was 0.5 % in February compared with 0.4 % in the previous month. On a monthly basis, the CPI rose by 0.6 %, offsetting the decline of similar size in the previous month. Economists had expected a gain of 0.5 %. The EUR / USD pair rose to $ 1.3968 during the European session.
Tuesday: The dollar traded lower against the euro, but was able to recover most of the previously lost positions. Impact on the dynamics had trade balance data of Germany and on wholesale U.S. inventories.
As it became known, in January German exports grew more than expected, after a decline in December. Exports rose 2.2 % on a monthly measurement in January, recovering from the 0.9 % drop in December. Exports are projected to grow had 1.5 %. In addition, imports expanded by 4.1 % after falling 1.4 % a month earlier. Growth rate was significantly higher than the increase of 1.4 per cent expected by economists. Because of the markedly increase import, the trade surplus fell to a seasonally adjusted to 17.2 billion euro in January from 18.3 billion euros in the previous month. In annualized export growth slowed to 2.9 % from 4.5 % in December. Similarly, imports increased by 1.5 %, which is slower than the growth of 2.4 % in December.
Another report showed that wholesale inventories in the U.S. rose more than expected in January. According to the data, wholesale inventories rose 0.6 % in January after raising a revised 0.4 % increase in December. Economists had expected an increase of 0.5 per cent of reserves compared with 0.3 % growth, which was originally reported in the previous month. On the other hand, the Commerce Department reported: Wholesale sales fell 1.9 % in January after rising 0.1 % the previous month.
Thursday: The dollar rose sharply against the euro amid falling risk appetite during the U.S. session, when the stock market fall, despite strong U.S. data. Note one of the reports showed: initial applications for unemployment benefits fell by 9,000 and totaled a seasonally adjusted 315,000 in the week ended March 8. The result was the lowest since late November. Number of references to the previous week was revised slightly higher. Economists had forecast 334,000 new claims will be filed last week.
It was also reported that retail sales rose a seasonally adjusted 0.3% in February from January. Retail sales excluding auto purchases grew at the same pace. Economists had forecast a 0.3 % increase in total sales last month and an increase of 0.2 % excluding autos. Sales rose by a modest 1.5% compared with a year earlier. Changes showed a drop in retail sales by 0.6 % in January compared with the originally voiced by -0.4 %.
British Pound: Industrial output fell short of forecast, the Trade data reflected an increase in its deficit. Negative comments and added the representative of the Bank of England, Charlie Bean that the rate will be kept low for a long time, if the pound continues to strengthen, as such it will keep inflation dynamics. Speech by Mark Carney after the publication of the inflation report was virtually ignored, despite the fact that the head of the Central Bank said faster compared with other countries, recovery of the British economy.
Monday: Pound declined significantly against the dollar, reaching lows on February 27. Couple in Europe was under intense pressure and broke above $ 1.6700, absorbing foot and accelerating the pace of decline. The decrease was due to technical factors (correction after Friday's growth), as well as statements of the representative of the Bank of England Bean. Deputyof the Bank of England, Charlie Bean said today: interest rates will remain at the same levels for a longer time if the pound continues to grow.
"If sterling stronger, it is potentially weaken inflation as a negative impact on import prices , so achieving the target level of inflation will be rather medium term, which in turn means - monetary policy will remain accommodative for a longer period of time than expected "- says Bean .
The CB representative added: recovery of the British economy may face obstacles in the face of the eurozone's problems or stress in the emerging markets, as well as in the face of bubbles forming in the domestic housing market.
Tuesday: The British pound was down against the U.S. dollar on a background of mixed data on industrial production. In the UK, industrial production growth slowed in January, more than expected, while growth in the manufacturing industry remained stable compared to December.
The volume of industrial production increased by 0.1 % compared with December. Issue, according to forecasts, had to expand 0.3 % after 0.5 % growth in December. Manufacturing output rose by 0.4 %, the same as in December and remained above the 0.3 % growth forecast by economists.
The annual increase in industrial output accelerated to 2.9 % from 1.9 %. At the same time, growth in the manufacturing industry increased more than doubled to 3.3 % from 1.4 %.
Today in the British Parliament held a hearing at which the Bank of England and M. Carney MPC members P. Mr. Carney noted that the state of the British economy is improving much faster than in the rest of the world. Over the past few months increased inflation expectations, he said, and suggested that in the next three years, the Bank may raise rates gradually to reach 3.5 %. Carney said that the Central Bank will start folding QE program only after several rate increases, while it does not require consultation with the Treasury on this issue. The GBP / USD pair fell to $ 1.6596 during the European session.
Thursday: The British pound also rose substantially against the dollar on housing data. Rising house prices in the UK slowed in February, showed on Thursday last poll from the Royal Institution of Chartered Surveyors (RICS). House price balance amounted to six minimum score of 45. The result fell short of forecasts, at 52, that it would be unchanged compared with the result of January (which was revised down from 53). Among the individual components of the survey, sub indexes price expectations, sales and number of customers continued to increase. Regionally, prices rose at a much faster pace in London and the South East. The GBP / USD pair rose to $ 1.6718 during the European session.
Japanese Yen: Speaking of Japanese developments, the Central Bank's decision not to amend the monetary policy also benefited the Yen. Also, strengthening of the Japanese yen was initially caused by weak data from China, which intensified fears of a further cooling of the China economy. In the future, the demand has grown even stronger as there is information on building the number of Russian troops on the border with Ukraine. In addition, support for the yen gained against the background of rather weak U.S. data. Index of retail sales almost coincided with forecasts, data on producer price index reflected their decline.
Monday: The yen rose against most major currencies against the backdrop of continuing tensions in Ukraine around the Crimean Peninsula, as well as due to the fall in Chinese exports to the lowest level since 2009. These negative factors increase the demand for safe-haven currency, which is the yen. In February, China's exports fell by the largest value since the beginning of the financial crisis. Index decreased yearly by 18.1 %, while experts expect growth to 7, 5%. The USD / JPY pair rose to Y103.42 during the European session.
Tuesday: The yen rose sharply against the dollar, while escaping with a narrow range, and reaching high yesterday. Currency appreciation can be explained by the reduced demand for safe-haven assets such as equities and commodities, amid concerns about instability in China's financial system. Besides growth of the yen helped drop in copper prices (fixed for the third day in a row) to the lowest level since 2010.
We add that the Japanese currency barely reacted to the decision to leave the Bank of Japan interest rates unchanged at 0.10%. Board members unanimously voted to keep monetary policy unchanged. By the end of next meeting confirmed the intention to maintain the policy of increasing the monetary base in the range of 60-70 trillion yen annually. The Bank of Japan also confirmed buyback of government bonds in the amount of government about 50 trillion yen and corporate bonds at 2.2-3.2 trillion.
Wednesday: The yen rose against most currencies on concerns about the state of China's economy. This increases the demand for safe-haven assets, which, in particular, is the yen. In February, China's exports fell by the largest value since the beginning of the financial crisis. Index decreased yearly by 18.1 %, while the experts had expected growth of 7.5%. However, the real picture is quite difficult to evaluate because of the rather long New Year celebrations on the lunar calendar. Holidays in China traditionally distort statistics. Meanwhile, imports grew by 10.1%, resulting in a trade deficit reached highs for 2 years at $ 23 billion. The USD / JPY pair fell to Y102.65 during the European session.
Canadian Dollar: The rate of the Canadian dollar traded lower against the U.S. dollar, but was able to recover most of the previously lost positions. Growth was helped by Canadian data that showed: the number of new housing increased tabs on a monthly basis by an average of 192,094 units in February. This was stated by the Canadian Mortgage and Housing Corporation (CMHC). Results, followed by three months of decline, were slightly above analysts expected 190,000 new bookmarks. In a research note expert CIBC World Markets said the results were in February according to the range , which saw last summer and early fall , but less than the rate of more than 220,000 units, which are seen in mid-2012. CMHC reported, the number of urban bookmarks new housing rose to 175,584 units. Bookmark urban apartment jumped 13.3% to 116,458 units, while single-family detached urban Bookmarks fell 2.4 % to 59,126 units.
Australian dollar: The Australian dollar fell against falling Chinese exports to the lowest level since 2009. In February, China's exports fell by the largest value since the beginning of the financial crisis. Index decreased by 18.1 %, while the experts had expected growth of 7.5%. But the real picture is quite difficult to evaluate because of the rather long New Year celebrations on the lunar calendar. Holidays in China traditionally distort statistics. Meanwhile, imports grew by 10.1%, resulting in a trade deficit reached highs for 2 years at $ 23 billion.
The Australian dollar rose significantly against the U.S. dollar by more than 0.81 % after the publication of statistics on employment in the region. According to a report by the Australian Bureau of Statistics, the unemployment rate remained unchanged at 6%. This is the highest since July 2003, which is fixed for the second time in a row. In turn, the number of people employed increased by 47,300 against the expected 15,300, and that contributed to a sharp strengthening of the national currency of Australia.
However, the Reserve Bank of Australia (RBA) still tends to further deterioration in the labor market and sees a risk for rising unemployment in 2014 against the backdrop of significant reductions in public investment in the natural resources sector.
New Zealand dollar: The New Zealand dollar fell against the yen after China's central bank lowered the rate on the Yuan. People's Bank of China today lowered the base rate for the Yuan to 0.18 %, the lowest level since July 2012.
Swiss Franc: Swiss Franc continued to strengthen against the dollar, breaking with a two-day consolidation and peaking in the last 28 months. Franc firmed the increased risk aversion amid worries about China and the situation between Russia and Ukraine.
Market participants are waiting for tomorrow's data for China. Economists predict that the Chinese industrial production has increased markedly during the first two months of this year, but the rate of this increase will be less than was recorded in December. It is estimated that industrial production increased by 9.5 % ( yearly ) in January and February, compared with a gain of 9.7 % in December. Experts also expect that retail sales rose by 13.5 % per annum for the first two months of this year - it's a little less than 13.6 per cent growth in December. Growth of investment in fixed assets, probably slowed to 19.5 per cent per annum, compared with an increase of 19.6 % in January.
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