Forex

Currency market weekly review (March 11 - March 15, 2013)

Euro: On Monday, the euro fell against the dollar amid decrease in the demand for the risky assets. These negative dynamics were caused by the news about the lowering of the sovereign rating of Italy by the Fitch rating agency. The sovereign debt rating was downgraded to the level of BBB + with a negative outlook, which increased political uncertainty. In addition, Monday’s releases informed that the Industrial production in France fell by 1.2 % versus +0.1% and the trade surplus of Germany narrowed by € 16.9 billion to € 15.7 billion. On results of the report published on Tuesday, which showed that the annual inflation rate in Germany came out at the lowest level since November 2010, at 1.5% in February against 1.7 % in January, coinciding with forecasts, the EUR / USD pair demonstrated strong growth into the $ 1.3070-80 area. .On Wednesday, the Euro weakened against the background of weak results of the published data on industrial production and growth in the yield of Italian debt securities. In details, the industrial production declined in January in the 17countries of the Euro zone, confirming the recent data which demonstrated the weakness of sector in the 1st quarter of this year. The data showed that industrial production in the euro area in January fell by 0.4% compared to December, after rising 0.9% the previous month. The yield of Italy bonds with a term expiration in 2015 was at 2.48% versus previous 2.30% and the papers expiring in 2017 at 2.95% versus 2.55% bonds previously. The currency weakened against the U.S. dollar on Thursday amid the background of launched this day a 2-day summit, which was focused on the problems of stimulating economic growth in conditions of high unemployment. The economic news published on Thursday demonstrated that in the 4th quarter of 2012, the employment rate in the euro zone fell by 0.8 % in yearly term and by 0.3 % quarterly against the previous values of by 0.6 % and by 0.1% respectively. The EUR / USD pair found support during the Friday’s sessions and even showed moderate growth strengthening into the $1.3060 area.

US Dollar: The dollar index on Monday went up closer to almost 83 levels which is the highest level in seven months in anticipation of data on retail sales in the U.S. However, the currency was under pressure after the release of the results of the auction on U.S. government bonds. As it became known, the 3-month and 6-month treasuries were sold at their yields, which declined from 0.11 % to 0.095 % and from 0.12% to 0.115 %, respectively. Wednesday’s news provided support for the currency; it grew after retail sales in the U.S. showed that in February the sales increased considerably, registering the largest increase in the past five months, and improving the prospects for the world’s largest economy. The sales increased by 4.6% comparing with the same period at the last year demonstrating their biggest increase since September and beat the Economists expectation of growth only by 0.5%. The Ministry of Labor presented on Thursday another positive sign for the U.S. economy, publishing the statistics that showed that the number of initial claims for unemployment benefits unexpectedly fell in the week ended March 9. The report showed that the number of applications for unemployment benefits fell to 332K for the week ended of March 10. The decrease in value surprised all markets, which had expected that the number increases to 355K from 340K, which was originally reported last week. However, this good news could not support the demand for the currency and on Friday the U.S. dollar lost some of its won positions, yet its outlook remains positive.

British Pound: The GBP / USD pair continued falling passionately dropping down to its weakest level since June 2010 after the industrial production showed an unexpected decline. According to the National Bureau of Statistics, industrial production in the UK in January fell by 1.2% compared with December, suggesting that the economy is closing to another round of recession. During the European session the GBP / USD pair sharply fell to the lows of $ 1.4832 then was able to recover to $ 1.4900 area. On Wednesday, the GBP / USD pair climbed to $ 1.4981. The pound was higher against its counterparts amid the background that many analysts have noted that the decline of 6.5% in this year was excessive, which increases the possibility that the government will delay fiscal austerity measures in the budget next week. And it continued on Thursday amid the speculation that Qatar will invest in infrastructure projects in Britain. These rumors directly led to increased demand for sterling. The growth of the currency, in addition, was also associated with the fact that many market participants were waiting for the publication of the annual budget for 2013.The GBP / USD couple on Friday strengthened towards the 1.5120 area, adding up around 1.25% this week or 210 basis points.

Japanese Yen: The orders for industrial equipment in the country on Monday showed the strongest decline in eight months falling by 13% in January in monthly terms with the analysts’ prediction of the drop by only 1.7%. However, the yen was held at the lowest levels continuing its fifth day of decline in a row, against presentation of the most probable deputy chairman of the Bank of Japan Mr. Iwata. This day in Tokyo, the professor of economy of the Gakushuin University, Mr. Iwata said that the Bank of Japan can reach its target of 2% inflation over the next two years, using the method of buying bonds. Also, the index of purchase prices of the goods for Japanese corporations published by the Bank of Japan recorded fall of 0.1 % in February. These data once again confirmed the deflation in Japan reducing for the 11th month in a row. The USD / JPY pair after holding the Y96.63 levels strengthened against all 16 major currencies. The Japan's currency grew more than 0.3% amid of falling of the U.S. stock futures. The issue supported demand for safe assets and the USD / JPY pair fell to Y95.63 area during the sessions.The Japanese yen rose on Thursday against its rivals after the economic adviser of the Prime Minister Shinzo Abe, Mr. Hamada warned the ruling party that the targeting of the exchange rate can lead to currency wars. In addition, he said that if the future head of the Bank of Japan, Mr. Kuroda will perform too diligently his duties the inflation rate may reach 4.5 %, which can be dangerous for Japan.

The New Zealand dollar: fell against all its major counterparts on concerns about the drought in the country which may continue thus influence negatively the New Zealand economy. In connection with these events, there can be changes in the monetary policy of the Central Bank of New Zealand.

Swiss franc: The Swiss franc fell, as many market participants were waiting for the meeting of the National Bank of Switzerland on the issue of monetary policy, which may considered providing measures that could help stop the deflation and stimulate economic growth.

Australian dollar: After February’s data showed the strongest monthly growth in employment in Australia over the past 13 years the Australian dollar rose against all major currencies. These data reduced the likelihood of further lowering interest rates; the number of jobs in Australia in February, according to the Australian Bureau of Statistics, increased by 71,500 compared with January while the number of jobs with part-time employment increased by 53 700. The expectations of the economists were at the rise of jobs only by10000. The unemployment rate in Australia, however, remained unchanged in February at 5.4 %.