Forex

Currency market weekly review (March 1 – 5, 2010)

By Forex-Metal

In the beginning of the previous week the situation in Greece continued to render a negative influence on the euro dynamics. According to the released information, Greece was obliged to undertake all necessary measures to reduce the budget deficit. And the EUR/USD pair reached its minimums at the level of $1.3460. At the same time the US ISM manufacturing index for February, which was published on Monday, decreased and turned out to be below the forecast: its factual level of 56.5 against the expected level of 57.9. Nevertheless, according to the experts’ opinion, this index level showed the rehabilitation of the American economy.

Due to the survey, which was held in Great Britain, it would be probably impossible to form the government with the substantial majority of the votes, which are necessary for the reforms’ implementation. Therefore, the political situation rendered a strong pressure on the sterling, which in turn dropped against the major currencies. As a result, on Monday the GBP/USD pair decreased to the range of  $1.4780.

On Tuesday the released information, that the government of Greece planned to inform of the reduction of the budget deficit for 4.8 billion euro on Wednesday, supported the euro currency. And the EUR/USD pair demonstrated its growth to the level of $1,3620.

As for the publications on Tuesday, according to the expectations, the Central Bank of Australia increased the principal rate to 4%, which pushed Australian dollar upwards. In addition, according to the predictions, the Bank of Canada left the principal rate unchanged at the previous level of 0.25%. The speculations regarding the possible increase of the principal rate in the nearest future rendered positive influence on the national currency dynamics. And the Canadian GDP growth for 0.6%, which was published on Monday, supported the Canadian dollar increase.
 
On Wednesday the government of Greece confirmed the plan of the budget deficit reduction and the increase of the taxes. This fact supported the demand growth for the euro currencies and set back the US dollar to its minimums. The euro received additional support from the Euro-zone fundamentals, which were published on Wednesday.  The PMI servers index for Germany showed its growth: factual level of  51.9 against the expected 51.7. And the EUR/USD pair grew to the level of $1.3735.

On the same day the sterling dynamics switched to the opposite direction. The Nationwide consumer confidence index for February, which was released on Wednesday, turned out to be above the forecasts and its previous month value: the factual level of 80 against the expected level of 73. The PMI services index showed positive results as well: its February value amounted to 58.4 against the forecast of 55. Due to the positive fundamentals the sterling rate grew. And the GBP/USD pair increased to the level of $1.5130.

The released data on Thursday showed, that according to the expectations, the ECB left the principal rate unchanged at the previous level of 1.00%. The problems in Greece, as well as the results of the head of the ECB conference, pressured the euro. In addition, the rating agency Moody's announced of the reduction of the European bank Deutsche Bank AG rate. And the EUR/USD pair demonstrated its decrease below the level of $1,3600.

The positive US data, which was released on Thursday, rendered support to the American dollar. The initial jobless claims dropped to 469 thousand and turned out to be below the forecast. And the volume of the factory orders for January increased. As a result, the US dollar grew against its major competitors.

As the experts predicted, the Bank of England did not change the principal rate, and it was left at the level of 0.50%. Against the background of the negative European news, and positive US fundamentals, the pound also decreased. As a result, the GBP/USD pair traded somewhat above the level of $1,5000.

The Japanese yen demonstrated its consolidation against the US dollar during the whole trading week. Only at the end of the week the USD/JPY pair grew to the level of  Y 90.50 due to the speculations regarding the possible measures of quantitative easing in Japan.

Against the background of the released positive US fundamentals on Friday, the demand for the high-risk currencies grew and the EUR/USD pair increased to the level of  $1.36, and the  GBP/USD pair reached its maximum level of above the $1.5160 mark.