Forex

Currency market weekly review (October 08 - October 12, 2012)

Euro: The euro weakened on Monday after the publication of the Euro-Zone Sentix Investor Confidence report, the result of which showed decrease in October to -22.2 versus forecasted values of -20.9 The EUR / USD pair fell to $ 1.2937 area this day. The speech of European Central Bank President Mr. Mario Draghi, who said that the Eurozone faces risks associated with financial instability, put pressure on the currency and it fell against almost all traded counterparts on Tuesday. Also, this day the International Monetary Fund has published the forecast for growth of the economy in the region. Accordingly to information, the growth of economy will be much less compare with result of the previous forecast. In addition, the IMF has revised a forecast of global economy and stated that the growth will fall to 3.6% in 2013 (from 3.9%), noting the risk of further serious decline. The EUR / USD pair dropped to $ 1.2911 after these negative forecasts. The fact that Spain is still in no hurry for asking for financial aid that delays implementation of the new European Central Bank’s plan of the purchasing of bonds, put euro under pressure on Wednesday. Thursday’s positive came after the publication of the German inflation index which recorded in September +2.0 % in y / y term versus previous +2.1 % and coincided with forecasts’ values. The French CPI in September, also recorded +2.2% change in y / y term and was almost in line compare with the expectations of +2.4 %. Toward the close of the week the EUR / USD pair was trading closely to 1.2950, showing decrease by 0.5% compare with previous week close.

US Dollar: The dollar index, which is the ratio of the "American" to a basket of six of its main competitors, added 0.5 % this week. On Monday, the dollar index rose by more than 0.5% against the meeting of European finance ministers in Luxembourg, as well as on speculations that Spain is trying to avoid the need for financial help at the expense of the growth of its own sovereign debt. On background of announce made by Standard & Poor's Ratings Services agency about the lowering the credit rating of Spain, the U.S. dollar has strengthened its position against its competitors on Thursday. The international rating agency lowered Spain's long-term credit rating by two steps from BBB + to BBB- with negative outlook, and short-term by one step from A- 2 to A-3. However, the report on Initial Jobless Claims, recorded that the number of initial claims for unemployment benefits decreased by 30K to 339K level for the week from September 30 to October 6, which is the lowest level in four years, and spoiled some winning positions  of the currency, so the dollar index fell by 0.3% to 79.75 this day.

British Pound: Pound decline on Monday as a Lloyds Employment Confidence report conducted by Lloyds Bank showed that the assessment of the prospects of employment index fell in September to -49 from -43 in August. It continued trading lower also on Tuesday when the result of the report for the manufacturing production of the United Kingdom recorded decline in August more than it was expected, and showed 1.25 with forecasted -0.7%. Also, to the fall of the asset contributed the industrial production report, which registered a decline of -1.1% against +3.1 % in July, was due to the fact that at the periods of the summer plants are usually closed for maintenance. In addition, the rate of the UK visible trade balance in August sharply rose to 9.844 billion from 7.337 billion the July and the total trade balance showed a deficit of 4.169 billion from 1.705 billion in July. All published results exceeded the forecasts of analysts in negative way. The GBP / USD pair decreased to the $ 1.600 area. The GBP / USD pair was able to grow on Wednesday after testing the previous day's low of $ 1.5975. It continued also on Thursday, strengthening up to the highs of $ 1.6032 after the National Institute of Economic and Social Research reported that the GDP estimate for the UK economy expanded in the third quarter by 0.8%, registering with the highest rates growth over the past five years. Close to the end of the week the GBP / USD pair was trading around the $1.6040.

Japanese Yen: The yen grew on Monday amid published by the World Bank downgraded forecasts for GDP of Asia region (excluding Japan and India). So, it was expected that the economic growth of GDP will increase at its slowest pace since 2001 by only 7.2% in the current year, whereas previously predicted was at 7.6%. Moreover, the forecasts for 2013 were also reduced, so the growth of the rate will be 7.6% instead of 8 %, as it was expected before , which is primarily due to the slowdown of the Chinese economy. On Thursday, After the Japan's Economy Minister Mr. Maehara said that Japan may conduct an intervention into the Forex market in order to reduce the high rate of its National currency on their own, without the approval of the United States; the USD / JPY pair rocketed to a new intraday high of Y78.45. The minister also added that the purchase of foreign bonds by the Bank of Japan, as the one of the ways to increase the monetary base in the country, is the prerogative of the Bank of Japan even though it may conflict with the interests of the U.S.

Australian dollar: The speculations on the results of the unemployment rate report in the country provided adverse impact on the Australian currency’s trading dynamics the Australian dollar updated its three months low against the U.S. dollar. Also, the speculations that China, which is the largest trading partner of the Australia would continue further to stimulate its economy, the Australian dollar recovered from recent downfall. The Australian dollar rose for the third day in a row after the country sold its thirty years, most long-term debt securities, thus increased demand for the country’s investing assets. The Australian dollar rose against its rivals after the publication of positive statistics on the labor market reported by the Australian Bureau of Statistics. So, in September, the number of employed people in the country increased thus showing the largest increase in new jobs since May 2012. The result grew by 14.5K confirming the fact of recording better than analysts' expectations results for the third month in a row.

Swiss Franc: The Swiss currency weakened against most major currencies after the State Street Corp (STT) and Bank of New York Mellon Corp (BK) announced that they would charge investors who hold their assets in Danish kroners and Swiss francs at Swiss Banks.

Canadian dollar: The concerns about slowing of the growth of Chinese economy pressured the loonie this week. The Canadian dollar fell against most of traded currencies against the fact that the issue will have a negative impact on demand for commodities such as oil, the one of the products of Canadian export.