Forex

Currency market weekly review (October 15 - October 19, 2012)

Euro: The euro weakened during Monday’s early sessions and the EUR / USD pair fell to $ 1.2890 area, amid lingering concerns about the unwillingness of Spain to submit a formal request for assistance as well as on some obstacles in confirming the next tranche for Greece. The support for the currency this day was provided by the statements of the German Finance Minister Mr.Wolfgang Schaeuble who said that Greece will not encounter the sovereign debt default. In addition, Mr. Schaeuble urged central banks to monitor the inflation risks associated with excess of the liquidity on markets. The EUR / USD pair was able to recover to the $ 1.2980 area. On Tuesday, for the first time in two weeks, the EUR / USD pair rose above $ 1.30, as the index of sentiment in the business environment in Germany rose more than economists’ forecasts. So, the survey conducted by the ZEW Center for European Economic Research, revealed that index of investor and analyst expectations, which aims to predict economic development for the six months rose to -11.5 from -18.2 in September and was much higher than forecasts of -14.9. The only one negative factor that limited taking large long position on the euro currency was the information that the rating agency S & P downgraded the rating of 15 Spanish banks as well as Spanish region of Barcelona in one step from 'BBB +' to 'BBB-', maintaining a negative outlook. The euro strengthened to monthly highs in each of its pair on Wednesday amid news about confirming by the international rating agency Moody's the long-term sovereign rating of Spain at «Baa3» level. This day positive was supported by the fact that the yield on 10 -year bonds in Spain fell by 29 basis points to a level of 5.51%, the lowest level since April 4, while the yield on 10- year Italian bonds reached the lowest level since March 19. The EUR / USD pair rocketed to a $ 1.3128 level, updating its monthly high.  However, on Thursday and Friday the currency came under slight pressure and the EUR / USD couple faced a correction sliding down to around $1.3020 area as market participants were focused on the summit of EU leaders.

US Dollar: The dollar fell against almost all its counterparts on Monday as the U.S. and European stock markets grew this day, boosting investors’ appetite for higher-yielding assets. One more negative factor for dollar was the report on retail sales. It showed that U.S. retail sales rose more than expected in September, increasing by 1.1% m / m in August from a revised value of 1.2 % m / m and analysts forecasts of increase by 0.8%. On Tuesday, after data showed that industrial production in the U.S. rose more than expected in the last month increasing by 0.4% with an average forecast growth of 0.2% the dollar fell against most major currencies. The positive results of the reports of Housing Starts and Building Permits in U.S. published on Wednesday also put dollar under pressure and the dollar index decreased by 0.6% to 79.01 this day. In details, the number of new houses built in the United States increased by 15% to 872K in the last month, exceeding analysts' forecasts and a number of building permits rose in September jumped to a maximum of 4 years, 894 thousand. However, on weakened investors’ confidence of strengthening of the economic recovery, the currency was able to regain some lost positions. The dollar rose after the Initial Jobless Claims report recorded that the number of applications for unemployment benefits in the U.S. rose more than expected. As it was reported by the Labor Department, the number grew to 388K in the week ended October 13 and exceeded the economists' estimates of 365K. The dollar index ended up this week losing only 0.4%.

British Pound: The pound was supported by the factor of strong correlation with the trading dynamics of the euro currency, which was strengthening up from the beginning of this week. The GBP / USD pair grew to $ 1.6107 area on Tuesday, even despite of the weak results of the inflation report in the UK, which showed the lowest levels in nearly three years. The consumer prices in the UK rose in September by 2.2 % compared to the previous year, and an increased by 0.3% to 2.5 % compared to August’s values. The GBP / USD pair significantly grew on Wednesday climbing to new highs of $ 1.6176 after published today reports which showed that the unemployment rate of UK in August unexpectedly fell from 8.1% to 7.9 % and the number of applications for unemployment benefits in September decreased by 4K. Also, the average weekly earnings increased by 1.7% in y / y term and the Employment Change recorded increase by 212K due to the number of employees increased during the Olympic Games. The GBP / USD pair retested the winning level of $ 1.6176 on Thursday on performance of the retail sales in country in September, that showed a significant growth, beating analysts’ expectations. The pair, however, was not able to hold this conquered level and dropped to the lows of this day.

Japanese Yen: The overall decrease in demand for the safe heaven assets put heavy pressure on the Japanese currency this week. The yen reached minimum values of the month against its counterparts and on Thursday amid growing optimism associated with started this day the two-day meeting of European Union leaders in Brussels. Markets were full of positive expectations about announcing the solutions for resolving the Eurozone debit crisis. The pressure on the currency was also provided by the fact that on October 30 the central bank of Japan may announce another package of measures for stimulating the National economy. The USD / JPY pair rose to Y79.30 level this week updating its monthly high.

Australian dollar: The Australian dollar grew this week and hit a two-week high against the dollar on increased demand for the risky assets all over the markets. The currency strengthened against almost all its rivals after the publication of macroeconomic statistics in China showed that the growth of the gross domestic product in the III quarter of 2012 grew by 7.4% year on year coincided with the forecast of analysts and confirmed its good pace.