Currency market weekly review (October 21 - October 25, 2013)
Euro: The single European currency strengthened against its competitors, the EUR / USD at the moment added more than 150 basis points and reached the 1.3840 level and gained 0.9 % against the dollar. The PMI index of services and the German business climate in this country contributed to the weakening of the euro in the second half of the week.
Monday: The euro traded in range and was stable against the dollar amid data on producer prices in Germany. The producer prices in September and October fell by 0.5% on an annual basis. The prices of non-durable consumer goods increased by 2.1%and the prices of intermediate goods and energy decreased by 2% and 1.4% respectively, compared with September 2012. On a monthly measurement of producer prices rose 0.3%, offsetting a 0.1% drop in August. It was predicted that the prices would increase by only 0.1%. The EUR / USD pair is trading in the range of $ 1.370 - $ 1.3675 during the European session.
Tuesday: The euro exchange rate increased significantly against the dollar, in response for the weak employment data in the U.S. The EUR / USD pair rose above $ 1.3750 after U.S. employment data, the highest level since November 2011.
Wednesday: Euro fell against the U.S. dollar amid evidence of continued growth of debts of the euro area governments in the 2nd quarter of 2013 year. That indicated that the one of the most difficult problem of European Union has not been solved. According to agency Eurostat data released on Wednesday, the eurozone public debt in relation to the aggregate euro area GDP in the 2nd quarter increased to 93.4 % versus 92.3 % in the 1st quarter and to 89.9 % in the same period the previous year. According to the rules of the European Union, governments must keep their debt at a level not exceeding 60 % of GDP. The EUR / USD pair fell to $ 1.3735 during the European session. The euro rose against the dollar, while restoring previously lost ground, after the European Commission said that the level of consumer confidence in the euro area increased more in October , reaching with its highest level in 27 months, which is likely to indicate continued increase in consumer spending , albeit slowing pace . According to the report, a preliminary index of consumer confidence in the euro zone rose this month to the level of 14.5, compared with 14.9 in September. Meanwhile, data showed that the level of sentiment in the EU has remained unchanged for October - the corresponding index was 11.7 points. In September, the figure has exceeded its long-term average at 12.3, the first time since June 2011. Introduced , the report showed that spending growth may continue in the third quarter as well.
Thursday: The euro fell after the publication of disappointing purchasing managers' index (PMI) in the euro zone.
The data showed that manufacturing activity in the services sector in October did not grew a fourth consecutive month, but the pace of growth slowed compared with the last few months falling unexpectedly to 51.5 from 52.2 in September, while , according to forecasts , it has been a little increase to 52.3. Services PMI fell to 50.9 in October from 52.2. On the other hand, the growth of manufacturing activity improved slightly in October, the corresponding index rose to 51.3 from 51.1 in September. It was expected the index to rise to 51, 4 . The EUR / USD pair rose to $ 1.3826 during the European session, and then fell to $ 1.3760.
In details: The labor market in September gave thoughts to suggest that the Fed is not going to reduce the quantitative easing program in 2013, therefore the U.S. dollar continued to remain under pressure last week. The Dollar Index lost almost 0.7 % and came close to annual lows on Friday sessions.
Monday: The dollar declined significantly against the euro, and lost the all previously earned positions which associated with the release of weak U.S. data. The sales of existing homes fell in September
by 1.9 % from the previous month to a seasonally adjusted annual rate of 5.29 million. Also, as it was reported by the National Association of Realtors, the pace of the previous month was revised down to 5.39 million from 5.48 million previously voiced. Nevertheless, the data show that the pace of sales in July and August were the best since 2009. Economists had expected sales rate in September at 5.3 million.
Tuesday: The dollar brought signs of stability as investors were much more confident in opening large positions before the employment data that should tell how much the U.S. Federal Reserve will continue to purchase bonds at the current rate. The U.S. dollar traded in a narrow range against most major currencies, as market participants are waiting for the publication of data on the change in Nonfarm Payrolls, as well as official data on unemployment in the United States. According to the median forecast of analysts in the U.S. economy in the past month there were created 179K jobs, higher than the August figure of 169K, however, and is expected that the official unemployment rate would be at 7.3 %. The Department of Labor reported that the number of people employed in the U.S. increased less than expected. It was shown the reduced growth of the economy pace. Employment growth in September was by 148K, while employment growth in August was revised up to 193K (higher than originally reported). The average score of economists was at 179K. Thus, the data came out much worse than expected. It was also reported that the unemployment rate fell to a five-year low, 7.2% - the lowest since November 2008. This result was better than expected 7.3 %. However, the dollar's decline could not stop even data on construction spending. The Ministry of Commerce reported that the seasonally adjusted construction spending rose in August by 0.6%, reaching at this annual level of $ 915.100 billion, while economists expected spending to increase by about 0.4%.
Thursday: The dollar fell against most major currencies, as recent partial shutdown of the government effected economic growth in the United States. Against this background, there were views that the Federal Reserve would be forced to extend the duration of the program of monetary stimulus. The dollar fell slightly, which was associated with the release of weak U.S. employment data. The Ministry of Labor said that the number of initial claims for unemployment benefits fell from a seasonally adjusted by 12K to 350K in the week ended October 19. Applications for the previous week were revised slightly higher from the initial value. Figures for the last week exceeded economists' expectations at 341,000 new claims. However, there has been the second consecutive decline, which indicated that employment in the private sector also suffered from a 16-day shutdown of the federal government. The total number of 's report does not include the benefits of federal employees who file for unemployment benefits through a separate program. Report on Thursday showed that the four-week moving average of claims, which smoothes out volatile weekly data, rose by 10,750 last week to 348,250.
In details: The British pound was not feeling very confident. The Minutes of the last meeting of the Bank of England did not bring any surprises, fixing the continued the program of monetary stimulus. In the second half of the day on Friday, the GBP / USD pair was quoted at $1.6197, remained unchanged since the begging of the week even ignoring the weakening of the dollar.
Monday: The pound fell slightly against the U.S. dollar, in response, the statistics from the Markit Economics survey. The report said that the UK household finances remained under pressure in October, but the assessment of the employment situation has improved slightly .The seasonally adjusted index of household finances, which measures the overall presentation of the financial well-being of households, was 41 in October and has remained in negative territory. The October value was slightly better than the values of 40.8 in September, and was above the long-term average of 37.9. Meanwhile, the survey found that the trend in the labor market improved during October. Indicator of activity in the workplace remained above the neutral mark the ninth consecutive month. The GBP / USD pair rose to $ 1.6182 during the European session, and then dropped to $ 1.6140.
Wednesday: The British pound reduced its power after the release of the protocol of the Bank of England reflected the unanimous sentiment of the Committee members on keeping loose monetary policy. In respect of new policies transparent communication, the newest head of the Bank of England M. Carney stated: "At the moment it seems likely that in the 2nd half of 2013 unemployment will be lower and the rate of production - faster than expected in the August inflation report ".However, saying further, " On the basis of the latest statistics on the labor market is still too early to make any confident verdicts on the extent of the growth of productivity." The GBP / USD pair fell to $ 1.61120 during the European session.
Thursday: The pound regained previously lost ground against the dollar in anticipation of tomorrow's GDP report Britain. It is expected that the results of tomorrow's GDP report will support the positive tone of the British macro received during the last quarter. Office for National Statistics may report on the economic growth of 0.8% in the 3rd quarter. Yesterday, the Bank of England published the minutes of the meeting, which reflected the confidence of members of the Committee in the growth of the UK economy, as well as hints to the fact that the data for the 3rd quarter may be stronger than expected. The GBP / USD pair rose to $ 1.62100 during the session.
Monday: The yen fell against all major currencies after the release of the trade deficit of the country. The Ministry of Finance reported in Tokyo, that in September, imports exceeded exports by 932.1 billion yen. This value was higher than previously expected by analysts to increase 918.6 billion. An additional pressure on the Japanese currency had speech of Governor of the Bank of Japan Mr.Kuroda, who promised to continue easy monetary policy to achieve stable inflation. The USD / JPY pair rose to Y98.29 during the European session.
Tuesday: The yen continued to fall against most currencies in anticipation of the publication of the inflation data, which are likely to be the highest since 2008. According to the median forecast of economists, the nationwide consumer price index excluding fresh food, last month, will grow by 0.7 % compared with a year earlier. The measures for accelerating of inflation, which applies the Bank of Japan, already accelerated the consumer price index in August by 0.8 %, which is the fastest pace since November 2008. The USD / JPY pair rose to Y98.43 during the European session.
Wednesday: The yen rose against all of its major counterparts amid a sharp rising demand for safe-haven assets. It occurred after the volume of bad loans in China soared to a peak in July, stimulating demand for safer assets. The yen rose against all major currencies. The USD / JPY pair fell to Y97.10 during the European session.
Canadian Dollar: The Canadian dollar declined significantly against its counterparts, which associated with the application of the Bank of Canada. As it was expected, the Bank of Canada decided to keep interest rates unchanged at 1% at the October meeting. However, in the statement issued after was announced that the Bank of Canada expects modest growth in 2013, and the uncertain economic conditions may have a negative impact on exports and business investment in Canada. According to Central Bank estimates, the growth rate of real GDP should accelerate from 1.6 % in 2013 to 2.3 % in 2014 and 2.6 % in 2015.
Australian dollar: The Australian dollar touched highs against its counterparts after the publication of the inflation data revealed that in the last quarter the consumer price index rose more than economists’ forecasts. This increased the likelihood that the Reserve Bank of Australia completed its two-year program to mitigate the monetary policy. The Australian dollar rebounded slightly after yesterday's fall, after a preliminary PMI index for the manufacturing sector from HSBC Holdings Plc and Markit Economics in China, which is the largest trading partner of Australia, raised to 50.9, exceeding analysts' forecast, the expected value of 50.4. This month, China's manufacturing strengthened more than expected, and this was a sign that the economic recovery is gaining momentum this quarter.
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