Currency market weekly review (September 02 - September 06, 2013)
Euro: The European currency continued to decline this week after the ECB President Mario Draghi during a press conference said that the Governing Council had discussed the possibility of additional rate cuts.
Monday: The Euro was trading without a trend against the U.S. dollar despite the positive data on the manufacturing PMI, the results of which was presented by the Markit Economics. They showed that in the last month euro zone manufacturing sector expanded at the fastest pace in 26 months. According to the report, the Purchasing Managers' Index rose in August to the level of 51.4, up from 50.3 in July beating the preliminary reading of this indicator of 51.3 and expectations of the many experts of remain this result unchanged at 51.3. The EUR / USD pair is trading in the range of $ 1.3207 - $ 1.3230 during the European session.
Tuesday: The slight support for the Euro currency provided the report on the euro area, which showed that the producer price index for the industrial sector, not included construction, rose in July by 0.2% year on year, after a 0.3% increase in June and forecast of many economists of growth by 0.1%. The EUR / USD pair fell to $ 1.3155 during the European session.
Wednesday: The euro retreated from session highs against the dollar, against the background of the weak retail sales data. According to the report, in July retail sales rose by 0.1 % compared to the previous month. Many experts believed that the value of this index will rise by 0.5 %, after falling 0.7 % in June, which was revised upwards from -0.5 %. On an annual basis, retail sales fell in July by 1.3 %.The expected fall was projected at by only 0.3 %.Meanwhile, the report on GDP in the second -quarter showed a growth by 0.3 %, thus confirming the predictions of experts and the previous estimate. On an annualized basis, the GDP fell by 0.5%, which was slightly lower than originally reported - at 0.7% reduction. The EUR / USD pair rose to $ 1.3188, but then fell to $ 1.3171 during the European session. At the American session, the euro rose against the dollar despite the fact that the previously weak retail sales data from the blocked part of the positive GDP report. The EUR / USD pair rose to $ 1.3216 during the American session.
Thursday: The euro restored all the previously lost positions against the dollar ahead of the ECB press conference and U.S. data. The trading dynamics of the currency were partly influenced by’s placement of bonds by Spain and France. The results of auction, which was done through the sale of 10 - and 5- year bonds attracted €4 billion, reaching the upper limit of the target range €3 -4 billion. The EUR / USD pair rose from $ to $ 1.3220 during the European session. The EUR / USD continued its decline as a reaction to the speech of ECB President Mr. Draghi who announced that the increase in GDP forecast for 2013 will be by 0.4 % from July's forecast of 0.6%, mentioning the existed risks. He also reiterated that interest rates should remain at current levels or below “for an extended period ", while the central bank is ready to act at any time updating again the session low , which has helped the publication of positive data on the index of business activity in the services sector. The pair is currently trading at $ 1.3124 EUR / USD turned and fell below $ 1.3200 after data ADP employment and appeals for unemployment benefits, as well less than was recorded in the previous week. Note that the latter figure was the lowest since October 2007, which were several months before the start of the last recession.
US Dollar: At the last week the reports for U.S. key macroeconomic indicators were better than expected and increased the chances that the Fed will begin reducing the quantitative easing program already at its next meeting on September 17-18.The U.S. dollar strengthened its position against all its competitors.
Monday: The U.S. markets were closed in observance of Labor Day, but that did not stop the foreign exchange market to show sharp fluctuations. For the most part, the U.S. dollar has suffered losses in the framework of the corrective pullback.
Tuesday: The dollar rose sharply reaching maximum values of the session when the U.S. data on the production index was released. As it was learned, the manufacturing activity grew in August in the U.S. According to the report, Purchasing Managers Index (PMI) for the manufacturing sector in the U.S. August rose to 55.7 against 55.4 in July and beat expectation of fall to 54.2.
Thursday: The big contribution for strengthening of the dollar made a positive data on activity in the U.S. service sector. According to national survey of managers conducted by ISM, the economic activity in the non-manufacturing sector in the U.S. rose 58.6 % in August from 56.0 % in July. This showed that the growth in the non-manufacturing sector has accelerated. In addition, the data submitted by the Department of Labor showed that at the end of last week, Initial Jobless Claims reached with levels seen before the recession. The report showed that for the week ended Aug. 31 , the number of those who applied for a first time unemployment benefits fell moderately from a seasonally adjusted at 9K, down to the level of 323K, while many economists predicted that this figure will drop to 330K from 332K.The dollar index was up and reach the 82.60 areas.
British Pound: The British pound again strengthened its position across the market after the Monetary Policy Committee did not announce any change in the monetary and credit policy. Also, the data on the PMI indices in industry, construction and services were better than expected.
Monday: The British manufacturing sector continued its expansion in August , showing at the same time the fastest pace in two and a half years. According to the studies presented by the Markit Economics and the Royal Institute of Purchasing and Supply (CIPS), the seasonally adjusted purchasing managers' index (PMI) for the manufacturing sector rose to the level of 57.2 in August, compared to the upwardly revised index for July at around 54.8 beating the economists’ expectation of rise the index to 55 points. Note that the data showed that the amount of production in the sector rose most rapidly in July 1994. The rise in new orders was supported by the successful launch of new products, promotional activities and increasing customer confidence. The pound on the backdrop of a significant growth of industrial activity as the result was higher against the U.S. dollar, the GBP / USD pair rose to $ 1.5595 during the European session.
Wednesday: The value of the pound was significantly higher against the dollar, which was helped by a report on the index of the PMI services sector. The results of recent studies that have been presented Markit Economics and BME showed that the activity in the UK service sector has grown considerably in last month, registering with the fastest pace of expansion in more than six and a half years. The growth of the overall index was led by increase in the number of new orders received by the British services sector, which rose at the fastest pace in more than 16 years, due to the ongoing strengthening market confidence and improve marketing. In details: the seasonally adjusted index rose in August to a level of 60.5 from 60.2 in July beating the economists’ expectation of decline to 59.8. In addition, the prices for the products recorded a slight increase. The study showed that the British service providers still believe that the activity will continue to grow over the next year. The GBP / USD pair rose to $ 1.5640 during the European session.
Monday: The USD / JPY pair rose to Y99.40 during the European session, after the Prime Minister Mr. Shinzo Abe announced his intention to introduce a sales tax to improve the economic situation in the country. The published also data on the volume of housing starts in Japan, which in July rose by 12.0%, with an expected growth of 14.3 % affected the trading dynamics of the asset.
Tuesday: Japan's currency fell against all major currencies after a report published about the monetary base in the country rose in August to a 40 year high. Index increased by 42 % compared with a year earlier, to ?177 trillion ($ 1.78 trillion).
Thursday: The yen fell against the dollar, after strengthening against all major currencies when the Bank of Japan raised its assessment of the economic growth of the country, and left its program of quantitative easing unchanged. It should be noted that , the Bank of Japan said that the country's economy is recovering. The government plans to raise the consumption tax from 5% to 8% in April next year, and a decision about the strategy to be announced in early October. In addition, in order to achieve the target level of 2% inflation over the current leniency policy, the Bank of Japan unanimously decided to keep the key policy of increasing the money supply by ?60-70 trillion in the year through the purchase of government bonds in Japan. During the European session, the USD / JPY pair reached the level of Y100.15.
Canadian Dollar: The USD / CAD rate fell sharply approaching towards a session low, which was associated with the announcement of the rate decision and the publication of the accompanying statements of the Bank of Canada. The decision was on leaving the basic interest rate of the Bank of Canada at 1.00% which absolutely matched the 1.00% forecasted.
Australian dollar: The Australian dollar moved up again after the Reserve Bank of Australia left interest rates unchanged and on the market again dominated sentiment that the regulator could complete the cycle of decline.
The Australian dollar rose after the rate decision and the statement by the RBA on keeping the interest rate at a record low - 2.5 %. According to the bank, to boost the economy of the country will require longer maintain the low rate, as slowing growth in China have a negative impact on the value of commodities and does not stimulate the flow of investment in the mining industry of Australia. The Australian dollar significantly grew against its U.S. counterpart, responding thus to the GDP report, which were published by the Australian Bureau of Statistics. At the end of the second quarter the Australia's economy grew in quarterly terms by 0.6% which is fully in line with the experts, and followed the same growth in the last two quarters. Meanwhile, it became known that the annualized growth of 2.6 %. According to the average forecast of economists an increase was at by 2.5 %.
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