Currency market weekly review (September 16 - September 20, 2013)
Euro: The important economic releases in this period have not been published, and the dynamics of the EUR / USD pair was strongly depended on news background around the U.S. currency. The European currency took full advantage of the weakening of the dollar and went to resistance at 1.3575 closing strongly by the end of the week at $1.3530 level.
Monday: During the European session the EUR / USD pair rose to $ 1.3375 level. The impact on the trading dynamics of the asset had Mr. Draghi speech and data for the euro area. The European Central Bank President Mario Draghi confirmed again the benchmark for future policy of ECB, saying that interest rates will be remained at current or lower levels for an extended period, as the economy is still fragile. The consumer price data showed that on an annualized basis the index in August rose by 1.3 % matching the preliminary estimates, while slowing the pace of its growth compared to July, when the value of this index increased by 1, 6%. As for the monthly inflation, it was at 0.1% in August, which completely corresponded to experts estimates.
Tuesday: The euro rose against almost all its competitors due to the anticipation of the announcement of the outcome of meetings of the Open Market Committee of the Federal Reserve of U.S., which begins and will end tomorrow. According to the median forecast of economists, the majority of the voting committee may decide to reduce the amount of monthly purchases of bonds to $ 75 billion to $ 85 billion. The Statistical Office Eurostat reported that the seasonally adjusted trade surplus of the euro zone fell in July to a level of €11.1 billion, compared with a revised downward from the previous month at €13.5 billion. According to the average of experts surplus in trade in goods would have increased to 15.3 billion from €14.9 billion, which was originally reported. In addition, the data showed that exports in July totaled €155.9 billion, down 1.6% from June, while imports reached €144.8 billion, which is 0.1 % less than in the previous month. The EUR / USD pair rose to $ 1.3369 during the European session.
The data published institute ZEW of German showed that the index of sentiment in the business environment has grown significantly in the month of September, registering with the second monthly increase and exceeded the estimates of many experts. According to a report this month, the indicator of economic sentiment for Germany's business climate rose to 49.6, up from 42 in August. Meanwhile, studies have shown that the current conditions index also rose, registering the third consecutive monthly gain. The value of this index in September rose to the level of 30.6, up from 18.3 last month. It was the best figure since June last year. The currency received slight support on this data.
Wednesday: The course of trade of euro area did not even consider the data, which showed that by the end of July construction output in the euro zone rose again, although recorded improvement at a slower pace than the previous month, yet showing fourth monthly increase in a row. Many of experts assumed that the sector continues to recover from an unusually cold winter. According to the report, the July construction output rose on a monthly basis from seasonally adjusted 0.3% to the level of 0.9 %.The EUR / USD pair did not reacted on these news and continued trading in a narrow range as many market participants awaited the decision of the FOMC meeting.
US Dollar: After Lawrence Summers withdrew his candidacy from the race for the post of head of the Fed in favor of Janet Yelen and Open Market Committee Federal Reserve surprisingly upheld a program of quantitative easing the U.S. dollar came under heavy pressure. The remain candidate for the head of the Fed Janet Yelen is a supporter of the progressive reduction of monetary stimulus and considers it appropriate to maintain low interest rates over extended period of time after QE3.
Monday: The dollar fell to a two-week low against the euro after former U.S. Treasury Secretary Larry Summers has withdrawn his candidacy for the post of chairman of the Federal Reserve System. In a letter to Barack Obama, he wrote that he wanted to avoid unnecessary conflicts.
The U.S. dollar rose against other major currencies against the background of mixed statistics, which were presented by the Federal Reserve Bank of New York. According to the reports, in September, the index of manufacturing activity from the Federal Reserve Bank of New York fell to 6.29 , compared to 8.24 in August. According to the average forecast of economists, the value of production index would have grown to the level of 9.2. The fall was due to the deterioration of the employment situation. The industrial output rose moderately at the end of last month, which was another sign of recovery of the manufacturing sector. The seasonally adjusted volume of industrial production increased in August by 0.4 %, which was followed after zero growth in July, while the level of use of the existing production capacity increased by 0.2 percentage points - to the level of 77.8 %. However, the growth of industrial production was slightly below forecasts of experts - at the level of 0.5 %.
Tuesday: The data published on U.S. inflation demonstrated that the consumer prices at the end of last month rose less than expected, continuing with a series of "soft" reports on inflation, which will affect the decision of the Federal Reserve officials on future policy. According to the report, the August consumer price index rose by 0.1 %, compared with an increase of 0.2 % in the previous month. Core CPI, which excludes food prices and energy costs, also rose by 0.1 % added that the CPI was slightly below forecasts of experts - at the level of 0.2 %, while the growth of the underlying index confirmed their expectations. In addition, it was reported that on an annual basis, consumer prices rose in August by 1.5 %, which was followed after increasing by 2.0 % a month earlier. Meanwhile, the core consumer price index rose by 1.8 %, compared with growth of 1.7 % in July.
Wednesday: The dollar was kept tight, as many market participants were waiting for the announcement of the results of the two-day meeting of the FOMC. Many forecasts anticipate that the U.S. Federal Reserve is expected to begin a retreat from the ultra - loose monetary policy through the small decline in bond purchases, while stressing that interest rates will remain at a level close to zero for a long time. Most economists expect the Fed will roll monthly purchase by a modest $ 10 billion to total $ 75 billion, which would signal the beginning of the end of an unprecedented monetary expansion.
The U.S. Fed's decision on interest rates was on keeping the interest rate at 0.25 % with 0.25 % forecasted and leaving the buying bonds without any change. The FRS upheld thresholds for unemployment and inflation. In its statement it reads that the continuation of bond purchases at 85 billion dollars a month will contribute to stronger economic improvement. The U.S. Dollar sharply fell against the Pound, to its lowest level since January and against the euro, the lowest level since February.
Thursday: The U.S. dollar index fell to its a seven-month low to 80 mark, after the Federal Reserve decided to leave interest rates at the current level of 0.25 %, and keep the size of the monthly program of asset purchases at the previous level of $ 85 billion. The authorities found it necessary to wait for the new signs of steady improvement in the economy.
The U.S. dollar rose slightly against its competitors after data on the labor market and U.S. housing, which were announced by the Department of Labor, showed that at the end of last week, the week ending September 14, the number of American workers who first applied for unemployment benefits rose slightly, increasing by 15K people, and reaching a level of 309K. The result was significantly better than the forecasts of experts who had expected growth to 323K from 292K, which was originally reported last month.
British Pound: After the minutes of the last meeting of the Monetary Policy Committee the British pound has once again strengthened its position. The results have recorded the complete unanimity of its members on avoiding increasing of the program of quantitative easing.
Monday: The pound rose sharply against its competitors, also responding to the gathering of the race of the candidates for the post of head of the Fed. The trading dynamics were also affected by information from Rightmove. As it became known, the agency Rightmove expects housing prices in the country will grow by 6% this year, which is much faster than the earlier forecast of 4 percent growth. The Rightmove also raised its forecast for UK house prices, which was primarily due to the fact that demand continues to exceed supply, amid concerns that the new scheme the government to increase the activity in the housing market will fuel the real estate "bubble". However, the house prices fell by 1.5% on a monthly basis in September which was a part of the summer traffic; the market continued to record a fall in prices. The GBP / USD pair rose to $ 1.5960, and then retreated to $ 1.5910 during the European session.
Tuesday: The pound was slightly under pressure due to weak results of important macroeconomic reports. It is learned from the Office for National Statistics, at the end of last month, the growth of annual inflation slowed again, registering the second monthly decline in a row. According to the report, in the month of August consumer price index in UK rose by 2.7 % per annum, compared with an increase of 2.8 % in July, which was confirmed the experts' forecasts. In addition, it was reported that on a monthly basis the consumer price index rose 0.4 %, after the previous month. Meanwhile, the core inflation, which excludes the cost of energy, food, alcoholic beverages and tobacco products, remained unchanged in August - at the level of 2 %, confounding economists' expectations for a moderate increase to 2.1 %. Another report from the Office for National Statistics showed that producer prices rose in August by 1.6 % per annum, compared with an increase of 2.1% a month earlier. Experts estimate the growth of this index was up 1.8%. In monthly terms, wholesale prices rose by 0.1 %, which followed a 0.2 percent increase in July. It was assumed that the growth will be 0.2 %. The pound rose slightly against the dollar; the GBP / USD pair rose to $ 1.5940, and then fell to $ 1.5878 which was accompanied by a release of weak data for UK.
Wednesday: This month, members of the Committee of the Bank of England voted unanimously to maintain the policy unchanged. The pound rose significantly against the dollar, which was associated with the publication of the protocol of the Bank of England. The ”minutes” meeting, which was held on September 3-4, showed that “no member believed that additional incentives would be appropriate at the present time." In the report, published , was revealed that the politicians have voted " 9-0 " for the conservation program of bond purchases at around 375 billion pounds (598 billion dollars) and for keeping interest rates unchanged at a record low of 0.5%. The GBP / USD pair rose to $ 1.5980 during the European session.
Thursday: The pound fell markedly against the dollar, which in the first place was due to the publication from the Office for National Statistics of the weak performance on Britain. As it was shown by data, at the end of last month the amount of UK retail sales unexpectedly contracted due to marked decline in sales in food stores. According to the report, in a monthly basis, retail sales including automotive fuel, fell last month to 0.9%, while experts averaged this value by growth by 0.5%. Also, the data showed that sales excluding automotive fuel fell 1 percent after rising by 1.2% in July, while economists forecasted that they will remain unchanged.
Japanese Yen: The Japanese yen use the attempt to strengthen against the dollar after the Fed decision, however, the intention of the Bank of Japan's monetary base to double in the next two years outweigh the negativity against the dollar the market began to actively get rid of USD/JPY pair sellers.
Monday: The yen fell against its competitors after the Syrian Minister of National Reconciliation Mr. Heidar Ali said that Damascus pleased with the agreement reached by U.S. Secretary of State John Kerry and the Minister of Foreign Affairs of Russia Sergey Lavrov on the subject of chemical weapons in Syria. The USD / JPY pair fell to Y98.68 level then was able to Y99.16 area.
Wednesday: The yen weakened against most major currencies, against the background of Japanese stocks, which led to a drop in demand for safe-haven assets. The USD / JPY pair fell Y9.77, then rebounded to Y99.00 area.
Thursday: After the Ministry of Finance of Japan stated at the publication of the Government's report on the trade balance of the country that the trade deficit decreased to ?960 billion y ($ 9.8 billion) in August, while analysts expected a rise in the deficit to ?1,100 billion the yen continued to fall against all major currencies after. The USD / JPY pair rose to Y99.0 area.
New Zealand Dollar: The New Zealand dollar rose after a report published gross domestic product report for the second quarter showed an increase by 2.5 %, exceeding the average forecast of analysts, who expected to see growth of 2.3%.
Swiss franc: The Swiss franc rose slightly against the dollar amid the release of economic forecasts SECO. The State Secretariat for Economic Affairs (SECO) on Thursday cited the increase in domestic demand and raised its economic forecast for Switzerland for 2013 and 2014.
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