Currency market weekly review (September 23 - September 27, 2013)
Euro: The Parliamentary elections in Germany won with clear advantage of the German Chancellor Angela Merkel did not bring any surprises to markets. However, the positive results of The Consumer confidence in Germany which rose to the highest post-crisis levels since June 2007 supported the euro currency all over the past week.
Monday: The euro exchange rate fell slightly against the dollar after the data on manufacturing activity in the euro area came out weaker than economists' expectations. However, the Purchasing Managers 'Index rose primarily due to improved activity in the services sector. The production index rose in September more than expected to a 27- month high of 52.1 compared with 51.5 in August, while the economists had expected a rise to 51.7. The index of purchasing managers in the services sector reached 52.1 compared with 50.7 in August. Activity in the services sector rose a second month in a row and expanded at the fastest pace since June 2011. Meanwhile, the index of manufacturing activity fell to 51.1 in September from 51.4 in August, yet industrial production increased for the third consecutive month. The EUR / USD pair fell to $ 1.350 area during the European session.
Tuesday: After data on business sentiment in Germany, which were weaker than expected the euro exchange rate fell slightly against the dollar. The Ifo survey showed that business climate index rose to 107.7 in September from a revised 107.6 in August, while many economists' expected it at the level of 108.4. Also, the Ifo business expectations index rose to 104.2 in September from 103.3 in the previous month, where accordingly to forecasts the index had to grow to 104 mark. The current conditions index fell slightly to 111.4 from 112 in August with forecast an increase to 112.6. The EUR / USD pair fell to $ 1.3470 during the European session.
Wednesday: The Consumer confidence in Germany rose to the highest post-crisis levels since June 2007. As it was revealed by the research group GfK, the GfK consumer climate index rose to 7.1 in October, while the index September’s was also revised up by 0.1 points to 7.0. The result was in line with analysts' forecasts. The component “willingness to buy " added 0.6 points to 45.0 points in September , and remains at the highest level since December 2006 . The economic expectations component rose by 8.9 points to 10.7. On the other hand, expectations of household income declined 3.5 points to 33.7 and fell to second month in a row after four consecutive periods of growth. The euro rose against the dollar to the level of $1.3520.
Thursday: The Euro fell against the dollar amid political instability in Italy. Italian President Napolitano unexpectedly canceled his participation in a conference in Rome due to “suddenly emerged political instability." In addition, the volume of lending to the private sector in the euro area fell again in August. This was a signal of the one of the key signs that showed that the sustained recovery in the euro area has not yet emerged. Data released on Thursday by the European Central Bank showed that the volume of lending to the private sector decreased by 2.0% compared to August of last year. The EUR / USD pair fell to $ 1.3480 during the European session.
US Dollar: After a significant decline in the previous week, the U.S. dollar started its correction during the period from 23 to 27 of September. The presented economic data did not change the fundamental picture as slightly negative figures on orders for durable goods were offset by another unexpected decline in applications for unemployment benefits, which achieved the lowest levels since 2007.
Monday: The dollar was higher against all currencies excluding the yen ahead of 's speech, the president Federal Reserve Bank of New York and Atlanta Fed Dudley Dennis Lockhart. Recall that last week, the Fed unexpectedly refrained from lowering monthly asset purchases, saying that more signs of sustainable recovery of the labor market. The little pressure on the U.S. dollar had data on the index of business activity in the industry. The index of manufacturing activity in the U.S. PMI Markit weakened to 52.8 versus 54.2 and 53.1 which was its previous result. The decrease was primarily due to a reduction in new orders, including export, as well as the deterioration of the employment situation.
Wednesday: The dollar declined significantly against the euro, which was associated with the release of data on Germany and the United States. The U.S. data showed that orders for manufactured durable goods showed a slight increase in August as demand for aircraft and military equipment declined. Another data revealed that the total orders for durable goods rose in August by 0.1 % to a seasonally adjusted $ 224.92 billion while economists forecasted that orders will remain unchanged from the previous month. Meanwhile, another report showed that sales of new U.S. homes rose in August by 7.9 % to a seasonally adjusted annual rate of 421K recovering from a big drop in July. The increase was due to increased sales of new buildings in three of the four regions. The sales rose at the fastest pace of growth since January, while economists had expected sales to rise to 422K, compared with the initial estimate of sales in July of $ 394,000. On Wednesday, the U.S. Commerce Department revised the July sales down to 390,000.
Thursday: The U.S. dollar strengthened strongly against its competitors which was associated with increased political uncertainty in Italy, as well as the release of important U.S. data. Also the course of trade was affected by U.S. data that showed that the gross domestic product, the broadest measure of all goods and services produced in the economy, rose by a seasonally adjusted 2.5 % in the second quarter, in line with the preliminary value voiced last month. The economists forecasted that the revised second quarter growth rate of 2.7%.Meanwhile, another report, which was submitted to the Department of Labor, showed that the number of Americans applying for first time unemployment benefits remained near six-year low last week, indicating improvement in the employment situation. The Initial jobless claims fell by a seasonally adjusted 5,000 to 305,000 in the week ended Sept. 21. Value was lower than the forecast of economists in 319,000 new claims. The Ministry of Labour has revised slightly upwards the number of complaints in the previous week to 310,000 from 309,000.
British Pound: Some pressure on the British pound had the data on the current account of balance of payments which formed some uncertainty about recovery strengthens. The GBP / USD pair in the absence of important news maintained a high correlation with the EUR/USD pair as usual. By the end of the week it demonstrated the intention to maintain a well-established uptrend adding about 0.8 %.
Tuesday: The British pound fell against the dollar after the data that showed that the approved applications for mortgage loans increased in August, both in quantity and in value terms in the UK. The data presented by the British Bankers Association (BBA) confirmed that the number of mortgages approved for house purchase rose to 38,228 which is the highest level since 2009. However, the August level was below the consensus of the forecast of 38650. In value terms, mortgage applications to purchase homes rose to 6 billion British pounds from 5.8 billion pounds in July. In addition, the data showed that the level of unsecured borrowing rose by 0.3% compared with a year earlier. As part of the annual growth of credit cards was 6.7 % surpassing the personal loans and overdrafts, which grew by 5.1%. The GBP / USD pair fell to $ 1.5956 during the European session.
Wednesday: The British pound rose against the dollar after data on retail sales in the UK. Accordingly the Confederation of British Industry (CBI), the retail sales in September rose to its highest rate in 15 months. The volume index of retail sales in September reached 34, the highest level since June 2012, when it was only 42. The result indicated that consumer confidence, which is an important part of the economy, continues to strengthen. The GBP/USD pair moved up to the level of $1.6060 during the European session.
Thursday: The British pound fell against the dollar after the final data showed that annual GDP in the second quarter was revised down. The released final data by Office of National Statistics (ONS) showed that the UK economy the expanded by 0.7% in the second quarter compared with the previous quarter, which was in line with the preliminary estimates. The GBP / USD pair fell to $ 1.6034 during the European session.
Japanese Yen: The Japanese yen came under pressure on speculation related to the tax benefits that the Japan government intends for acceleration of the pace of economic growth. The USD / JPY pair retreated to Y98.200 area after trying the strength of the resistance in the 99.155 area.
Monday: Against the background of the fact that the U.S. Treasuries rose and their yields fell on discussing the Fed's rate of economic growth, the yen rose against most major currencies. The yield on 10-year bonds fell by 1 basis point to 2.726 %. The yield on 30 -year bonds also fell by 1 basis point to 3.755 %, and 5 - year securities - 1.5 basis points to 1.469 %. The speeches by leaders of the Fed after the decision of keeping the asset purchase program again raised the question of when the Fed is ready to stop easy monetary policy.
Thursday: The yen fell against all major currencies after the news agency Kyodo News reported that the Japanese government is planning to commit to "immediately" begin a study on the effectiveness of corporate tax rates. The head of the investment department of the Government Pension Investment Fund of Japan (GRIF), which manages 121 trillion yen ($ 1.23 trillion), Takatoshi Ito said that the beginning of the Olympics -2020 Japan should raise the sales tax to a level of at least 20 % in order to prevent a “catastrophe “on its bond market. The USD / JPY pair rose to Y99.20 during the European session.
The currencies of Australia and New Zealand:
The currencies of Australia and New Zealand fell against most major currencies amid falling Asian stock indexes, departing from theirs the four-month high.
The Australian dollar rose after's publication of the preliminary data of the manufacturing index from HSBC PMI on China’s economy. This month the index rose to 51.2, from 50.1 in August, while analysts had expected growth of only 50.9.
The New Zealand dollar fell against all major currencies, after the official data released recorded the growth of the trade deficit of the country up to NZ $ 1,2 billion ($ 989 million) in August. The result was the worst in the last five years.
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