is4profit Weekly Currency Roundup (17th August 2012)
So, what’s happened in the world of currency this week?
The Euro remained trading upwards against the US Dollar this week as optimism that action to curb the European debt crisis is coming close to fruition. The currency began the week by edging up 0.1% to $1.229 against the Dollar.
On Tuesday the Euro posted gains against many of its peers following the release of regional GDP data. The figures weren’t as bad as predicted with France posting 0% growth and Germany doing better than expected by posting 0.3% growth.
Despite the Euro zones powerhouse nation posting growth it will not be enough to prevent the currency bloc slipping into recession.
As the week wore on the Euro remained up against a basket of currencies after the Eurozone economy narrowly missed entering recession in the first half of the year but with austerity measures stifling growth prospects and the continuing debt crisis it is inevitable that the region will enter recession in the next quarter.
GDP across the Eurozone shrank by 0.2% in the second quarter after risk adverse consumers and businesses curbed their spending. Only a handful of the 17 Euro using nations posted growth whereas the rest either stagnated or contracted.
On Thursday the Euro hit a two-week low against the Pound following better-than-expected retail sales figures out of the UK, doubts were also beginning to seep in over the European Central Bank’s debt buying plan before German Chancellor Angela Merkel threw her support behind the proposals. As a result the Euro hit a six-week high against the Japanese Yen and made gains against all 16 of its major counterparts after Germany signalled its backing for the European Central Banks approach to resolving the Euro crisis.
The US Dollar began the week making gains against a basket of currencies as concerns over the state of the global economy weighed on economies across the world. The worries boosted demand for the safe haven currencies of the Dollar and Japanese Yen.
The ‘Greenback’ had maintained four days of gains against the Euro and was expected to continue to do so as GDP out of France and Germany was expected to be worse than predicted. This did not prove to be the case however, after traders and investors once more became optimistic over the ECB’s bond buying scheme.
GDP data out of the Eurozone for the single currency region is expected to show a contraction for the second quarter, raising optimism that the ECB will step in and act. By mid-week the Dollar made gains once again against the majority of its peers following the release of the nation’s retail sales figures. The data was better than predicted with sales rising by 0.8% in July the first increase in four months, as a result the Dollar soared to a one-month high against the Yen.
This combination of good news has saw expectations that the Federal Reserve will implement further monetary easing wane. At the end of the week the Dollar weakened as demand for riskier currencies rose following a speech by German Chancellor Angela Merkel in support of the embattled single currency. The Dollar also posted losses against the Pound following the positive retail sales data out of the UK.
The Pound began the week trading lower against a basket of currencies as concerns over the health of the UK economy weighed down on the Pound. The Pound fell further against the Euro ahead of Tuesdays release of data that showed that UK inflation slowed to a 2 ½ year low in July.
Sterling also weakened against 10 of its 16 peers following the revelation that UK house prices dropped to its lowest level for a year. Against the US Dollar the currency rose to a two-week high as demand for the safe-haven currency waned on the back of increasing optimism over the European Central Bank’s proposed bond buying scheme.
On Wednesday and Thursday the UK economy received some good news in the form of better-than expected unemployment and retail sales data. As a result the Pound made gains against 13 of its 16 peers. Economists said that the data added to evidence that Britain’s economy may have shrunk less in the second quarter than the 0.7% contraction previously estimated by the Office for National Statistics.
The Pound gained 0.4% to $1.5743 against the Dollar after weakening by as much as 0.3%. It jumped to as high as $1.574, its highest level since July 30th. Against the Euro, Sterling weakened 0.2 % to 78.50 pence, after reaching 78.13 pence, the strongest level since July 31.
The Japanese Yen has remained relatively steady this week despite the change in demand for safe haven currencies. The beginning of the week saw the Yen strengthen as worries crept in over the state of the Euro crisis but these gains were quickly reversed as optimism returned over the ECB’s debt buying plans.
As the week came to a close the US Dollar soared to a one-month high against the Japanese Yen after the US posted upbeat economic data. Data released showed that industrial output rose in July and home-builder sentiment reached its highest level in five years. The Yen is remaining in the region of 78.000 to 79.000 against the Dollar.
The ‘Aussie’ started the week struggling to make gains against the U.S Dollar after investors remained cautious over the state of the global economy. Disappointing economic data out of Asia caused demand for the riskier commodity based currencies to falter with Japan posting weaker than expected growth figures and China showing a slowdown in its trade.
Despite the concerns over the slowing global economy the Aussie remained close to its all-time high against the Euro. The ‘Aussie’ ended the week trading close to a 3-1/2 month high against the Japanese and trading up against most of its peers as demand for riskier commodity based currencies increased.
New Zealand Dollar
As usual the ‘Kiwi’ followed much the same pattern as its Australian neighbour. As the week progressed the New Zealand Dollar hit a three-week low against the US Dollar.
The New Zealand Dollar may extend its level of decline to a more than two-month low after descending from the top of its year-long contracting rang and is expected to make a 0.5% weekly decline
The Canadian Dollar remained it’s parity with the US Dollar and by the end of the week rose to its strongest level for three months.
Increased demand for commodity-based currency and the rise in value of the country’s biggest export of crude oil added to the gains.
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