is4profit Weekly Currency Roundup (7th September 2012)
The first week back to work for many and the children are back at school. So how have the major world currencies been performing this week?
The Euro began the week trading relatively steady as the markets awaited the outcome of the European Central Bank’s meeting on Thursday. Traders remained cautious as they took a wait-and-see approach to the single currency. The Euro then made gains against most of its major peers almost reaching a two-month high against the US Dollar. The gains came after ECB President Mario Draghi’s plans to buy the bonds of debt ridden member nation’s bolstered confidence in the single currency.
On Thursday the Euro came close to an eight-week high as the markets geared up for the release of the European Central Banks new bond buying scheme. After the ECB conference the Euro rose broadly due to Spanish 10-year bond yields falling below 6% for the first time since May. The new plan will see the Bank lower borrowing costs for indebted Eurozone countries.
ECB chief Mario Draghi said that the Bank would undertake unlimited, short-dated bond purchases under strict conditions to ease funding pressures on governments that sought help. He added that the ECB would not expect better treatment than other creditors in the case of default.
The Dollar began the week trading down against the Pound and Euro following the aftermath of the Federal Reserve speech last Friday. The Dollar also slid against the Japanese Yen ahead of this week’s data releases. Many traders were predicting that if the job figures came in particularly low then the chances of the Federal Reserve implementing further quantitative easing will increase.
As the week progressed the Dollar also continued to slide against the Japanese Yen, posting its fourth day of slides against the currency. The US Dollar weakened against most of its peers due to the demand in riskier assets increasing ahead of the European Central Bank’s bond buying announcement. Against the Pound the currency pair is slowly edging upwards towards the important barrier of 1.600.
Friday saw the ‘Greenback’ weaken against the perceived riskier currencies following yesterday’s European Central Bank announcement of its new bond buying intervention plan. The losses were limited however, by a succession of strong economic data out of the world’s largest economy.
At the start of the week the Pound first pared gains against the Dollar, before hitting a session high of $1.5896 as the market digested Ben Bernanke’s speech on Friday. The Euro rose to a three-week high against Sterling after demand for the single currency increased ahead of the European Central Bank meeting on Thursday.
The Pound rose toward a three-month high against the US Dollar, and most of its counterparts due to the UKs latest PMI report showed that the country’s manufacturing sector shrank less than economists predicted.
The Pound rose to a 3½ month high against the US Dollar mid-week as the markets prepared for the European Central Bank’s announcement on its bond buying programme later today. The Eurozone is the UK’s biggest trading partner and any easing of the debt crisis is positive for the Pound and UK economy.
On Friday the Pound has inched higher against the Euro last night before retreating slightly this morning. The rise came after traders and investors learned little that they were not expecting from the European Central Bank’s meeting yesterday. The Bank of England also stuck to market expectations by keeping its interest rates at 0.5%. Against the US Dollar the Pound has followed the upward trend of riskier currencies, rising to a 3½ month high. With the ECB meeting out of the way it is expected that investors will now go back to focusing on UK data.
The Yen began the week trading up against the US Dollar as the markets awaited the results of some key economic data. The Yen weakened as the week progressed due to increasing demand for riskier currencies as optimism dragged down on the safe haven currencies. Friday saw the Yen drop further as fears grow that the feuding Japanese government could end up running out of money by as early as November.
The Australian Dollar dropped to a six-week low due to the release of worse-than-expected retail sales data and further evidence of a weakening Chinese economy. The ‘Aussie’ reversed some of its losses mid-week after the Australian Central Bank decided to leave interest rates unchanged at the 3.50% mark and delivered a policy statement that was far more upbeat about the state of the economy than many economists were expecting. The ‘Aussie’ then slumped to its lowest-level for six months as the nation’s economic growth slowed more-than-expected in the second quarter. On Friday the ‘Aussie’ was trading upwards after the country’s jobless rate made an unexpected decline in August.
New Zealand Dollar
The ‘Kiwi’ made gains against its Australian cousin due to the release of dwindling retail sales figures and the slowdown of the Chinese economy. The currency then slipped against its Australian relation after the Australian Central Bank decided to maintain its current interest rate level. Falling demand for commodities such as iron ore and dairy goods also caused a drag on the New Zealand currency.
On Friday the ‘Kiwi’ is held its ground and traded up against the US Dollar. The news out of the ECB saw the perceived riskier currencies post gains against the American currency.
The ‘Loonie’ posted its biggest monthly gain against its US relation on Monday after the nation’s economy posted better-than-expected GDP figures. The Canadian Dollar was also boosted by its biggest export of crude oil, hitting its highest price since last October. Last Friday’s Federal Reserve speech also boosted confidence in the country as Canada’s biggest trade partner the United States outlined firm action to improve the economy.
The ‘Loonie’ is continued to make gains against the US Dollar as demand for riskier currencies continued to remain high due to optimism over Europe. The currency then shot up to a four-month high against its US relation due to the strong jobs data out of the world’s biggest economy and the revelation of the ECB’s bond buying plans. Risk sentiment has soared as the markets become optimistic that the global recession has hit a turning point.
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