is4profit Weekly Currency Roundup (19th October 2012)
The key focus for the Euro this week is the meeting of EU leaders in Brussels being held on the 18th and 19th.
At the start of the week the Euro fell for the first time in three days against the U.S. Dollar before making a recovery. It then dipped against 10 of its 16 major counterparts as investors took a wait-and-see approach over whether Spain will soon request a bailout.
The Euro strengthened to a one-month high against the Dollar after Spain kept its investment-grade credit rating from Moody’s. However the currency slumped slightly against both the ‘Greenback’ and the Pound as investors grew nervous over the outcome of the two-day EU heads of state summit in Brussels.
The Euro ended the week unmoved by the European summit. Some progress has been made towards creating a banking supervisor for the single currency but as expected very little has been mentioned about resolving the issues of debt-ridden Greece and Spain.
The ‘Greenback’ began the week trading lower against a basket of currencies due to promising economic data emerging out of China. The world’s second biggest economy posted stronger-than-expected export figures tempering concerns that the country’s economy is slowing down; the news stunted demand for the safe-haven Dollar.
The U.S. Dollar came close to reaching an eight-week high against the Japanese Yen but posted losses against the Pound and Euro.
The USD then weakened against the majority of its rival currencies as risk appetite continued to improve. Against the Yen the Dollar failed to breach the psychologically important barrier of 79.00 as demand for safe havens began to lessen.
The British Pound weakened for a third consecutive week against the U.S. Dollar due to a run of poor UK economic data and a broader strengthening of the North American currency. Bank of England meeting minutes, Jobless Claims Change data and Retail Sales growth figures were all released between Tuesday and Thursday.
Sterling then dropped to a four-month low against the single currency after the credit ratings agency Moody’s maintained Spain’s sovereign credit rating at the investment grade. The Pound depreciated 0.3% to 81.25 pence per Euro after reaching 81.38 pence the weakest level since June 15th.
In midweek Sterling was trading at its highest level for more than a week against the Dollar after receiving a boost from better-than-expected jobs data. According to the Office for National Statistics the number of people out of work fell by 50,000 to 2.53 million in the three months to August. The total number of people in work rose to 30 million causing the overall unemployment rate to fall to 7.9%, down from 8.1% in the previous three-month period.
Economists are predicting that the UK’s deficit narrowed to £13.5 billion in September compared to £14.4 billion in August.
The Japanese Yen has seen a week of declines against the U.S. Dollar as investors opted for the American currency as their safe-haven of choice.
In midweek the Dollar came close to posting an 8-week high the Yen.
Speculation is growing that the Bank of Japan could soon implement a new round of monetary stimulus to boost the country’s economy. As a result the Yen made losses against the Euro.
The ‘Aussie’ began the week hovering above a three-month low against the US Dollar following the currency’s decline at the end of last week. The currency held steady against the ‘Greenback’ due to the Reserve Bank of Australia (RBA) taking a more optimistic approach to the country’s economy than expected. Minutes of the RBA’s October 2nd policy meeting warned that economic growth is likely to be weaker over the next year as mining investment slows, but it still expects mining to contribute solidly to overall activity.
The Australian Dollar then climbed to its highest level for two-weeks against its US counterpart as confidence over the Eurozone situation improved.The Aussie Dollar rose as far as $1.0324, a high not seen since Oct 2nd.
Midweek it reached its highest level in two weeks after Chinese data showed signs that the world’s second largest economy is showing signs of stabilization. The news has caused the markets to be more optimistic over Australian exports and caused the ‘Aussie’ to rise against the Japanese Yen.
New Zealand Dollar
The ‘Kiwi’ started the week at a one-month low, as the markets were frustrated over Spain’s hesitation to seek a bailout. The currency was also weakened by the Australian Dollar’s slide to a three-month low and as concerns mount that the nation’s economy is slowing down.
The New Zealand Dollar has fallen against all of its major peers after data showed inflation slowed to its slowest pace in 12 years, boosting speculation that the country’s reserve bank will make interest rate cuts. Consumer prices rose by only 0.8% in the third quarter compared to the previous year, the lowest level since the fourth quarter of 1999.
The NZ Dollar ended the week heading for a drop against its Australian counterpart after poor local inflation data raised expectations that the country’s Central Bank may cut interest rates in a bid to revive the slowing economy.
The ‘Loonie’ started the week slightly up against its US relation due to China posting stronger-than expected trade and economic data. The currency was struggling to make any gains over the weekend as the markets were unsure over the state of the North American economy and the continuing uncertainty over Spain. The Canadian Dollar remains above parity with its US relation.
On Thursday the Canadian Dollar strengthened for the first time in four days against the ‘Greenback’ as declines in risk aversion caused demand for riskier commodity based currencies to increase.
Thursday’s late trading saw CAD fall by its biggest level for three-months against the US Dollar, erasing all of the gains it made. The declines come after the country’s finance minister, Jim Flaherty, said that the nation may have to revise down its economic outlook. The comments saw demand for the riskier commodity-based currency slump as confidence wavered.
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