is4profit Weekly Currency Roundup (2nd November 2012)
The Euro had a relatively good week with it trading upwards against most of its major counterparts. However, at the beginning of the week the Euro got off to a pretty poor start as investors grew concerned ahead of Monday’s meeting between Italian Prime Minister Mario Monti and the Spanish premier Mariano Rajoy. The two leaders are in disagreement over how best to resolve their nations’ debt problems with neither leader willing to commit to a bailout. Their hesitation saw confidence in the Euro waver and frustration increase in the markets.
On Tuesday it changed its fortunes and made gains against the US Dollar and British Pound due to a slightly better-than-expected GDP result for Spain. The national GDP was predicted by economists to fall by 0.4%, instead it fell by 0.3%. Spain’s central government budget deficit narrowed in September and the nation’s GDP shrank by a smaller margin than was predicted. On Friday however, the Euro retreated as a weak result from a Eurozone PMI report damaged confidence in the currency.
This week, the Dollar saw a number of key economic indicators released but the headlines were dominated by hurricane Sandy, a storm that forced the closure of the New York Stock Exchange. Trading of the American currency was muted due to the impact of the hurricane; the biggest storm ever recorded to hit the USA. As a result of the lack of trades the Dollar slid against the majority of its peers.
By midweek the ‘Greenback’ was able to make a bullish recovery against the Euro as the US markets reopened for the first time in two days thanks to Hurricane Sandy. On Friday the Dollar had extended its gains against the Japanese Yen due to a batch of better-than-expected data. Against riskier assets however, the Dollar weakened as the good news created higher demand for riskier currencies such as the Canadian Dollar.
The Pound began the week weakened against the Euro and Dollar, after Bank of England deputy, Charles Bean warned against over-optimism following last week’s better-than-expected GDP growth figure of 1%. The warning has caused the markets to raise bets that the Bank of England could implement further monetary easing measures causing investors to seek safe havens in the US.
The Pound then dipped against the Dollar falling below the 1.61 mark but steadied later on due to Hurricane Sandy forcing the closure of the US stock exchange and causing investors to take a risk adverse approach to the normally regarded safe haven currency. The Pound then reversed some of its losses against the US Dollar after the latest retail sales figures for October bolstered the chances of a sustained economic recovery in the UK.
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 against 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 trading down against the US Dollar as the markets grew increasingly risk averse due to the Hurricane in the USA. This was reversed however once investors began to pare bets that the nation’s Central Bank will lower interest rates in the near future. As a result the currency strengthened against most of their major peers. Against the Japanese Yen the ‘Aussie’ weakened after the Bank of Japan expanded its asset-purchase fund by 11 trillion yen.
The ‘Aussie’ then reached its highest level for a month due to speculation that Fridays US jobs data will show that the world’s biggest economy is improving, supporting demand for riskier assets. The Australian Dollar is currently experiencing its longest ‘winning streak’ since August.
New Zealand Dollar
The ‘Kiwi’ followed its Australian relation for most of the week. The currency benefitted from improved building approvals and the improving outlook from China, with Building approvals in New Zealand increasing by 7.8 percent in September from August, economists had been predicting a 3% advance.
Midweek Trading was relatively thin this week after New York City was buffeted by Cyclone Sandy, which forced the closure of the stock exchange. At the end of the week the New Zealand currency was bolstered by yesterday’s upbeat Chinese manufacturing figures which showed that the nation’s industrial output increased for the first time in three months.
The ‘Loonie’ slumped below parity against its US counterpart for the first time since August as risk appetite waned. The currency fell for five days straight and was not helped by Hurricane Sandy battering the US East Coast and Canada’s South East. The currency also suffered due to the credit ratings agency Moody’s warning that it may cut the ratings of six Canadian-based lenders.
The Canadian Dollar then strengthened against the USD, ending its five-day losing streak after manufacturers’ prices rose for the first time since April due to Hurricane Sandy battering the Eastern United States.
On Thursday the ‘Loonie’ slumped to a three-month low against its US relation after Canada’s GDP took an unexpected dip for the first time in six months. The news caused investors to take a risk adverse approach to the currency and spurred bets that the Canadian Central Bank won’t raise interest rates in the near future.
The nation is facing the prospect of some grim data this month with a report due on the 2nd of November forecast to show that hiring slowed in October. On Friday it strengthened from the three-month low against its American relation as an unexpected increase in US manufacturing gave a boost to risk appetite. It gained versus the majority of its 16 most-traded peers after a private report said U.S. companies added more workers than forecast.
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