is4profit Weekly Currency Roundup (9th November 2012)
The Euro began the week at a two-month low against the US Dollar and slumped to a one-month low against the Pound due to renewed uncertainty over the Euro crisis as Greece faced an important parliamentary vote. Greek Prime Minister Antonis Samaras vowed that the proposed wage and pension cuts in his country will be the last.
In midweek the Euro made gains against the US Dollar and the Pound due to increased demand for riskier currencies after President Obama won the US election.
The Euro then took heavy losses on Thursday due to investor fears over the Greek parliament’s ability to implement a new round of austerity measures and worries that the US will implement strict budget cuts in the near future. It fell to a two-month low against the US Dollar after European Union finance ministers announced that they will delay for ‘weeks’ the decision to give Greece its next round of aid. The currency also wasn’t helped after European Central Bank President Mario Draghi said that he expects economic growth to remain weak.
The ‘Greenback’ suffered losses against the Japanese Yen ahead of the US Presidential election. Uncertainty over the result caused investors to seek shelter in the safe-haven Yen.
Against the Euro the Dollar continued to make gains as the markets grew concerned over the Euro crisis and the potential threat of Greece being forced to abandon the Euro.
The Dollar reversed its gains against the Euro and weakened against the Pound after Obama defeated his rival Mitt Romney. The outcome of the election has been met with a sigh of relief from most quarters and as a result the demand for riskier assets increased dragging on the Dollar further.
On Friday the US Dollar made gains against the Pound and Euro due to fears that the Euro crisis has deepened after the European Union took the decision to delay granting more aid to Greece. The announcement caused investors to flock to the safer USD as risk appetite declined.
Against the Dollar, Sterling slipped below the 1.60 mark due to a resurgent American currency ahead of the US Presidential election. The Pound then rose to a two day gain against the US Dollar as the Bank of England prepared to begin its meeting to decide whether to introduce more monetary stimulus into the UK economy. Sterling also benefited from the increased demand for riskier assets as a result of the US Presidential elections.
The Pound then hit a five-week high against the Euro due to the Bank of England deciding to leave the interest rate and the size of its bond-buying programme unchanged. The decision had been expected by investors after the UK posted its stronger-than-expected growth figures for the third quarter. The Pound is set to make further gains as the markets digest the news that the European Union has opted to delay granting the vitally-needed bailout to Greece.
The Yen began the week trading upwards against the US Dollar as the world grew concerned over the outcome of the US election. With Obama’s victory it then weakened as investors sought riskier assets.
At the end of the week the currency weakened against the majority of its peers ahead of next week’s GDP data. It is expected to have shrunk adding to signs that the world’s third largest economy is falling behind the USA and China.
The Australian Dollar began the week climbing to its highest level since September after the Reserve Bank unexpectedly kept its benchmark interest rate unchanged at 3.25%. As a result of the decision the Australian currency strengthened against all of its 16 major counterparts. The currency then went on to rise to a fresh six-week high against the US Dollar due to speculation that Barack Obama’s re-election will boost the prospect of the US Federal Reserve introducing further monetary stimulus. Such a move would weaken the ‘Greenback’ and increase demand for riskier commodity based currencies.
The ‘Aussie’ went on to touch a seven-week high against the New Zealand Dollar as employment gains in Australia exceeded expectations. As a result of the good news, investors reduced their bets that the Reserve Bank of Australia will cut borrowing costs next month. The number of people employed increased by 10,700 last month, causing the nation’s unemployment rate to decrease to 5.4%.
On Friday it made gains and reversed some of its losses after Australia’s biggest trade partner, China, posted new data showing that industrial production and retail sales showed better-than-expected results.
New Zealand Dollar
The ‘Kiwi ‘began the week down against its Australian counterpart after the Reserve Bank of Australia kept interest rates on hold. The currency was prevented from sliding further by the release of the country’s latest jobs data. Employment figures for September were in line with expectations.
At the end of the week it slumped against the majority of its most traded peers after the country saw its unemployment rate rise to a 13-year high, adding to evidence that the nation’s economy is faltering. The jobless rate soared to 7.3% from 6.8% in the second quarter, the highest increase since 1999.
On Friday the ‘Kiwi’ followed its Australian cousin on trading upwards on the back of improved Chinese data.
The ‘Loonie’ began the week outperforming all other major currencies after data showed an improving picture for the US economy but then it declined from its strongest level in almost a week as investor appetite for riskier assets waned over concerns over Greece’s fiscal struggle worsening the Euro crisis and as the outcome of the US election dented confidence.
Mid-week, CAD turned downwards against the US Dollar as relief over Barrack Obama’s election victory turned sour as investors realised that the re-elected President could face a difficult task to stop economically damaging tax hikes coming into effect at the end of the year. The ‘Loonie’ then declined against the US Dollar, falling below parity for the first time in a week. The decline comes as the markets were spooked by the European Union’s decision to delay granting Greece its next round of bailout funds.
This currency update is provided by TorFX – FSA Authorised Currency Brokerage. For more information and to request a free quote, visit www.torfx.com