is4profit Weekly Currency Roundup (7th December 2012)
The Euro began the week trading at a one-month high against the US Dollar after German lawmakers finally agreed upon Greece’s latest rescue package. It then traded near to a 6-week high against the Dollar as optimism that the regions troubles can be resolved grew. Midweek the Euro made major gains due to the release of a better than expected Spanish unemployment change figure which boosted faith in the Euro-zones economic recovery. Against the US Dollar the single currency leapt to a six-week high and hit a one-month high against the Pound.
It then plummeted from a seven-week high against the US Dollar and fell against the majority of its 16 major peers ahead of the release of a report that showed how much the currency bloc’s economy has contracted adding to concerns that the Euro crisis is far from over.
On Friday the currency declined to its lowest level for a month after European Central Bank President Mario Draghi said that economic weakness will persist in the Eurozone and suggested that the Central Bank could make a further cut to the already record low interest rate. Against the Japanese Yen the currency dropped from a seven-month high and dipped to a two-week low against Sterling. Germany’s Bundesbank contributed to the weakening by downgrading its growth outlook for next year.
The ‘Greenback’ began the week trading bearishly against its riskier currency rivals. The release of a number of positive global economic indicators led to investors buying riskier assets. Deepening concerns over the negotiations on the ‘fiscal cliff’ caused the US Dollar to weaken against virtually all of its main currency rivals.
On Friday the USD made gains due to an increase in risk aversion. The European Central Bank slashed its growth forecasts for next year leading investors to seek safe-havens elsewhere. Dollar traders can expect heavy volatility following the release of the US Non-Farm Payrolls (NFP) figure later today. The NFP is widely considered the most significant event on the Forex calendar and its impact is typically felt throughout the marketplace. At the moment, analysts are forecasting that the indicator will come in around 90,000, which if true, would be substantially less than last month’s 171,000. Any worse than expected data is likely to lead to losses for the Dollar before markets close for the weekend.
The Pound started the week down for a third week, touching its lowest level in more than a month due to traders taking bets that European policy makers would make progress on stemming the Eurozone debt crisis. Against the Dollar the currency was little changed as the US posted a solid rise in GDP.
The Pound then traded at a one-month low against the Euro due to tracking the single currency’s gains against the US Dollar. Against the Dollar the Pound remained trading above a one-month high, edging upwards and above the important 1.60 mark.
Midweek the Pound was little changed against the US Dollar and the Euro due to the markets waiting to see the outcome of the latest Bank of England policy meeting. The Bank maintained its asset purchasing target at £375billion, and kept interest rates at the historically low-level of 0.5%. Sterling remained just above a one-month low against the Euro despite Chancellor George Osborne giving a gloomy autumn budget statement yesterday. On Friday Sterling rose for a third day against the Euro hitting its strongest level in two weeks. The rise came following the release of a report showing that UK industrial output advanced for the first time in three months in October.
The Yen took a bit of a bettering this week after the demand for safe havens varied widely over the seven days. On Monday the Yen was trading at its lowest level since April against the US Dollar. All week the currency was broadly weaker finding strength as investors grew nervous over the Eurozone and ‘fiscal cliff’. By Friday the Yen was holding steady but could suffer from volatility due to the upcoming Japanese elections.
The ‘Aussie’ made losses against all of its major counterparts after data showed that the nations retail sales took an unexpected dive, fanning expectations that the Reserve Bank would cut interest rates.
The currency made an increase against the US Dollar after the Reserve Bank of Australia cut interest rates by a quarter of a per cent to 3.0%. The nation’s interest rates are at their lowest level since September 2009. The Aussie Dollar then strengthened against most of its currency rivals despite the release of a number of disappointing economic data reports. Annual economic growth slowed to 3.1% due to a slowdown in the mining sector but GDP increased by 0.5% falling from 0.6% in the previous quarter.
On Friday the ‘Aussie’ was trading close to a two-month high after data showed that the nation’s construction industry contracted at a slower pace than expected.
New Zealand Dollar
The ‘Kiwi’ held steady ahead of the Reserve Bank meeting that decided any changes to the nation’s interest rate. Wheeler kept the rate at its current 2.5% level in his first full monetary policy review, while noting the deteriorating economic data in recent months. The ‘Kiwi’ is traded higher as a result. The ‘Kiwi’ then hit an eight-month high against the Japanese Yen after the New Zealand Central Bank decided to keep interest rates unchanged and predicted that economic growth will increase. Against the US Dollar the ‘Kiwi’ advanced for a fourth day.
This week the ‘Loonie’ strengthened against its US relation after the Bank of Canada kept interest rates on hold at 1%. Bank of Canada Governor Mark Carney, who recently said he will take the reins at the Bank of England next July, has been signalling a need to raise the main policy rate since April, making Canada the only industrialized economy to lean toward a rate increase. The currency is trading just above parity.
On Friday the Canadian dollar hit a one-month high against the US Dollar ahead of the release of data that economists expect will show that the nation created 10,000 jobs in November, up from a 1,800 gain in October. The currency remains vulnerable to the ongoing negotiations over the ‘fiscal cliff’ and any negative news is sure to impact the currency.
This currency update is provided by TorFX – FSA Authorised Currency Brokerage. For more information and to request a free quote, visit www.torfx.com