is4profit Weekly Currency Report (25th January 2013)
World currency market news for the 25th January 2013
The Euro had a strong week as it traded upwards against the Pound made gains against most of its currency rivals. The start of the week saw European finance ministers authorising the disbursement of the next round of emergency aid for Greece. The move boosted confidence in the Greek government and has increased optimism in the Euro-zone.
Midweek the Euro made gains against most of its rivals after positive British employment data led to risk taking in the marketplace.
On Friday the currency hit an eleven-month high against the US Dollar and a twelve month high against the Pound.
The ‘Greenback’ saw relatively little movement at the start of the week due to a lack of significant US economic data and international news.
It then took losses against most of its higher yielding rivals due to the release of better-than-expected British unemployment data. The data led to risk taking on the markets which gave a boost to perceived riskier currencies.
On Friday the currency made significant gains against the Pound due to the release of disappointing UK BBA mortgage approval figures and a contraction in the UK’s GDP.
The Pound had a bad week as it weakened against the US Dollar despite economists forecasting that the UK’s budget deficit shrank in December.
British Prime Minister David Cameron has delivered his keynote speech on the UK’s continuing membership of the European Union, promising to give the British people a referendum on the issue during the next parliament in 2015. The speech will no doubt cause volatility in the markets, it is expected that the Pound could weaken further as a result.
On Friday the Pound weakened further against its major peers after the latest GDP figures released by the Office for National Statistics showed that the UK economy has contracted by 0.3% in the October to December quarter of 2012. The currency is expected to take further losses over the course of next week as the markets digest the disappointing news. The prospect of triple-dip recession is now very real.
The Yen is continuing to weaken as the Bank of Japan’s monetary easing programme begins to take effect.
On Thursday the Japanese currency tumbled to a two and a half year low against the US Dollar and yearly losses against the Pound and Euro.
Japan also posted a record high trade deficit for 2012 with the trade gap increasing to 6.9 trillion Yen as Japanese exports to Europe and China fell dramatically.
The ‘Aussie’ strengthened against the US Dollar after the Bank of Japan revealed that it would expand its monetary stimulus further, boosting the prospects for global growth. It then weakened, halting two days of gains after data showed that consumer prices rose less than expected during the last quarter of 2012. Midweek the ‘Aussie’ weakened against most of its 16 most-traded rivals due to a decline in commodities. The fall came after the International Monetary Fund lowered its estimate for global economic growth. Australia’s latest consumer price index showed an increase of 0.2%, less than the 0.4% forecast by economists.
On Friday the currency strengthened for a second day against the Japanese Yen due to speculation that pressure will increase on the Bank of Japan to expand its stimulus after consumer prices fell. The currency continued to weaken against the US Dollar despite positive news emerging out of China.
On Monday the ‘Kiwi’ followed its Australian Dollar in trading upwards against the US Dollar. The rise came after the Bank of Japan announced a doubling of its inflation target to 2% and as it implemented a new round of quantitative easing.
It then weakened against the US Dollar due to the currency tracking the Australian Dollar lower after Australia’s fourth-quarter inflation reading rose by only 2.2%. Economists had been expecting a rise of 2.4%.
On Thursday the currency strengthened against most of its peers after the small nations manufacturing PMI increased to 50.1, signalling growth. The New Zealand currency was also boosted by news that Chinese manufacturing expanded at its fastest pace in two years which led to a brightening in the outlook for commodity based currencies.
On Friday it was trading down against the US Dollar due to a lack of support to push the currency higher. The currency’s strength was also weakened by a food scare. Fears are growing that the nation’s milk exports may be affected as dicyandiamide was found in some milk products.
At the start of the week the Canadian Dollar fell to its lowest level in three-weeks against the US Dollar due to traders trimming their bets that the Bank of Japan’s monetary easing policy would not achieve its desired weakening effect. As a result the currency weakened against the majority of its most traded peers.
Mid-week it weakened to its lowest level in a year against its US relation as economists predicted that the Bank of Canada will maintain its current benchmark interest rate at one per cent. The currency was also weakened after a report showed that Canadian retail slows slowed in November.
By the end of the week the Canadian Dollar is trading close to parity with its US relation after the Bank of Canada said that the need to raise interest rates is not urgent. The currency had slumped to a two-month low after the Bank cut its prediction for growth to 2% instead of the October prediction of 2.3%.
It then fell to a ten-week low against its US relation as the Bank of Canada reduced its forecast for growth and put less emphasis on raising interest rates. The currency pair is trading below parity for a second day in a row.
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