is4profit Weekly Currency Report (8th February 2013)
World currency market news for Friday the 8th of February 2013
After hitting 87.17 pence, and almost a 15-month high, against the British Pound the Euro began the week trading slightly lower on the expectation of UK manufacturing data showing improvement.
The Euro recorded further declines against its competitors as political issues erupted in Italy and Spain but was able to rebound following stronger-than-expected services PMI figures for the 17-nation currency bloc.
Despite disappointing German retail sales data the common currency posted significant gains against safe-haven assets the US Dollar and Japanese Yen on Tuesday as investors developed an appetite for risk.
However, by Wednesday concerns regarding the tone of the ECB announcement caused the Euro to drop by 0.5 per cent against the US Dollar, close to a week-low.
Although the ECB held rates at their previous level the Euro slump deepened on Thursday, and it lost ground against several of its most traded currency rivals. The common currency’s drop was largely in response to central Bank President Mario Draghi’s comments regarding the potential pitfalls of the Euro’s present strength.
The Euro continued to fall as the week came to a close, approaching a five-week low against the US Dollar.
Strong ISM manufacturing PMI allowed the US Dollar to bounce back before the close of trade on Friday after the safe haven currency fell in response to poor US non-farm payrolls data.
Although a lack of significant economic news for the US saw the ‘Greenback’ droop, political unease in the Eurozone pushed investors towards safe-haven assets, boosting the US Dollar.
This situation was rapidly reversed however as far better-than-forecast Eurozone services PMI data triggered a bout of risk-taking in the marketplace. The ‘Greenback’ declined against the Euro but was able to advance on the Japanese Yen as the latter currency broadly weakened.
By Wednesday investors were bracing themselves for the outcome of the ECB’s policy meeting and rate decision. Speculation surrounding the event deterred risk-taking and pushed the ‘Greenback’ higher as trade progressed.
After Thursday’s ECB meeting resulted in no rate change but a veiled warning regarding Euro exchange rate strength the common currency softened against all but two of its biggest rivals, shedding 0.9 per cent against the US Dollar.
On Friday the American trade deficit narrowed by more than expected and the US Dollar continued to trade higher against a broadly softening Euro. The ‘Greenback’ did post declines against the Japanese Yen however after the Asian currency gained by the most for nearly two years.
On Monday the Pound advanced on the Euro slightly but fell against the US Dollar as economists forecast that a UK services PMI report would reveal a second month of contraction.
By Tuesday UK services PMI had defied expectations and shown sector growth. As a result Sterling gained modestly on its European rival, aided by Italian and Spanish political issues, which caused the common currency to soften.
Before the close of trade on Tuesday the Pound was approaching a five-month low against the US Dollar as investors prepared for Thursday’s volatile BoE rate decision and the testimony of future BoE governor Mark Carney.
During his testimony Mark Carney was broadly expected to hint at the need for additional easing to boost the UK economy. However, Carney took a different approach and argued that flexible inflation targeting could be enough to give the British economy the boost it needs.
After his speech the Pound advanced on several of its most traded peers. By Friday Sterling was heading for its first weekly gain on the US Dollar for a month and its biggest weekly gain against the Euro for two years.
After broadly softening for much of the week, the Japanese Yen was able to post significant gains on Friday. The Japanese Finance Minister expressed concerns that the Yen had declined too extensively and too rapidly, and his comments saw the Asian currency soaring by the most for nearly two years against the US Dollar.
Although the Australian Dollar began the week strongly, brushing the highest level against the Japanese Yen for nearly four and a half months, the RBA rate decision and accompanying statement sent the ‘Aussie’ tumbling.
Losses were tempered by the Australian trade deficit narrowing and a better than expected housing report, but disappointing retail sales figures caused the currency to plummet to the lowest level against the ‘Greenback’ seen so far this year.
By Thursday the ‘Aussie’ was trading close to a 12-week low against the US Dollar as a result of uninspiring Australian employment data.
As the week came to an end the RBA’s decision to slash growth forecast’s initially caused ‘Aussie’ losses, but the South Pacific currency was able to rebound following far better-than-forecast Chinese import/export data.
At the beginning of the week the ‘Kiwi’ was trading close to a 16-month high against the US Dollar and a two and a half year high against its Australian counterpart.
After experiencing a slump on Tuesday an increase in the price of one of New Zealand’s main exports kept the nation’s currency trading higher against the Australian Dollar.
By mid-week worse-than-expected employment data for New Zealand caused the ‘Kiwi’ to slide against the majority of its most traded currency peers, but impressive Chinese import/export figures triggered a rebound before the close of trade on Friday.
On Monday the ‘Loonie’ traded lower against its US counterpart as political concerns in the Eurozone allowed the US Dollar to strengthen.
The Canadian Dollar also lost ground as a result of falling commodity prices and lacklustre US data.
As the week continued the ‘Loonie’ posted modest gains against its key competitors as a result of increasing crude-oil prices.
However, these advances were quickly shed as Canadian housing and employment data pointed to weakness in the nation’s economy.
By Friday afternoon the ‘Loonie’ was trading in the region of 0.9976 against the US Dollar.
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