Market review for 22 – 26. 03, 2010

During the whole trading week the uncertainty of the Greek issue continued to have a major influence on the market dynamics. Thus, on Monday the absence of the specific bailout plan for Greece concerned the market again.

During the whole trading week the uncertainty of the Greek issue continued to have a major influence on the market dynamics. Thus, on Monday the absence of the specific bailout plan for Greece concerned the market again. The demand for the high-risk currencies started to drop. The German Chancellor Angela Merkel stated, that the EC summit, which will take place this week, is not planned to consider the issue of the financial help for Greece. During the second part of the day, against the background of the ECB President’s comments, the euro rate started to rehabilitate. Jean-Claude Trichet was strongly against the speculations regarding the possibility that any of the EC countries might leave the Euro-zone. Therefore, the EUR/USD pair dropped to its minimums around the level of $1,3490 and then rehabilitated to the $1,3540 mark.

On the same day due to the speculations, that the Dubai World company was planning to refer to its creditors with a request to extend the repayment terms, the sterling rate decreased. At the end of the trading day the sterling rate managed to rehabilitate following the euro. And the GBP/USD pair set its minimums in the range of $1,4930.
On Tuesday the uncertainty in the situation with Greece continued to pressure the euro rate. Conflicting opinions within Euro-zone, regarding the bailout plan for Greece, only strengthened this pressure. The ECB President, Mr. Trichet, opposed the Greek proposal regarding the low-interest loan. According to the speculations, the Euro-zone countries would probably decide to allow the IMF to render support to Greece. As a result, the EUR/USD pair showed its minimums in the range of $1,3475.
The positive US fundamentals were released on Tuesday. In particular, the Richmond Fed manufacturing index for March grew and reached the level of 6 against the forecast of 5. The existing home sales volume, and the house price index showed positive results. According to the experts’ opinion, the released data rendered temporary support to the American dollar competitors. The UK fundamentals, which were published on the same day, turned to be negative. The consumer price index in Great Britain turned out to be below the forecast: 0.4% against the expected 0.5%. The retail price index also demonstrated a decreased result: 0.6% against the forecast of 0.7%. The sterling reacted with a sharp drop. And the GBP/USD pair dropped to its minimum in the range of $1.4970.
The announcements, that the help for Greece from the IMF would undermine the stability and confidence in the European Community, had a strong pressure on the euro. Along with that, the absence of the bailout plan for Greece and the dissociation of the EC counties regarding this issue only complicated the situation. In addition to the above, the rating agency Fitch Ratings reduced the long-term credit ratings of Portugal. As a result, the euro rate collapsed against the US dollar, the yen and the pound. And the EUR/USD pair demonstrated its minimum at the level of $1.3305. Along with that, the negative fundamentals were published in the US. The durable goods orders volume resulted in an increase, but was below the forecast. The new home sales dropped for February: 308 thousand against the predicted 315 thousand.

On Thursday the euro temporarily interrupted its decrease, due to the published decision regarding the bailout plan for Greece. The Prime Minister of Luxemburg, Jean-Claude Juncker, announced that bilateral credits would be provided, as well as a number of financial instruments from the IMF. At the same time, the head of the ECB, Jean-Claude Trichet, was sharply against such decision. The EUR/USD pair rehabilitated to the level of $1.3370, but then dropped again to the $1,3265 mark.

The positive US fundamentals, which were released on Thursday as well, rendered additional support to the American dollar. The initial jobless claims dropped to 442 thousand against the forecast of 450 thousand. The sterling also demonstrated a temporary increase, as a result of the release of the positive UK fundamentals. In particular, the retail sales volume in Great Britain grew in February and turned out to be above the forecast. The GBP/USD pair grew and reached its maximums at the level of $1.5005, but the rate decreased again and dropped to $1,4796.

The report, which was released on Wednesday, showed oil inventories growth, and therefore pressured the oil rate. Some decrease of the US dollar rate rendered support to the oil rate, which rehabilitated to the $80.98 mark per barrel.

During the last day of the trading week, due to the reached agreement regarding the bailout plan for Greece, the euro rate showed some rehabilitation.

Against the background of the general US dollar strengthening, the USD/JPY pair reached its weekly maximum at the level of Y92,94. Its minimum was set at the Y90,05 mark.

The gold prices were also under pressure of the Euro-zone disagreements regarding the Greek issue. But by the end of the week, the gold rate managed to rehabilitate.

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