During the beginning of the previous trading week the high-risk currencies experienced a considerable drop against the shelter-currencies. The results of the G20 meeting During the beginning of the previous trading week the high-risk currencies experienced a considerable drop against the shelter-currencies. The results of the G20 meeting, which discussed the necessity of reducing budget deficits twice by 2013, lead to the massive sales of the euro. Also the fact that ECB planed to refinance its 442 billion funding program this Thursday made the investors nervous. The released negative Euro-zone fundamentals on Tuesday decreased the euro rate to its minimums of $1.2150. In particular the Euro-zone consumer confidence indicator stayed at the previous level. At the same time the US dollar was higher against the EUR and the GBP. Apart from the euro related concerns, it was also due to the rather healthy and solid spending reports from the US. Personal spending picked up (+0.2% vs. +0.1%) and there was some income growth (+0.4% vs. +0.5%). For the first time in 10 months the savings rate jumped to +4.0%.
The AUD has fallen the most in the past three weeks mostly on concerns that the global economy maybe slowing. There was a rumor that the crisis maybe be back for a second round or second wave and this of course affected the growth of such high yield currencies like AUD.
The British sterling did not follow the euro decrease, since it was saved by one of the members of the monetary policy of the Bank of England, who stated that the principal rates level should start growing.
Nevertheless, from the middle of the week the US dollar started to loose its former strength. The euro was supported by the announcements that the ECB granted credits for the amount of a bit less than 132 billion euro, the investors expected offered credits in the amount of 250 billion euro. At the same time the British pound dropped after the Nat’wide house prices index release, which showed growth only for 0.1%.
The following American fundamentals rendered temporary support to the USD. The Consumer Confidence Index fell sharply and unexpectedly since last month: 52.9 vs. 62.8. The inflation expectations index edged down to 5.2% from 5.3%. The labor market also declined. All this indicators provided another confirmation that the Fed would most likely keep the rates low for a long period.
On Thursday the euro and the sterling managed to strengthen against the US dollar. The released US economic indicators had a negative influence on the market participants’ expectations regarding the rehabilitation of the American economy. The initial jobless claims grew to the level of 472 thousand, and the ISM manufacturing index dropped to 56.2. As a result the EUR/USD pair grew to the $1.2530 mark. And the GBP/USD reached the $1.52 level.
By the end of the trading week the US dollar continued to drop. The US non-farm payroll figures could not support the American dollar either, since its level decreased for 125 thousand. Therefore, the EUR/USD pair closed the trading week at the level of $1.26, and the British pound reached the $1.52 mark.