The first day of the previous week did not show any interesting movements of the currency pairs, since American and Canadian investors were not participating in trading due to the Labor day celebrations the financial markets of the US and Canada. At the same time expectations for the release of the positive Euro-zone fundamentals supported the euro during the morning trading on Monday. The first day of the previous week did not show any interesting movements of the currency pairs, since American and Canadian investors were not participating in trading due to the Labor day celebrations the financial markets of the US and Canada. At the same time expectations for the release of the positive Euro-zone fundamentals supported the euro during the morning trading on Monday. In particular, it is forecasted that the German factory orders will show growth for 0.5% for July. And the EUR/USD rate reached the $1.2920 mark. The sterling also managed to show maximums at the level of $1.5490. The UK 3Q growth in manufacturing production demonstrated record-breaking increase. The BRC August retail sales monitor showed increase from its previous level. It should be mentioned that the credit agency S&P confirmed the credit rating of Australia at the AAA level, and pointed out that the financial consolidation would continue during 2011.
A new wave of concerns over the former European bank stress test results pressured the euro on Tuesday. The Association of German banks stated that 10 leading banks might need additional capital in order to comply with new norms and regulations. As a result, the euro dropped against major currencies. Morning trading showed EUR/USD minimums at the level of $1,2760. The German factory orders for July decreased for 2.2%, when experts predicted increase for 0.5%. This factor reflected in an additional decrease of the EUR/USD pair to the $1.2734 range. The potential for European defaults alarmed the market participants again.
According to the expectations, the Bank of Japan left the principal rate unchanged at the level of 0.1% on Tuesday. Following the decision statement read, that the Japanese economy showed signs of moderate rehabilitation, and the monetary policy would continue to be soft. The yen showed stabilization against its major competitors. The USD/JPY pair showed minimums at Y83.70.
According to the forecasts, on Tuesday the Reserve bank of Australia left the principal rate unchanged at the level of 4.50% for the fourth consecutive meeting. The following statement read, that the global economy forecast stayed uncertain. Therefore, the Australian dollar dropped against competitors.
On Wednesday the euro continued to be under pressure of the former European banks stress test results. The EUR/USD pair traded in the range of $1,2680, and showed minimums at $1,2660 mark. Member of the ECB board of directors, Axel Weber, stated today, that the double-dip recession or deflation were not expected, but it was too “early to say that the crisis was over as the future outlook remained uncertain”. At the same time sterling managed to grow against its competitors after the publication of the positive data. The monthly Halifax House prices for August showed increase for 0.2% compared to the expected decrease for 0.5%. Manufacturing production growth for July stayed within its forecasts of the 0.3%. The GBP/USD reached maximums at the $1,5490 mark.
At the same time the yen continued to demonstrate increase against the US dollar, and renewed its 15-year maximum as the new wave of speculations over the US economy slow-down reinforced. The USD/JPY dropped to the range of Y83.30. But the speculations regarding the possible intervention of the Bank of Japan, pressured the yen, and the national currency stepped back from the reached positions.
According to the expectations, the Bank of Canada increased the principal rate to 1.00% on Wednesday, and the Canadian dollar demonstrated growth.
At the same time the release of the Beige Book report showed, that the US economic activity demonstrated slow-down signs, manufacturing industry continued to grow, but its growth rate decreased.
On Thursday the euro was pressured after the announcement of the Member of the ECB’s Executive Board, Jürgen Stark, who mentioned that some of the German banks needed additional capital. This statement also supported the released information from this week, that 10 largest German banks needed additional capital to comply with new norms and conditions. The EUR/USD rate dropped to the range of $1.2670. The sterling also dropped to the $1,5400 mark during the morning trading. The Bank of England interest rate decision met its expectations at 0.50%, and continued to maintain its asset purchase target at GBP 200B. Therefore, the sterling did not demonstrate much reaction to these releases.
Australian dollar was supported by the released economic docket on Thursday, which showed the decrease of the Australian unemployment rate on August to 5.1% from 5.3% on previous month and forecasted level of 5.2%. As a result, the Australian dollar hit its 4-month maximum against the US dollar. The expectations over the possible increase of the principal rate reinforced.
The released US fundamentals on Thursday turned out to be better, than their forecasts. Therefore, the American session demonstrated stabilization of the high-yielding assets over the save-haven currencies. In particular, the US initial jobless claims decreased to 451K against the expectations of 470K. And the special report showed the decreased US trade balance deficit to $42.8 billion against the expected deficit of $47.0 billion.
On Friday the positive trading attitude was a result of the released trade surplus of China, which weakened the save-haven currencies.