Weekly review for 20 – 24. 09, 2010

During the previous trading week the greenback demonstrated weakness before the release of the FOMC meeting, as well, as after it. The greenback rate showed decrease as the expectations for the FOMC meeting expressed possibility of the further measures aimed to stimulate the US economy. During the previous trading week the greenback demonstrated weakness before the release of the FOMC meeting, as well, as after it. The greenback rate showed decrease as the expectations for the FOMC meeting expressed possibility of the further measures aimed to stimulate the US economy. The Federal Open Market Committee was expected to keep their benchmark interest rate unchanged at 0.25 % during the considerable period of time. The concerns over the slow-down of the US economy rehabilitation rate reinforced. And the EUR/USD pair strengthened above the $1,3100 mark. Throughout the whole day the US dollar rate continued to trade around its 5-week minimum against the euro. The demand for the save-haven currencies dropped. At the same time Monday saw a strong drop of sterling after the release of the Rightmove House prices, which showed a decrease for 1.1% in September.

Speculations regarding the possible increase of the principal interest rate at the next RBA meeting supported the Australian dollar rate growth against the major currencies. The head of the Reserve Bank of Australia, Glenn Stevens, mentioned that the boom in the mining industry was expected next year, which would contribute to the economy growth.

On Tuesday the EUR/USD pair managed to reach maximums at the $1,3145 level. Positive results of the bond auction in Spain and Ireland supported the euro. Investors’ optimism grew as the concerns over the European budget crises dropped. The greenback was still under pressure as the expectations for the negative US fundamentals (especially in the housing market) reinforced. Concerns that the US economy rehabilitation rate continued its slow down pace strengthened. Market participants were waiting for the results of the FOMC meeting. Experts’ forecasts confirmed that the FRS would keep the interest rates at the low levels during the long period of time.

At the same time the pound extended its decline and demonstrated a sharp drop on Tuesday. The GBP/USD rate reached the $1,5500 minimums. The released UK budget deficit for August showed largest figure from 1993.

According to the expectations, the interest rate was left at the previous level of 0,25%, and the FRS mentioned that the principal rate would not be increased for the extended period of time. The low rehabilitation rate during the recent months has been confirmed as well. The following decision statement also noted that the housing market was still at the depressed level. The economic outlook remained uncertain.

On the same day the yen started to strengthen again, as market participants expected the Japanese government to undertake additional measures aimed to weaken the national currency. The USD/JPY pair showed minimums at the Y85,26 mark. Due to the positive results of the US housing data, the Japanese yen rate dropped against the euro, since the demand for the high-yielding assets increased.

At the same time the Australian dollar demonstrated growth on the wave of the increased optimism.

On Wednesday the euro received some support in the threshold on the state bond auction in Portugal, which was expected to show good results, following Spain and Ireland. And the EUR/USD pair set maximums at the level of $1,3400. It was published later on, that the results of the state bond auction in Portugal were positive.

On the same day the sterling grew and reached the $1,5620 mark. It happened after the released minutes of the Bank of England for September, where Andrew Sentance continued to vote for the interest rate raise.

Meanwhile the yen continued to strengthen against the major currencies, which reinforced concerns over the possibility that Japanese government would interfere with currency market again.

Thursday saw the euro stepping back from the previously reached maximums against the greenback. The released Euro-zone fundamentals escalated investors’ concerns over the rehabilitation of the European economy. In particular, the Euro-zone Purchasing manager Services index dropped to 53.6, when it was expected to decrease only to 55.5. The Euro-zone Purchasing manager Manufacturing index also dropped unexpectedly to 53.6, which was below the forecasted level of 54.5.

At the same time the released US fundamentals supported the US dollar rate a little during the American trading session, and the greenback stabilized against the euro, as a safe haven currency. The initial jobless claims grew to 465K against the forecast of 450K. The existing home sales showed an unexpected growth to 4.13M over the forecasted 4.10M. The leading indicators index showed increase to 0.3%.

On Friday the euro managed to reach maximums at the level of $1.3495, as the positive European fundamentals were released. The German Ifo Business climate and German Current assessment indices for September turned out to be higher than forecasted. At the same time the US durable goods orders dropped below expectations and the US New home sales for August were below the predicted level as well.

The company commenced operations in January 2007, established by a professional gold and foreign exchange dealer with over 10 years of experience. Currently domiciled and regulated in Panama.Author Risk Warning: You should not invest in FX or CFD the money you cannot afford to lose. An investment in FX and CFD is potentially risky to the investor, and in some cases the investor may not get back the amount he has invested. With... More