Weekly review for 25 – 29. 10, 2010

The greenback demonstrated diverse trading activity this week. On Monday the EUR/USD pair grew and reached the $1,4000 level. The released Euro-zone industrial new orders showed considerable increase over the predicted data. The greenback demonstrated diverse trading activity this week. On Monday the EUR/USD pair grew and reached the $1,4000 level. The released Euro-zone industrial new orders showed considerable increase over the predicted data. The stock markets growth also supported the euro. The US dollar was decreasing against the major currencies, due to the expectations for the results of the G20 Meeting which took place in South Korea this weekend. According to the released information it has been decided not to continue devaluation of the national currencies. As a result, the speculations regarding the quantitative easing reinforced. The demand for the high-yielding assets increased, and the greenback rate dropped.

On the same day the yen reached its 15-year maximum against the American dollar, as a result of the G20 Meeting. The USD/JPY rate reached the level of Y80,65.

By the end of the day the US existing home sales data showed unexpected growth above the forecasts (10.0% against expected 4.1%). This released statistics rendered temporary support to the greenback.

On Tuesday the greenback showed stabilization against the euro. The speculations, that the actions of the FRS could be effective, reinforced. Tuesday was also notable for the movement of the sterling. The sterling showed some stabilization as the expectations for the positive release of the UK economic docket influenced the market. The UK Gross domestic product for the third quarter was predicted to increase for 0.4%. The GBP/USD pair grew to the $1,5790 level. After the release of the report, which showed that the GDP doubled the forecast and grew for 0.8%, the sterling continued to increase against the greenback. According to the expectations, the Bank of England would expand its quantitative easing policy. The sterling was also supported by the S & P credit agency, since the “AAA” rating was confirmed for the UK and the forecast has been changed to stable. The pound increased against all its competitors as well.

The following positive US fundamentals were released later during the day: The consumer confidence for October increased to 50.2 against its forecast of 49.5. The house price index grew for 0.4% against the forecasted drop for 0.2%. In addition, the Richmond Fed manufacturing index grew to the level of 5, while the forecast was at the level of only 1. The greenback grew against the euro, due to the increased inflation expectations.

Speculations regarding the positive impact from the US quantitative easing policy rendered support to the greenback on Wednesday, which reached its weekly maximums against the euro and the yen. The release of the positive US fundamentals resulted in the stabilization of the US dollar. The Durable goods orders for September grew for 3.3% against the forecast of only 2.0% growth. The Durable goods orders report reflects the positive mood of the national economy. At the same time concerns that the Federal Reserve’s quantitative easing program in November would not be as large as markets expected, reinforced.

The EUR/USD pair dropped below the $1.3800 mark, but managed to reach its maximums at $1.3850. Greece informed of the insufficient tax levy, which pressured the euro. At the same time Portugal released its 2011 budget report failure. The problems of the European countries’ budgets were not over yet, and continued to pressure the market.

The released on Wednesday Consumer price index for the 3-d quarter showed increase only for 0.7% against the forecasted growth for 0.8%. As a result, the probability, that the RBA would increase the interest rate, dropped. Therefore, the Australian dollar rate decreased against the spectrum of the major currencies.

According to the expectations, the Reserve Bank of New-Zealand left the principal rate unchanged at the previous level of 3.00%. This has been already the second meeting in a row, when the Reserve Bank kept the principal rate unchanged.

The demand for the risky assets grew on Thursday, and the euro stabilized. The EUR/USD pair showed maximums at the level of $1,3865. The released Euro-zone fundamentals supported the euro. The Business climate indicator for October increased to 0.98 against the expected 0.79 growth. Economic and industrial Euro-zone indicators were positive as well. The sterling rate also grew and the GBP/USD pair managed to reach the $1,5890 mark. The published UK fundaments also supported the sterling. The UK Nationwide house prices turned out to be lower than forecasted, but the released later on the CBI Reported sales for October reached the 36 level against the expected 35 and 49 from the previous month. Therefore, the greenback demonstrated a decrease for the first time after the three consecutive days with positive dynamics.

According to the decision of the Bank of Japan, which was taken unanimously, the principal rate was left unchanged at the level of 0.10%. This outcome has been expected by the market participants. The Bank of Japan also stated of its intentions to purchase corporate debts with low credit ratings. As a result, the Japanese yen stepped back from its previously reached minimums. The USD/JPY pair decreased to Y81,30.

Regardless of the previous RBNZ principal rate decision, the New-Zealand dollar managed to grow on Thursday. The head of the RBNZ, Alan Bollard, stated that the interest rates would probably be increased, which supported the national currency and supported the demand for the risky assets.

The US dollar continued to weaken against the euro on Friday and the sterling reached its weekly maximum, and the GBP/USD reached level around $1.6040 mark.