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Market review for 31.01 – 04.02, 2011 (6/2011)

The beginning of the previous trading week saw the strengthening of the euro.  On Monday Euro-zone positive fundamentals have been released: The expected Consumer price index in January reached the 2.4% (it’s 2-year maximum) against the forecasted 2.3%. According to some experts’ opinion, the ECB might increase the principle interest rate. As a result, the EUR/USD pair grew to the $1,3700 level. By the end of the day the EUR/USD pair grew higher and reached maximums at the $1,3740 mark.

According to the experts’ expectations, and against the background of the recent flood, the  Reserve Bank of Australia would keep the interest rate unchanged at the previous level of 4.75%. Therefore, the Australian dollar was under pressure since the instability in Egypt could decrease the demand for the risky assets. The demand for the save-haven currencies increased, and the yen rate stabilized. The USD/JPY rate stabilized at the Y82.30 mark. At the same time the negative data, released on Sunday, pressured the national currency: building permits decreased for 18.6% against the forecasted drop for 1.3%.

Instability in Egypt and concerns over the possibility of its spreading on the neighboring  countries  rendered pressure on the oil price as well, which pushed it higher to the $89.54 mark per barrel. Its rate reached maximums above the $90.20 level in the beginning of the week.

According to the expectations, on Tuesday the Reserve Bank of Australia left the principal rate unchanged at the level of 4.75% for the third month.  The RBA continued to have a very favorable view of the Australian economy. As a result, the Australian dollar almost reached parity versus the American dollar.

On Tuesday the greenback continued its negative dynamics against its competitors, since the demand for the save-haven assets dropped, as the world economy rehabilitation growth rate increased. Weakened greenback brought the EUR/USD pair to the maximums of $1.3700. During the European session the pair reached maximums above the $1.3800 mark after the released Euro-zone PMI manufacturing data (57.3 against the forecasted 56.9).

The sterling showed considerable growth on Tuesday, even though the UK fundamentals were rather mixed. The PMI manufacturing data was much stronger than expected: 62.0 against the forecasted 58.0.  Expectations for the increase of the principal rate by the Bank of England supported the pound as well. As a result, the GBP/USD reached the $1.6140 level.

Euro traded around its maximums against the US dollar on Wednesday. The Euro-zone Producer price index for December showed unexpected growth: 53.7 against the forecasted 49.5. The EUR/USD reached the $1.3861 maximum. Market participants fixed their profits on euro long positions. Market participants saw a strong growth of the sterling on the same day.  Several factors rendered support for this rally. The UK construction PMI demonstrated a considerable growth: 53.7 against the expected 49.5.  As a result, the GBP/USD pair reached maximums at the level of $1,6229. The announcement of the Bank of England member, Mr. Sentance, that the interest rates should be increased, supported the sterling as well. The pound increased against the major currencies.

During the second part of the day on Wednesday the trading dynamics changed. The euro was pressured by the released Ireland rating by the “S&P” agency, which was reduced again. The EUR/USD closed the trading day at the level of $1,3770. The greenback changed its trading direction and showed some growth. The ADP employment for January surprised market participants: 187K growth compared to the forecasted 140K.

Strong Australian economic docket supported the national currency on Thursday, and the Australian dollar hit its 1-month highs. Trade balance report showed higher surplus compared to the forecasts. Building approvals demonstrated considerable increase.

The released on Thursday Euro-zone fundamentals were mixed. German and Euro-zone PMI services and composite indices were above expectations. But the Euro-zone Retail sales for December showed a decrease of 0.6%, when the forecasted growth was at 0.5%, which had a temporary pressure on the euro.   And the EUR/USD pair dropped from the maximums of $1.3826 to $1.3750. According to the expectations, the ECB left the principal rate unchanged at the previous level of 1.00%. But according to the released information, the head of the ECB, Jean-Claude Trichet, did not express concerns over the increased inflation level, and the euro started to drop.

On Thursday the GBP/USD pair renewed its weekly maximums at the level of $1.6277, which was a result of the published UK PMI Services data, which turned out to be at the 54.5 against the expected 51.3.

Strong US fundamentals, which were released during the second part of the day on Thursday, were even better than expected. Initial jobless claims dropped, ISM non-manufacturing composite index increased above forecasts and the Factory orders volume grew, when the forecast was negative. The EUR/USD closed the trading day at the $1.3600 mark. The pound also decreased following the negative dynamics of the euro and the GBP/USD pair dropped to $1.6150 at the end of the trading day.

On Friday the US unemployment data was released. The unemployment rate dropped and resulted in 9.0% against the forecasted 9.5%, but the change in non-farm payrolls for January dropped for 36K, when the expectations showed growth for 146K. As a result, the EUR/USD pair traded even below the $1.3600 mark. The GBP/USD closed the week below the $1.6100 level.

09:01 GMT   Bid Ask
GBPUSD 1.36564 1.36757
USDCHF 0.97184 0.97492
AUDUSD 0.74678 0.74823
NZDUSD 0.71085 0.71442
EURJPY 113.389 113.635
GBPJPY 139.45 140.238
XAUUSD 1318.33 1318.83
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