The week has started with the US dollar strengthening against its main competitors on the threshold of the US Presidential elections day. And a confident victory of Barak Obama in the Presidential elections on Wednesday supported the dollar against the European currencies due to the market participants’ expectations that the democrats in power would speed up the recovery of the American economy. At the same time, the negative economic data published in the beginning of the week, almost did not effect the dollar rate. So, the ISM Manufacturing Index decreased to its minimum value of year 1982, and dropped for October until 38.9 against the forecasted value of 41.5.
In the beginning of the week, the fundamental data releases for Euro zone were rather weak. Italian, French and German Manufacturing PMI Indexes for October turned to be lower than forecasted. And due to the published European commission prognoses the economic growth rate in the countries of European Union would decrease. The pair EUR/USD showed its session minimum at the level of 1.2600.
The Australian currency got under pressure, since on Tuesday the Central Bank of Australia lowered the principal rate until 5.25% (it was expected that the reduction would be until 5.50% only from the 6.00% level).
The fundamental publications for USA continued to be very weak. According to the released report of the US supply management Institute, released on Tuesday, the production reduced and reached its lowest level for the last 26 years. The dollar index, which traces the American currency against the six trade US partners, was valued around 85,69, while its previous level was at 87,88. Therefore, the dollar incurred the most considerable daily losses against the euro from the moment that euro was introduced in 1999.
Recovery of the stock indexes resulted in the resumption of the interest to carry trades, which in turn supported the consolidation of the high-yielding currencies. The Australian dollar grew in price to a weekly maximum of 0,7011 on Tuesday.
In the middle of the week the US dollar continued to incur serious losses against the European currencies after the sharp fall of the Activity Indicator in the US non-manufacturing sector. According to the published ADP Employer Services data, there were 157,000 working places employment reduction in the US economy private sector last month, which was registered as a maximum level almost for 6 years. The ISM Services Index, which characterizes the US services sector condition, dropped in October until 44.4, that was worse than prognoses and weaker than its rate in September. This indicator reached its minimum mark from the year 1997.
On Thursday the ECB reduced the principal interest rate for 0.5%, and the euro reacted by a downfall against the dollar and the yen. Besides, the ECB President mentioned that the EC economy “weakened considerably” and he didn’t eliminate the further diminishing of the credit politics. And the Bank of England has made an unexpected decision to reduce the interest rate by 1.5% to 3,00% level. As a result, the British pound reacted with a quick downfall for more than 150 points, and the rate of the sterling reached the 1.5720 mark.
The released payrolls indicator at the end of the week dropped for the 10-th month in a row this current year in the USA. And the unemployment rate grew and reached the level of 6,5%. As a result the euro finished this week above the level of 1.2750.
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