Market review for 05 – 09. 01, 2009

The beginning of the week saw strengthening of the US dollar. The fundamental news, published on Monday, and, particularly, the announcement of the US President’s elect Barak Obama new plan, supported the dollar. It was expected that the newly elected US President would develop a tax reduction plan for the amount of $300 billion. In addition to that, a new economic inducements program was being worked out, which could amount to $775 billion.

Consequently, the euro happened to be under pressure. The euro also received the negative influence after the announcement of the ECB representative, Lukas Papademos, who mentioned that Europe might need further principal rates reduction. Only the British pound managed to strengthen against the dollar. And the GBP/USD pair set session maximums at the level of $1.4578.

The weak American data, published during the second part of the day, could not support the dollar, and the American currency ceased its growth. The factory orders for November turned to be -4.60% against expected volume of -2.30%. In addition to that, the increased oil prices stimulated the dollar weakening.

Among the fundamental releases, published on Tuesday, that influenced the movements of the British currency, the PMI Services index should be mentioned. Its value for December turned to be 40.2 against the forecasted 39 and 40.1 for the previous month, which supported the sterling. Therefore, the British pound managed to set a daily maximum at the level of 1.4991.

Rather unfavorable fundamental data, which was published on Wednesday in the US, influenced further reduction of the dollar. The ADP employment change for December turned to be much worse than the forecasts: -693 thousand against the -493 thousand. At the same time the German unemployment rate for December happened to be almost on the same level as expected: 7.60% against 7.50%, which rendered some support to the euro. And the EUR/USD pair established a session maximum at the range of $1.3650 mark.

On Wednesday the pound incurred losses against the dollar after the announcement of the UK Minister of Finance, Alister Darling, who mentioned that the country’s economy perspectives continue to be complex. And on Thursday the Bank of England reduced the principal rate for 50 basic points until the level of 1,50%, which corresponded to the experts’ forecasts. Therefore, according to the analysts’ explanations, the principal rate reduction was already built into the prices.

According to the US Department of Labor report, published on Thursday, the number of unemployed receiving the benefits, reached 4.6 mln, which was a maximum level from 1982. But at the same time, the initial jobless claims dropped until 467,000. The experts suggested that this reduction happened due to the holiday’s period. Therefore the dollar continued to be under pressure.

The yen continued to strengthen against the major currencies due to the drop of the Asian and European stock markets.

At the end of the week the dollar consolidated against the euro and reached 1.3420 level, and the pound dropped until 1.5125.