Market review for 12 – 16. 01, 2009

The beginning of the week saw the slow-down of the market participants’ activity, since there were almost no publications of the fundamental news on Monday. Only the expectations for the reduction of the principal rate until the minimal level from 2005 during the ECB meeting on Thursday had some impact on the market, which lowered the euro against the dollar and the yen. Therefore the EUR/USD pair established a minimum level at the mark of 1.3288.

On Tuesday the US dollar received some support and the euro continued its drop. The dollar was supported by the US Trade Balance for November, released on Tuesday, which showed the most considerable deficit decrease for the last 12 years. And the newly elected US President, Barak Obama, mentioned the necessity to increase the family and small businesses crediting. At the same time the euro rate continued its drop against the dollar due to the expectations of the possible principal rate reduction by the ECB and the risks of the Spanish rating decrease by the Standard & Poor agency. As a result, the EUR/USD rate stated a new minimum at the level of 1.3139.

The British pound dropped against the dollar on Tuesday after the published record-breaking deficit of the UK trade balance increase. The sterling turned to be under serious pressure after the released reports regarding the housing sales, which dropped until the minimal level from 1978, and the last month’s retail sales happened to be the weakest for the previous 14 years. The British pound dropped against the US dollar until the 1.4471 level.

On Wednesday the market situation has changed, since the US dollar happened to be under pressure. The dollar index, which traces the American currency against the 6 major US trade partners’ currencies, dropped until 83,746.

And the announcement of the FRS President, Ben Bernanke, who stated that the American government should be more active in order to stimulate the economical growth, had a negative influence on the dollar. According to the “Beige Book” report, which was published on Wednesday, the general weakening of the economical activity was mentioned, retail sales weakness, and decrease of the industrial production and real estate sectors of America.

The Japanese yen strengthened against the US dollar and the euro. The USD/JPY pair traded at the range of Y89,20-Y89,90 on Wednesday.

According to the expectations, the ECB reduced the principal rate for 0.5% until 2.0%, which temporary weakened the euro. After the statement of the ECB president, Jean-Claude Trichet, the euro strengthened, since the chief of the bank mentioned, that next month the weakening of the monetary-credit policy was not planned. As a result, the EUR/USD pair established a daily maximum at the 1.3241 level.

At the end of the week, the GBP/USD pair consolidated at the range of $1.4560 - $1.4660, and closed the week at the level of $1.4744. The yen grew against the high-yielding currencies, since the investment attractiveness of the Japanese currency increased, but the USD/JPY pair closed the week at the 90.58 mark.