Market review for 16 – 20. 02, 2009

On Monday the American financial markets were closed due to the celebration of the G. Washington’s birthday. Due to the negative Euro zone data, the dollar continued its consolidation from the very beginning of the week. Therefore the EUR/USD pair reacted by establishing a minimum at the 1.2730 level. And the yen began the week with the growth against the major currencies, since the investors started to get rid of the risk assets. Accordingly the USD/JPY pair dropped to a minimal level around Y91, 40.

On Tuesday market participants’ suspicions regarding deteriorating situation in Western Europe were supported by the announcement of Moody’s Investors Service agency regarding the possible rating reduction of a number of banks, which have representative offices in Western Europe. As a result the EUR/USD pair dropped sharply and reached $1.2600 mark. And the dollar continued to strengthen due to the stock markets’ drop. On the same day the yen changed its dynamics. According to the published information the minister of finances in Japan, Soiti Nakagava, announced that he would retire after the country’s budget would be accepted by the Parliament. That fact had an immediate impact on the yen, which dropped against the American dollar, and the USD/JPY pair established a session maximum around Y92.75.

On Wednesday the following negative US fundamental data was published: the new housing foundations number dropped to record breaking 466 thousand (the forecast was at 530 thousand), and the industrial production decreased for 1.8%, when the forecast was – 1.5%. The dollar continued to strengthen against its competitors due to the general negative information and suspicions regarding the stability of the banking system and Euro zone economy, nevertheless, that some published news supported the European currency. Particularly, some European banks announced of unexpectedly positive results for the forth quarter of 2008.

On Thursday the US dollar changed its direction. The American currency stopped its upward trend against its major competitors due to the consolidation of the stock indices. Rather diverse published fundamental news probably did not have a serious impact of the dollar dynamics. The initial jobless claims continued to increase and reached 627 thousand, and the Philadelphia Fed index dropped to – 41.3 against the forecast of – 25.0. The producer price index (MoM) grew to 0.8% when the forecast was at 0.3%. The EUR/USD pair established maximums at the $1.2750 level due to the released information regarding German plans to support the Euro zone economy in crises management plan.

At the end of the week investors fixed their profits, and the EUR/USD pair closed the trading week at the 1.2850 level, and the GBP/USD rate grew until 1.4450 mark.