Market review for 19 – 23. 01, 2009

On the first trading day of the week the US financial markets were closed due to the celebration of the Martin Luther King Day. At the same time the euro and the British pound turned out to be under pressure against the US dollar. The Standard & Poor’s rating agency decided to decrease the Spanish credit rating. And according to the Euro Commission released data, the forecasted economical growth rate of the European region for 2009 was reduced. The EUR/USD pair has dropped and reached the 1.3100 level.

On Monday the statement of Jean-Claude Trichet in Paris was published. He stated that the second plan, aimed to support the UK banking sphere liquidity, has been accepted. Therefore the pound decreased and reached its minimum at the level of 1.4438 against the American dollar.

On Tuesday the American dollar grew against the background of the deteriorating condition of the UK banking sector and negative Euro zone information. The inauguration of the US president, Barak Obama, rendered support for the American dollar as well. On Tuesday the UK government decided to increase its share in the Royal Bank of Scotland up to 70% . This fact reinforced the concerns about the county’s recession. According to the government report the inflation growth rate slowed down until 3.1% in December. As a result, the sterling decreased against the dollar and reached the lowest level for the previous 6 years and incurred losses against 16 major currencies. In this situation the yen strengthened as a shelter-currency for the market participants.

On the same day the Central bank of Canada reduced the principal rate by 50 points to 1%, which provoked the drop of the Canadian dollar.

After the publication of the Bank of England minutes of the previous meeting on Wednesday, the expectations that the principal rate would be reduced as well during the next meeting, reinforced, which pressured the pound.

The US publications on Thursday had a negative impact on the American currency, though the prices decrease at the stock markets supported the dollar. The number of the new housing projects in the US has dropped last month and reached 550,000 – a minimal level from 1959.

On Thursday the Bank of Japan left the principal rate unchanged at the level of 0,10%, which did not have any influence on the yen dynamics.

On Friday the British pound dropped and reached a new 23-year minimum – 1.3501. The EUR/USD rate decreased until the 1.2764 level. The USD/JPY pair dropped below the 88.00 mark.