Market review for 24 – 28. 11, 2008

In the beginning of the week the US government announced its decision to support Citigroup, the shares in which had dropped by 60% last week. It has been decided that the US Finance Ministry would allocate 20 billion dollars to the Citigroup in exchange for their preferential shares. Then it was published that a new program of consumer lending stimulation for the total amount of $800 billion was adopted by the FRS. According to this program, the US Central Bank will acquire debts of the mortgage companies for the amount of $600 billion. In addition to that, it was planned to establish a $200 billion fund aimed to support the consumer and small business lending. According to the analytics’ opinion, the attitude to the risk improved after the published information.

During the first part of the week the dollar was under pressure in spite of the above publications. The US fundamental releases mostly showed weak results. Thus, the secondary market current housing sales dropped in October. The durable goods orders turned out to be lower in October than the forecasts and the new home sales turned to be the lowest for the last 17 years.

As far as the Euro zone fundamental data is concerned, we should mention the drop of the IFO German Business climate index, which reached its 16-year minimum in November. At the same time, the industrial new orders dropped for September. But due to the stock markets growth the euro strengthened against the dollar and the yen. Therefore the EUR/USD rate grew until 1.3079.

The sterling consolidated against the dollar after the statement by Alister Darling, the UK Finance Minister, who presented the crisis management plan for the economy. And the pair GBP/USD showed its maximum levels of around $1,5045. But in the middle of the week, the third quarter UK GDP (QoQ) was published at the level of -0.5%. The private consumption report in UK showed a reduction for 0.2%, and the investments dropped for 2.4%. After such weak releases, the sterling incurred sufficient losses against the dollar.

On Thursday the US financial markets were closed due to the “Thanksgiving Day” holiday. Therefore there was a low activity on the Forex market in general. According to the published information on the same day, the European Commission announced a plan for stimulation of the EC economy, which includes the financial aid in the amount of 200 billion euros. During the second part of the week, the euro was decreasing against the dollar and was under pressure due to the speculations regarding further reduction of the principal rate by the ECB. Consequently, the pair EUR/USD finished this week at the 1.2644 mark. The British pound was also under pressure and dropped until 1.5256.

The yen continued to strengthen due to the speculations regarding the global economy slow down, and the pair USD/JPY traded at the range of Y94,70-Y96,00