In the beginning of the last week the tendencies on the part of investors towards minimizing the risks have continued. Carry trades were cut down and the demand for secure assets was growing. This was a leading factor to support the yen and the dollar. The British pound continued to incur losses against the US dollar as a result of the announced continued price drop for real estate in Great Britain.
On Monday the S&P 500 index reached its minimum mark from March 2003 due to concerns for the global financial crisis growth. Though the markets received some support by the evidence that the government measures, directed to recover the credit markets, began to show some results. The FRS undertook another step, supposed to unfreeze business activity in the credit sphere, by purchasing short-term corporate liabilities.
The published statistics showed worsening of the business climate index in Germany until 90,2 (a minimum level in five years) for October. As a result, the euro decreased against the dollar and the yen.
In the middle of the week the dollar continued to keep its positions against the major currencies despite the announced weak economic data. The US Consumer Confidence index dropped until the level of 38 for October and registered a historical minimum (the forecasted value was 53, and last month – 61.4). The US Richmond Fed Manufacturing Index dropped to -26, instead of the expected drop until -23. The American currency was still supported by the fear of the European crisis deepening and the expectations for the rates’ decrease in the region.
The German Gfk Consumer Confidence index announced a growth to 1.9 level for November against the forecasted value of 1.5. At the same time, the French Consumer Confidence indicator dropped for October and reached -47 mark against the expected level of -46. According to the experts, the main reason for euro and pound partial consolidation was a growth of the world stock indices. Therefore the pair GBP/USD strengthened for more than 600 points. At the same time the yen lost against the dollar more than 600 points due to the growth at the world stock markets and speculations regarding the possible intervention by the Bank of Japan.
The US dollar incurred losses against the major currencies on the threshold of the FRS announcement regarding the principal rate. The dollar index, which traces the American currency against the leading US trading partners, dropped for 2,2% and registered a maximum decrease from 1998. The FRS decreased a principal rate for 50 basic point until 1,00% according to the expectations. Though published on Thursday GDP growth rate indicator for the 3-d quarter turned to be higher than experts’ expectations: -0.3% against the forecasted level of -0.5%. In addition, the American dollar was supported by the drop of oil prices. As a result the dollar grew until 1.29 against the euro and until 1.6450 against the British pound.
The Canadian dollar was strengthening against the US dollar very fast. The growth rate amounted to +3,7% for the last 37 years due to the increased prices for gold, oil, gas and copper.
On Friday the Central Bank of Japan voted for the decrease of the principal rate until 0,3% (for 0,2 percentage points) in order to weaken the global financial crisis’ influence on the Japanese economy. (This was the first time in the last seven years the principal rate was reduced in Japan). As a result the yen has consolidated its positions.
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