Market review for 9 – 13. 03, 2009

The trading week started with the strengthening of the American dollar, as a shelter-currency due to the evidence of the world economic crises deepening. At the same time the dollar competitors incurred losses as a result of the fundamental news region-wise. Thus, the Sentix Investor Confidence indicator for the Euro zone region showed a strong drop to -42.7 level, when the forecast was at the -38.0 mark. As a result, the EUR/USD pair dropped to $1.2552. The GBP/USD pair decreased to the range of $1,3765 due to the released information on Monday, that the Lloyds Banking Group received the government guarantees for their assets in the amount of 260 billion sterling in exchange for their controlling stock. And the yen incurred losses against the US dollar and the euro after the announcement of the Japanese trading balance deficit, which occurred for the first time in 13 years.

Already on Tuesday the US dollar changed its dynamics, and allowed its competitors to strengthen. With the stock markets growth, the dollar dropped. Parallel with US dollar, the demand for the yen, as a shelter-currency, was decreasing as well. On Tuesday the released fundamental news in Great Britain turned to be very weak. The Industrial production level dropped to -2.6% in comparison to the forecasted level of -1.2%. And the Manufacturing production decreased to -2.9% against the expected -1.40%. Accordingly the pressure on the sterling increased.

The fundamental data, released on Wednesday, showed a sharp decrease of export in China, which amounted to the drop for 25,7% on February. This factor reinforced the pressure on the risk-sensitive currencies. As a result, the US dollar strengthened a little.

On the same day the producer prices index, published in Germany, showed a stronger decrease, than experts’ forecasts. This index turned to be at the level of -1.2% against the prognoses of -0.1%. This information confirmed the difficult situation of the Euro economy, but was ignored by the market.

On Thursday due to the world stock markets’ weakening, the US dollar’s value had appreciated. Nevertheless, during the second part of the day the stock rates growth lead to the decrease of the American currency. At the same time the euro was under pressure as a result of the speculations regarding the possible reduction of the principal rates by the ECB.

The purchase of the Japanese currency was growing on the threshold of the completion of the financial year in Japan, which increased the demand for the yen.

On Thursday the decision of the National Bank of Switzerland was published. It was announced that the principal rate would be reduced for 25 basic points and that the NBS would start interventions, aimed to weaken the rate of the national currency. As a result, the Swiss frank dropped against the major currencies.

On the last day of the trading week the EUR/USD pair grew to 1.2920, and the GBP/USD rate increased and reached the 1.40 mark