Weekly review for 18 - 22.02.2013

Euro: The data released on Monday showed that in December the current account surplus narrowed more than expected euro zone - up to € 13.9 billion from € 15.9 billion in November and the expected result of € 15.3 billion. The Indicator, which summarized the flow of goods, services, income and transfer payments in and out of the Euro-zone nations to other countries widened to € 27.0 billion from the previous value of € 20.8 billion revised from € 19.8.The currency grew on Tuesday amid positive results of the ZEW survey of February. The Germany’s economic sentiment improved from 31.5 to 48.2 and the euro area’s sentiment from 31.2 to 42.4, exceeding forecasts of 35.0 and 35.5 respectively. The support for the currency on Wednesday was provided by published data for Germany, which revealed that the producer prices in January were stronger than expected due to the high cost of electricity. The result suggested that the slowdown in the German consumer price index would be delayed. According to the report, producer prices rose in January by 0.8% in monthly terms and by 1.7 % per year, compared with forecasts at 0.3 % and 1.2 %, respectively. The EUR / USD pair however decreased this day by setting the minimums at $ 1.3363 on expectation of the outcome of the FOMC meeting. For the Thursday and Friday the EUR / USD pair kept forces for further decline amid pressured upon decisions of the FOMC meeting. Near the end of the week it was quoted at 1.3160, losing almost 200 basis points which is 1.45 % negative change.

US Dollar: The U.S. dollar has strengthened its position in the period from 18 to 22 of February. The dollar rose sharply against other major currencies against the U.S. publication of minutes FOMC. The currency substantially strengthened after the publication of minutes of the Fed meeting, in which it was noted that “the economy remained on a moderate growth, and tensions in global financial markets have eased. Also, was mentioned that the housing sector is strengthening, and the unemployment rate is likely to continue decline gradually. The solution of the "budget cliff” reduced the downside risks for the economy”. In addition, which was an important issue is that the minutes of the last meeting of the Federal Open Market Committee Federal Reserve U.S. revealed that some of its members are concerned about the growth of the total assets on the balance of FRS. The probability of early collapse of quantitative easing program has increased and the dollar got significant support. The index of the dollar added almost 1% this week.

British Pound: The pound fell on Monday, approaching the seven-month low against the dollar amid expectations of increasing inflation in the country. As it became known, that many futures traders increased bets that the currency will continue to decline. According to the data, the number and volume of short positions of hedge funds and other large speculators who are betting on further depreciation of the currency was significantly increased. Also exerted pressure on the currency was provided by the representative of the Bank of England Wil Martin, who noted that exporters can be benefited from the reduced rate of the sterling. Against to dollar, the British pound fell to the lowest level since July 12th 2012 to the level of $1.5413. The fears that tighter fiscal policy will continue to put pressure on the economy and concerns about possible downgrade of the credit rating of the United Kingdom as well as the assumptions that the next head of the Bank of England Mr.Carney will announce the implementation of the milder policy than the current one of the Mr. King negatively affected the British currency.

The pound kept falling also on Wednesday after the Bank of England minutes showed that some officials at this month meeting voted to expand the program of buying assets. The only three politics voted for increased bond purchase program by 25 billion pounds ($ 38.3 billion) to 400 billion pounds, while the remaining six members of the Monetary Policy Committee were against the increase. In addition, the pressure on sterling was supported after reports showed that the policy has been already considered for cutting interest rates. Also exerted pressure on the currency presented data which showed that, according to estimates of the International Labour Organization, the number of unemployed for three months till December 2012 increased by 10K, while the unemployment rate rose to mark of 7.8%, compared to 7.7% three months earlier before November. At the same time, the Office for National Statistics reported that the number of unemployed in the same period decreased by 14K, while the number of employed people increased by 154,000. In addition, the ONS reported that the number of applications for unemployment benefits fell in January by 12,500 to 1.54 million. All in all, on Thursday and Friday the GBP / USD pair tested the 1.5122 support which was about 1.7% negative change.

Japanese Yen: The statements of the Finance Ministers and Central Bank Governors of the G20 in respect of competitive devaluations of the rates of National currencies were interpreted by market participants as relatively mild in relation to Japan. For that reason, the yen fell against most major currencies. The USD / JPY pair reacted as rising to Y94.21 level . The yen continued move up as the Finance Minister Taro Aso expressed Japan government’s unwillingness to buy foreign bonds. His comments were opposed to the statement of Prime Minister Shinzo Abe, who said that the purchase of foreign bonds is one of many options, which should help to the monetary policy. The yen retreated from the lowest levels against the U.S. currency; the USD / JPY couple fell tom the lows of Y93.37 during the European session. On Wednesday, the yen rose against the dollar ahead of the meeting between the leaders of Japan and the United States. Investors interested in whether or not Obama would support a policy of Prime Minister Abe. Some countries are concerned that this policy is intended to artificially weaken the yen. The news that disappointed many investors was the one that has been published by the Ministry of Finance Japan on trade deficit in country. In January, it was recorded at almost $ 17.5 billion which was a record mark since 1947 year. The amount of imports grew much more strongly due to rising prices for oil and gas. However, the Japanese exports rose for the first time in eight months.

New Zealand dollar: The New Zealand dollar fell against all major currencies after information that the General Directorate of Quality Supervision of China, Inspection and Quarantine (AQSIQ) destroyed milk powder came from New Zealand. However, later after the “Fonterra Co” company - the world's largest exporter of dairy products, said that none of its products were destroyed by the Chinese authorities the New Zealand dollar regained some of its losses. In addition, after the chairman of the central bank of New Zealand, Mr.Wheeler in his speech to the manufacturers and exporters in Auckland expressed RBNA’s willingness to intervene in monetary policy to weaken the National currency the New Zealand dollar fell against its rivals. Graeme Wheeler noted that the monetary authorities are ready to intervene to decrease the growth of the New Zealand dollar.

Australian dollar: The Australian dollar rose against most major currencies after the Reserve Bank of Australia noted the possibility of further lowering the interest rate in case of a fall in economic growth in the region. The RBA also mentioned that the series of lowering of the interest rate which was done during the year helped stimulate the Australian economy.

Canadian dollar: The Canada’s wholesale sales fell by 0.9 % in December. The result of the report which recorded that the rate of decline was more than two times higher than economists' expectations pushed down the Canadian dollar which fell to a new 7- month low after the release.

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