Dollar was trading in narrow ranges against European currencies ...

For the most part of the previous week the dollar was trading in narrow ranges against European currencies, and only in the end of trading session it started showing some preferences. As a result ?green back? fell against the euro and strengthened against the pound. At the beginning of trading session American currency came under pressure against the yen, but till the end of the week it leveled all losses and fixed ?profit?. A single currency was supported by economic data, mostly indexes on Germany and EU, and low-interest loans of the CB of outlying countries. And the pound came under pressure because of investors? unconfidence in stability of the positions of British CB concerning easing program, which testified to transparent economic growth as a result of weak economic statistics. There were a few US economic statistics, which showed as usually conflicting results of economic indexes. The US production activity worsened according to the data from regions ? Chicago PMI just got revised down, under the level of 50.0, according to the report of the Richmond FRS for January, the index fell to -12 from +5 a month earlier, Kansas City FRB index fell for the third month in succession. But, the US PMI, researched by the Markit, rose to the level of 56.1 in January. Houses sale fell by 7.3% m/m in the housing market, but it is obvious that 20.0% y/y rise smoothed over the situation, leaving positive emotions concerning the housing market?s dynamics. According to the employment rates index, a number of unemployment insurance claims decreased two week in succession, but in this case there are some doubts about its authenticity, because of misrepresentation of economic data at the beginning of the year. This week mews package is rather rich in important information. It might seriously influence the market?s mood. First of all, it includes the topic of the US employment rates, represented by the labor market report for January, preliminary GDP data for the 4^th quarter and publication of the protocols of the last FOMC meeting. Forecasts expect positive results, a number of working places is expected to increase by +156/160 thousands, and the main economic index is also expected to rise to by +1.3% q/q. It can support the dollar if the released results do not disappoint the market. Concerning the protocols, on the threshold of publication of the economic data, it is possible that dollar selling might be observed as there are strong expectation which testify to mild policy of the EU Central Bank. But, signs of conflicts between the members of the committee might amend the situation.

EUR

A single European currency managed to rise against the dollar and other main opponents last week, the euro was mostly supported by the economic statistics and increased demand for the loans of outlying countries, particularly Spain. Preliminary data of Germany?s and Euro zone PMI indexes for January improved, but it kept decreasing in EU as a whole. The reports of German ZEW and Ifo presented positive dynamics ? ZEW noted improvement of economic mood and rose to 6.9 from 31.5, and Ifo announced about rise of the Business conditions index to 104.2 from 102.4 in December, when only 103.0 was expected. As a result of positive dynamics, the market didn?t pay attention to the negative part of the news such as producer price decrease, the rising unemployment rate in Spain, which rose to new record high, and also decrease of demand index in Italy, Holland and other EU countries. According to the forecasts, this week news might keep good mood concerning European currency. It is assumed that a monthly report of the European Commission about business mood would present improvements ? the economic mood index, the manufacturing confidence index, the consumer confidence index and the business climate index for January are expected to show positive dynamics. But, such important index as employment rates index might bring negatively part, as a number of unemployed is expected to increase, and unemployment rates in Euro zone is expected to rise to 11.9% after 11.8% earlier.

GBP

British pound turned out to be in the cohort of outsiders last week. As the yen it fell against the dollar and the euro, being fixed in negative territory. The pound came under pressure because of market?s unconfidence in the stable recovery of British economy and doubts that the Bank of England would not widen the easing program, and also announcement of British officials about their intentions to hold a referendum on whether Britain should remain in European Union. The protocol of the last meeting of the Bank of England did not bring special surprises, and was positive ? the decision to keep interests rates unchanged was made unanimously, but the announcement of D. Mills about increased assets-buying program negatively influenced the market. there were a few economic statistics, but its results caused the opinion that apprehensions concerning economic trends are well-founded ? budget deficit turned out to be bigger than last year, the UK GDP for the 4^th quarter decreased by 0.3% q/q, when -0.1%q/q was expected, industrial production fell by 1.8%, the UK production orders indicators for January sharply worsened to the level of -20 in comparison with -12 In December, when only -10 was expected. At such moment the pound was supported by unemployment rates data, which showed decrease but only for a short time. This week News package contains very few information, and it will be released in the second part of trading session. According to the forecasts, the indexes which testify to house price dynamics in January might rise ? Nationwide index is expected to increase by 0.3% m/m, consumer and mortgage crediting for December is also expected to increase, as the Gfc Consumer confidence index, which in expected to fix -27 after -29. But, the main focus of attention is directed to the Manufacturing PMI for January, which opens the cycle of the publication of economic activity indexes in the first month of the year. The index is expected to decrease to 50.8 from 51.4 in December. It can?t bring the perspectives as approaching to the level of 50.0, which is dividing border of upward and downward zones, this branch might face downward trend.

JPY

Long-awaited meeting of the Bank of Japan didn?t come up to the market?s expectations of aggressive quantitative easing program and disappointed the market. As a result Japanese currency strengthened against the dollar at the beginning of the last week. But, later information about Japan?s trade deficit in 2012 and increased apprehension that easing program would be implemented caused yen selling. What is more, Japanese government announced that sharp weakening of the national currency would not bring big problems and that the government would keep discussing changes in the Bank of japan law in order to provide the conditions of further quantitative easing policy. Concerning economic data, it showed negative trends and foreign trade data ?machinery orders, -27.5% y/y in December, activity index in all branches of economy, -0.3% in November after + 0.2% in October, and also leading and Coinciding indexes for November. Consumer prices in December remained in negative zone, -0.1% y/y. Today the data, which testifies deflation, was published ? corporation prices index remained in negative zone in December, -0.4% y/y. Later this week information about the results of the last month previous year will be released ? retail trade is expected to rose according to monthly statistics and decrease per annum, 0.4% m/m, 0.4% y/y after 0.0% m/m, 1.3% y/y earlier, industrial production is expected to show the same results, 4.2% m/m, -5.6% y/y after -1.4% m/m, -5.5% y/y, household spending is also expected to reduce to -0.1% y/y? from 0.2% y/y in November, and unemployment rate is expect to be unchanged ? 4.1%. Concerning the perspectives, general negative mood on the yen will more likely remain, but technical factors, which testify to resale of Japanese currency, and strong levels of support, which the currency pairs that includes the yen approach, might cause the next correction.

Source: http://blog.forex4you.com/dollar-was-trading-in-narrow-ranges-against-european-currencies/

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