Monday, January 31, 2011

Currency Roundup | FX Market Fundamental Analysis | 31 January 2011

Currency Roundup | FX Market Fundamental Analysis | 31 January 2011

USD : The dollar fell despite positive data showing an increase in people's spending activity after risk trends changed and favoured risk appetite currencies such as the euro. On the data front Personal Spending, in December, increased to 0.7% compared to a 0.3% rise last month and the expected 0.5% rise. Personal Consumption Expenditure Core decreased slightly from 0.1% to 0.0%, whilst Personal Income stayed the same at 0.4%, which was also in line with expectations. Look out for ISM manufacturing tomorrow at 15:00 GMT. At midday GMT today the dollar fell to $1.3670 to the euro and $1.5888 to the pound.

EUR : The euro advanced on data which fuelled increased inflation expectations, heightening speculation of an ECB move to increase base lending rates later in the year. The Euro-zone CPI estimate showed an increase of 2.4% compared with 2.2% in the last year and a 2.3% estimate. Italian PPI increased from 0.4% to 0.6% whilst YoY, the figure showed and increase above expectations to 4.6%. Further data showed German Retail Sales fell more than expected in December, falling by -0.3% which was better than the -1.9% fall last month but not as high as the 2.0% expected. Whilst YoY the fall was more, dropping by -1.3% compared with an increase of 2.0% last month and a forecasted change of 1.1%. At midday GMT the euro rose to $1.3670 to the dollar and £0.8603 to the pound.

GBP : The pound rose on commentary from BOE official Martin Weale who said - according to an article in the Guardian newspaper - that there’s a “powerful case for a modest rise in the bank rate.” This increased confidence that the BOE will eventually raise interest rates and helped boost sterling. There was no major economic data out for the UK today although Nationwide House Prices is out tomorrow at 07:00 and may move the pound, then later at 09:30 there is Consumer Credit. At midday GMT the pound rose to $1.5888 to the dollar and ¥130.57 to the yen.

JPY : The yen fell despite positive data showing a construction revival in the making as risk trends took precedence and risk appetite reigned, benefiting the euro and the pound the most. Last night’s data showed Industrial Production increased by 3.1% MoM in December compared to a 1.0% rise in the previous month, although YoY, the figure showed a fall. Meanwhile Construction Orders, Housing Starts and Vehicle Production all out today showed signs of Improvement with Construction Orders increasing by 13.1% in December compared to a -5.3% result in November and estimates of a 1.1% increase – a considerable swing. At midday GMT the yen fell to ¥82.19 to the dollar and ¥112.35 to the euro.

by Joaquin Monfort, Analytical expert , Forex4You © 2011

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