Thursday, January 20, 2011

Currency Roundup | FX Market Fundamental Analysis | 20 January 2011

Currency Roundup | FX Market Fundamental Analysis | 20 January 2011

USD : The dollar began rallying after the release of housing data which showed a very high increase in Existing Home Sales by 12.3% compared to 6.1% last month and 4.1% expected. Initial Jobless Claims and Continuing Claims both fell further improving the outlook, with the first falling from 441k to 404k and the second from 3887k to 3861k with an increase originally forecasted. At midday GMT the dollar traded at $1.3495 to the euro and $1.5990 to the dollar.

EUR : The euro continued its rise as the ECB retained a marginally hawkish outlook for inflation in its monthly report today, in which it maintained its monetary policy stance, saying its interest rate was ‘appropriate’ for the current conditions. It further attributed the cause of recent inflationary pressures to increasing global commodity prices and its outlook for growth remained “tilted to the downside”. Meanwhile, on the data front, German Producer Prices increased by 0.7% in December and 5.3% YoY in December. Both were an improvement on the previous month and an above expectations increase. Industrial Sales and Orders data showed a fall below expectations fall in all cases and Industrial Orders fell by an unexpectedly large -4.3% in November. At midday GMT the euro traded at $1.3495 to the dollar and £0.8439 to the dollar.

GBP : The pound fell rapidly after a below expectations fall in manufacturing orders as measured by the CBI Trends Total Orders for January which gave a reading of -16 – a large fall from last month’s -3 and well below the -1 expected. Tomorrow’s economic docket is showing Retail Sales which will be closely scrutinized by traders. If Retail Sales are poor, it may affect the outlook for the UK sufficiently for the exchange rate to fall. At midday GMT the pound traded at $1.5990 to the dollar and ¥131.45 to the yen.

JPY : The yen traded mixed as larger currencies dictated the trend today. It lost ground significantly to the dollar as data for the US showed a much higher than expected rise in New Home Sales and the unemployment rate fell. Against the euro the yen strengthened, however, after a mixed data and the ECB report which described a muted outlook for the region. Meanwhile, on the data front the Coincident Index expanded from 102.1 to 102.4 showing a rise in business activity and Convenience Stores also rose from 1.1% to 3.3%. Unfortunately the Leading Index fell a little from 101.0 to 100.6.At midday GMT the yen traded at ¥82.22 to the dollar and ¥110.95 to the euro.

by Joaquin Monfort, Analytical expert , Forex4You © 2011

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