Friday, January 28, 2011

Currency Roundup | FX Market Fundmamental Analysis | 28 January 2011

Currency Roundup | FX Market Fundmamental Analysis | 28 January 2011

USD : The dollar traded mixed strengthening against some currencies and weakening against others. GDP figures released today showed economic activity increased but not as much as had been expected. GDP rose to 3.2% in the 4th quarter of 2010, higher than the previous quarter’s 2.6% but not as high as the estimated 3.5%. Personal consumption also increased, above estimates, showing a 4.4% rise in January compared to 2.4% in the previous month and 4.0% estimated, although Core Personal Consumption fell to 0.4% in line with expectations. The ambivalent GDP data which was neither particularly poor nor good will probably lead to some loss of directional movement for certain dollar pairs as investors weigh up the pros and cons. At midday GMT the dollar traded at $1.3721 to the euro and was down against the pound at $1.5923.

EUR : The euro weakened slightly as assuring rhetoric from ECB big-hitters fell on deaf ears and concerns about the lack of additional material to fight the sovereign debt crisis weighed. There was a light economic docket with M3 Money Supply falling a little YoY to 1.7% from 1.9%, with 1.9% expected. Italian wages fell a little too (by one basis point) and Italian Consumer Confidence also declined from 109.1 to 105.9 – below expectations of a 108.9 reading. All in all a weak day for the euro, although the rate hike speculation of late continues and manages to keep the currency relatively buoyant and strong, as will probably be the case looking ahead. At midday GMT the euro traded at $1.3721 to the dollar and was down to £0.8614 against the pound.

GBP : The pound lost ground today after Consumer Confidence data showed the largest fall since 1994 and concerns at the effects on growth of the government’s austerity measures weighed. Gfk Consumer Confidence fell from -21 to -29 in January. The dramatic fall was partly attributed to the increase in the V.A.T sales tax which was introduced this year from 17.5% to 20.0%. Recent poor data has led to speculation that the BOE may hold back on a rate hike because of fears of the effects of higher interest rates during an economic slowdown. At midday GMT the pound traded at $1.5923 to the dollar and ¥130.87 to the yen.

JPY : The yen strengthened today after its dramatic fall following yesterday’s downgrade by the S&P. Positive economic data may have been partly responsible as the yen staged an impressive recovery. The Japanese economy had a heavy docket last night with a large amount of news releases most of which were positive. The Jobless rate slowed in December to 4.9% whilst in the previous month it had been 5.1% and expectations were for it to stay at that level. Household Spending decreased much more than expected in December, falling by -3.3% compared to only a -0.4% the month before and expectations of a -0.6% change. CPI fell to 0.0% but not as much as had been forecasted. Retail Trade fell substantially from 1.5% rise last month to -2.0% and 0.6% expected. At midday GMT the yen rose to ¥82.19 versus the dollar and rose to ¥112.76 against the euro.

by Joaquin Monfort, Analytical expert , Forex4You © 2011

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