FOREX weekly review (01.07 – 05.07.2013)

The greenback rose toward its strongest in more than a month against the yen and euro amid bets an improving U.S. economy will prompt the Federal Reserve to curb stimulus.

The solid US employment data came in to confirm the incipient recovery in the US economy, although many traders may argue that the pace it’s somehow slow, it is a recovery nonetheless. And it continues to widen the gap with the rest of its peers.

According to BBH Global Currency Strategy Team, “The jobs data will strengthen expectations of tapering Fed asset purchases, but we still think the talk of a move later this month is pre-mature. US yields are rising sharply in the aftermath of the jobs report… Looking at the Fed funds and Eurodollar futures curve, the market perceives an increased likelihood of a late 2014 hike in the Fed funds rate, which is completely discounted by early 2015”.

the Labor Department said nonfarm payrolls swelled by 195,000 jobs in June, while the unemployment rate edged slightly higher to 7.6%.

Moreover, the Labor Department revised job gains for May and April sharply higher. Economists had expected June job gains of 155,000.

Wednesday data showed the US private sector added more jobs than expected in June. The ADP employment report printed a 188K gain in June, against the 160K expected.

The Commerce Department has informed that the trade deficit expanded to $45.03 billion during May from $40.15 billion in the previous month (revised). The print also missed the median at $40.10 billion.

The June ISM Services Index was reported at 52.2, below the 54.0 forecast, and down from the May reading of 53.7.

EURO:

The European Central Bank President Mario Draghi made an unprecedented pledge to keep interest rates low for an extended period.

The common  currency dropped the most in almost three weeks versus the yen as Draghi said the ECB’s monetary policy stance will “remain accommodative” for as long as needed to spur growth.

The ECB’s President Mario Draghi predicted that interest rates will remain low for an extended period of time. Speaking at a press conference at the central bank’s offices in Frankfurt’s Eurotower, Draghi said that key interest rates will remain at their current levels or lower for as long as necessary. Policy makers left their main refinancing rate at 0.5% at today’s meeting.

In the U.K., the Bank of England signaled that it will leave interest rates at a record low for longer than investors had expected.

On Friday data released by the Deutsche Bundesbank showed, on an annual basis German Factory Orders n.s.a. fell 2% in May, down from the 0.3% drop in April.

Month-over-month German Factory Orders decreased 1.3% in May, up from the 2.2% decline registered the previous month. Analysts expected 1.2% growth.

Markit Services PMI in June rose to 48.3, comparing to 47.2 in Mayе. However uncertainty with Greece still makes some pressure on euro.

POUND:

The pound slumped the most in 18 months against the dollar after the Bank of England said rising bond yields around the world will weigh on the nation’s economic outlook.

On Thursday the Bank of England chief Mark Carney said increases in market rates weren’t warranted. He is also expected on Thursday to leave its lending rate unchanged, at a record low 0.5%.

Data released showed Markit Services PMI increased to 56.9 points in June, from 54.9 points in May. The result is better market consensus of 54.5 points.

Moreover, BoE said about improving of credit conditions in Q2. Demand rises across the board corp credit available +14.2% vs 12.3% prev corp credit available next 3 months +3.5% vs +3.1% prev.

YEN:

The yen lost its grounds versus the dollar. Bank of Japan Gov. Haruhiko Kuroda said earlier in the day the local economy was improving and that consumer prices were expected to gradually rise as the effect of the central bank’s quantitative easing took hold.

BOJ also raised economic assessment for 8 out of 9 regions in quarterly report.

COMMODITY CURRENCIES

AUSSIE: Australia’s dollar weakened as the Reserve Bank flagged declines in the currency after keeping borrowing costs unchanged at a meeting today.

“It is possible that the exchange rate will depreciate further over time, which would help to foster a rebalancing of growth in the economy,” Stevens said in a statement today.

LOONIE: The Loonie soared to C$1.0607, its highest level since October 2011, as the USD strengthened in the wake of better-than-expected NFP and after Canadian numbers came in slightly above expectations.

Source of information>>