Daily Forex market overviews by MasterForex.com

Overview of the main economical events of the current day - 22/02/2013

EUR reaches a 6 week low against USD

EUR reached a 6 week low vs USD after weak statistics that show that business activity in the region is declining more than expected. The business activity index feel from 48.6 to 47.3, while market participants were expecting an increase up to 49. The decline is happening among all sectors and numbers are below expectations providing the market with a sell off opportunity.

EUR also continues its decline vs JPY for a third day in a row on the back of the possibility of cutting the interest rates in order to stimulate UK economy.

JPY itself is showing gains against most currencies after media reporting that ex Deputy Head of Bank of Japan Mr. Ivata and the president of Asian Bank for Development Mr. Kuroda are two main candidates for the Head of Bank of Japan position. We’ll also mention that Mr. Ivata supports the idea of purchasing foreign securities to stimulate growth.

USD showed some decline after weak manufacturing activity data, which came at negative 12.5 compared to negative 5.8 a month before and expectations of growth to 0.7 in February.

By MasterForex Company

Overview of the main economical events of the current day - 25/02/2013

EUR continues its decline

EUR reached a month low against USD after ECB announcing that financial institutions are to repay less of their 3-year loans this week than expected. This erased the gains EUR showed earlier on higher than expected IFO index from Germany – as a result, EUR plummeted on news that banks are to repay only EUR 61bn per year – a level almost twice below than expected.

EUR also declined against JPY after European commission published a report which suggests that region’s economy is contracting for a second year in a row. According to the report EU’s GDP is to decline by 0.3% in 2013 and grow by only 1.4% next year.

JPY itself lost its strength on the eve of the meeting between American President and Japanese Prime Minister. Probably the most import piece of news for the currency in short term is the upcoming announcement of the next Head of Bank of Japan which might be made during this week.

By MasterForex Company

Overview of the main economical events of the current day - 26/02/2013

EUR erases its gains after disappointing Italian elections

EUR heavily declined erasing its recent gains on the backdrop of Italian elections which ended with a split between center-left and Berlusconi. Investors took a lack of unified decision as a hint of upcoming political battles and quickly reacted to the news.

JPY continues its decline reaching May 2010 levels against USD following the rumors that Japanese Prime Minister is to select someone supporting quantitative easing as a next Head of Bank of Japan.

GBP declined to a 2 year low after Moody’s cut sovereign bond rating of UK by 1 notch. While the outlook remains stable, the agency sees risks for economy recovery due to slowdown in growth rates. As the agency expects slow recovery at least until 2016, they forecast rising government debt in the coming years which is likely to result in continuing spending cuts.

By MasterForex Company

Overview of the main economical events of the current day - 27/02/2013

EUR swings back and forth

EUR rose from 7 weeks low vs. USD after investors bet on the fact that ECB will intervene to limit losses from so-called “periphery bonds”. The yields in Italian and Spanish bond markets are slightly up, while Italian stock market plummeted down after former Prime Minister Berlusconi announced that a union between left-centric party and him is impossible.

USD was under pressure after Head of FOMC Ben Bernanke announced that US economy will continue to recover this year, however labor market and the economy in whole are still weak, meaning that a next round of easing might be required. He also said that automatic spending cuts that are expected to be implemented starting this Friday are likely to negatively affect the rates of recovery.

As a result of the turbulence in forex markets, JPY appeared as a defensive option, which allowed it to show some gains.

By MasterForex Company

Overview of the main economical events of the current day - 28/02/2013

Euro continues to rebound

EUR continues to grow vs USD thanks to positive news coming from both Italy and Germany. Italy successfully placed its bonds on the back of rising economic confidence, while German Gfk released its consumer confidence figures that show an increase in the numbers – which comes in line with confidence estimates of two other German organizations (Ifo and ZEW). Looks like we can expect to see some recovery in German economy after somewhat disappointing growth rates in 4Q.

JPY was rising against most major currencies on upcoming appointment of Head of Bank of Japan and expectations that Mr Kuroda (who is nominated by the government and is against aggressive easing) is likely to take the position.

GBP grew against USD after a member of Bank of England proposed re-setting the target inflation level.

While two major figures were speaking yesterday – namely, Head of FOMC Ben Bernanke and ECB’s Head Mario Draghi, neither of them made any surprising comments which resulted in almost no reaction from market participants.

By MasterForex Company

Overview of the main economical events of the current day - 01/03/2013

USD shows gains as other currencies decline

EUR is falling against USD marking first monthly decline since July on the back of the Italian political battles as well as decreasing inflation in EU, which potentially opens doors for increased CB interventions. Moreover, Head of ECB Mario Draghi announced that no tightening of the monetary policy is planned in the near term. Even despite somewhat weak GDP data which shows that American economy grew by only 0.1% in 4Q compared to expectations of 0.5%, USD was rallying up.

GDP traded somewhat flat as Gfk consumer confidence index came at -26 in February – same level showed a month before and widely expected.

JPY remains under pressure after Prime Minister Shinzo Abe proposed Hariko Kuroda (Head of Asian Bank for Development) as a new head of Bank of Japan. Kuroda is known to be a supporter of additional stimulus and says that Bank of Japan has wide opportunities to do so.

By MasterForex Company

Overview of the main economical events of the current day - 04/03/2013

Both EUR and GBP declined rapidly on poor statistics

EUR is falling fast vs USD after Friday reports show declining manufacturing activity on the back of a record high unemployment level. According to Eurostat, unemployment reached 11.9% in January which is the highest number ever recorded in EU history. As a result, the union currency is entering its fourth consecutive week of decline against USD.

GBP is also under serious pressure after Markit PMI for February came at only 47.9 – a level below a threshold of 50, which separates growth and decline areas. The market expected the number to come at 51.0, however the number of both new external and internal orders is falling, while companies are firing people at highest rates in the last 3 years. This resulted in market participants becoming more sure that Bank of England is likely to introduce new easing measures during the next meeting which takes place this Thursday.

By MasterForex Company

Overview of the main economical events of the current day - 05/03/2013

Italian political battles put pressure on EUR and GBP

EUR is swinging back and forth against USD on the back of Italian politicians who can not form a coalition as well as upcoming GDP data for 4Q which is likely to show a recession in 4Q12. Market participants are waiting for the Financial Ministers meeting in Brussels and a number of Central Banks discussing their policies during the week. Finance Ministers are deciding whether they should give more time for Ireland and Portugal to repay their aid loans.

JPY is rising against almost all major currencies after Chinese index CSI 300 reached a 2 year low. JPY was increasing even after next Head of Bank of Japan Haruhiko Kuroda made a promise to pursue a softer monetary policy in order to defeat the deflation in the country.

GBP rose vs both EUR and USD as investors are afraid that the new Italian government will form for too long which potentially can result in slower recovery of the 17 economies of the currency block. Moreover, according to a recent report, housing prices in UK rose in February, showing the first gain in 9 months, which allowed for further gains.

By MasterForex Company

Overview of the main economical events of the current day - 11/03/2013

Labor market data supports USD

USD was enjoying quite a growth on Friday fueled by strong labor data which showed higher than expected employment rates in February, while unemployment level declined by 0.2% reaching 7.7% - a record low level since beginning of 2008. This resulted in speculations that FOMC might end its extremely soft monetary policy sooner than previously expected, allowing USD for gains, which reached a record high level vs JPY since August 2009.

EUR on the other hand was growing vs USD after dipping on the labor data publications even despite Fitch cutting Italy’s rating from “A-“ to “BBB+” with a negative outlook. The agency says that their outlook reflects deeper and longer recession than expected before, while political uncertainty is also amongst the reasons for the cut.

Today keep an eye on Japan’s Parliament (that might elect a new Head of Bank of Japan) as well as BoJ’s monetary policy meeting minutes, while from Europe expect some trade and manufacturing numbers.

By MasterForex Company

Overview of the main economical events of the current day - 12/03/2013

USD remains strong, however EUR outperforms it

USD trades more or less flat vs JPY remaining close to a maximum level since 2009 after hints that American economy is gearing up resulted in increased demand for USD. Market participants are also waiting for retail sales figures, which are believed to show improvement in February. Also keep an eye on upcoming retail prices data, which is also likely to show increase.

EUR grew vs USD erasing some Friday losses after US bond auction which ended up with slightly decreased average yield.

JPY trades close to 3 week low vs EUR after disappointing statistics from Japan. According to data, manufacturing orders are down 13% mom in January compared to expectations of only 1.7% - this is the highest drop in 8 months. Moreover, Haruhiko Kuroda (a most likely candidate for Head of Bank of Japan position) once again announced that more aggressive monetary policy is necessary, putting more pressure on the national currency.

By MasterForex Company

Overview of the main economical events of the current day - 13/03/2013

JPY finally shows some gains

JPY has shown gains vs USD for the first time in 5 days after an opposition member announced that his party will vote against Deputy Head of Bank of Japan candidate Ivata, who is perceived by the market as a supporter of softer monetary policy.

EUR on the other hand is declining vs USD erasing recent gains on the back of German Minister of Finance saying that the lower house of Bundestag might make a decision regarding Cyprus during next week. He also added that inflation remains under control which is a sign that ECB might follow up with additional stimulation.

GBP is also under pressure thanks to poor manufacturing statistics that show a 1.2% mom and 2.9% yoy contraction in January with the main reason for the decline being lower oil and gas production, which was seen as a sign that the economy is entering into a 3rd recession in the last 5 years.

By MasterForex Company

Overview of the main economical events of the current day - 18/03/2013

EUR was quite strong during most of last Friday, however this is likely to change today due to Cyprus news

USD reached a 7 day low vs EUR on Friday mostly on negative market sentiment as market participants are waiting for upcoming FOMC meeting during which they expect the terms of quantitative easing program to be revised. With these negative expectations in mind, investors were just waiting for a trigger to come and they found one in CPI rising by 0.7% mom in February compared to expectations of just 0.4% growth. This piece of news resulted in a prompt sell off of American currency.

GBP also rose vs USD on Friday thanks to Head of Bank of England Mervyn King who decided to calm the markets – and succeeded at that too. While he was known as a supporter of weaker GBP, King said that it’s market job to price the currency – not theirs. Moreover, he also commented that he finds current trade levels as comfortable, further calming the markets.

However probably the most important piece of news that is likely to set a trend for at least this week is an unprecedented step in a long-running Eurozone crisis – international lenders agreed to provide a EUR 10bn bailout package for Cyprus, but demanded that the nations pays for the help by taxing bank deposits. As a result, Cyprus government plans to impose a one-time 6%-9% tax (depending on the amount of a deposit) on all deposits in the country. This potentially creates an extremely unpleasant precedent – not only for Cyprus, but for other troubled EU economies as well, such as Italy and Spain. Banking customers realizing that government nationalizing part of their deposits in order to pay the debt is a real possibility might try and secure their funds by withdrawing their banking deposits – creating a Europe-wide banking run, which is could have unimaginable negative affect on recovery in Eurozone.

By MasterForex Company

Overview of the main economical events of the current day - 19/03/2013

EUR shows a 14 month record decline against USD

Just as we expected, EUR found itself in quite a tough spot after announcement that Cyprus government might nationalize part of the banking deposits in the country. Not only this situation shows that EU is far from recovery, but it also sets a not so pleasant precedent. As a result, EUR hit a 14 months low against USD and a 2 week low vs JPY. This Eurogroup’s decision was met with an extreme opposition which led to Cyprus government cutting small deposits tax rate from 6.75% to 3% in this proposed measure.

However not all is lost for EUR as the currency actually climbed a bit up after Cypriot government postponed its bailout meeting to today in order to have time to provide some proposals which will put the largest levy on large deposits as opposed to small ones. Moreover, EUR also found some support in debt placements by Italy and Spain, whose yields remained almost flat after the news, showing some stability in European debt markets.

GBP is enjoining some healthy growth rates as investors are running from risks and this trend is likely to continue at least for a short term. However, watch out for today’s UK CPI data – if the numbers come too low, even weak EUR is unlikely to protect the British currency from a sell-off.

By MasterForex Company

Overview of the main economical events of the current day - 20/03/2013

EUR reaches 3 months low vs USD

EUR heavily declined reaching a 3 months low vs USD on a rumors that Cypriot officials are unlikely to support the idea of a one time tax on banking deposits in the country – at least, in its current form. And indeed, news hit the wires in the evening – the Parliament voted against the idea. As a result, President of Cyprus invited party leaders for a meeting this morning, hoping to find some common ground. It looks like everything is about balance: Cyprus needs to find EUR 5.8bn to repay its foreign creditors and at the same time the government does not want to put a tax burden on small deposits in the country. At the same time, Central Bank of Cyprus says that if small deposits are not taxed as well, the government will not be able to collect the required funds. Eurogroup announced that Cyprus will be given a chance to leave small deposits untaxed, while Head of IMF supported the idea, proposing to put a 30%-40% tax on the largest deposits.

GBP on the other hand is feeling weak vs USD after reports that show growing inflation in February that reached a record high level since May, which puts additional economic pressure on households, slowing down the recovery. CPI rose by 0.7% mom in February after declining by 0.5% a month before. On a yoy basis, this means a 2.8% growth – negative news for GBP, however we were expecting some volatility on these numbers.

By MasterForex Company

Overview of the main economical events of the current day - 21/03/2013

Lots of market moving news made yesterday’s trading quite volatile

Market focus remains on EUR and Cyprus problems in particular. However, despite the fact that Cyprus government did not accept EU’s aid and the President was forced to start talks with party leaders and Head of Central Bank in order to find an alternative, the market seems to appreciate Cyprus looking for plan B resulting in EUR rising against USD. Moreover, there is a fair chance that Cyprus will find help elsewhere – and on a better terms: for example, Finance Minister of the island visited Moscow to prolong a EUR 2.5bn loan and to possibly secure some additional funding as Russia wants to protect its deposits in Cypriot banks.

USD remained somewhat flat after a two-day FOMC meeting as no changes were made to the monetary policy, which is a signal that officials do not believe that economy has recovered enough to cut the stimulus measures. Fed said they expect the unemployment to reach a required level of 6.5% only by 2015 and no rates increase is planned before that. As a result, FOMC is to continue its QE program in an attempt to fight high unemployment level, which sits above 7% since November 2008.

GBP’s volatility was extremely high, swinging the British currency back and forth. While GBP was declining in the morning, it jumped up on the release of Bank of England meeting minutes that show that most of the members are against increased bonds purchases. As a result, labor market figures did not have a strong effect on GBP even despite the fact that unemployment level declined less than expected in February.

By MasterForex Company

Overview of the main economical events of the current day - 22/03/2013

EUR is swinging back and forth vs USD

EUR is trading back and forth vs USD after showing a decline following weak PMI data from Germany, France and EU. Moreover, March numbers were a 4 months low for European Union, which is a signal that Eurozone is far from recovery. Nonetheless, EUR was able to offset most of the losses after a debt placement by Spain, which was oversubscribed with lower yields, showing growing investor confidence at least in Spain.

However Cyprus problem still remains probably the most important driver for European currency as EU government still hopes for a positive outcome during this weekend despite growing uncertainty as per recent survey 70% of Cyprus nationals would rather leave the Union.

JPY climbs up on comments of the new Head of Bank of Japan who says that exchange rate stability is a responsibility of Ministry of Finance, adding that purchase of foreign bonds by Bank of Japan might be seen as an intervention. Nonetheless, he still supports policy easing saying that the country needs to achieve a 2% inflation level in 2 years.

GBP showed gains vs USD thanks to strong retail sales data and lower than expected government borrowing level. According to the report, retail sales were up 2.1% in February compared to expectations of only 0.5% growth.

By MasterForex Company

Overview of the main economical events of the current day - 25/03/2013

EUR reaches a weekly high on Friday

EUR was showing quite a rebound on Friday fueled by optimism regarding the Cyprus situation. EUR was growing against all major currencies after Deputy Head of the ruling party announced that political forces are close to finding a consensus. However, soon another piece of news followed the wires suggesting that ECB after all declined measures proposed by the Parliament of Cyprus. Despite all this, official persons remain relatively calm, and try to pass this state of mind to the markets – for example, Minister of Finance of Holland denied rumors that Cyprus might leave EU.

Even unexpectedly declined German business confidence index, that reached 106.7 in March compared to 107.4 in February was not enough to put any serious pressure on European currency.

GBP used to trade at a 4 weeks high vs USD, however this quickly changed after Fitch Ratings announced they might cut UK’s AAA rating due to weak growth rates and unsettling debt forecasts. However this comes as a little surprise after UK said they expect their debt-to-GDP ratio to reach 100% in 2015-2016, which prompted a fast reaction from rating agencies saying that if the ratio climbs above 100%, a ratings cut is imminent. Fitch said they will wait until end of April to make a final decision.

By MasterForex Company

Overview of the main economical events of the current day - 26/03/2013

EUR shows a major decline on Monday

EUR showed quite a fall on Monday due to European leaders saying that saving Cyprus might set an example, fueling safety concerns regarding other large EU members. Head of Eurogroup announced that it is important to avoid risks in government sector and added that he believes that agreement on Cyprus might lead to a restructuration of the banking industry. Add to the mix Head of the Financial Committee of Cyprus Parliament saying that they might leave EU and rumors regarding Italian rating cut and you’ll get the picture why EUR is under pressure right now.

GBP was enjoining string growth vs EUR, however it actually declined against USD – poor mortgage and housing prices statistics took care of it. Nonetheless, this is likely just an immediate market reaction rather than a forming trend of some kind.

JPY is growing vs USD, offsetting previous losses as investors are using the currency as a defensive option given European uncertainty. We want to remind, that new Head of Bank of Japan Mr. Kuroda announced last week that he will do everything in his power to reach a 2% inflation level.

By MasterForex Company

Overview of the main economical events of the current day - 27/03/2013

EUR continues to decline as the situation in Cyprus develops

Just like we expected in the beginning of the story with Cyprus, European officials are making contradicting statements with the main concern being that saving Cyprus sets a negative example. As a result, EUR trades at a 4 months low vs USD. ECB promised to provided Cypriot banks with a much needed liquidity as they have EUR 68bn in deposits, while the largest banks will open only on Thursday, which is likely to result in a huge outflow from the savings accounts – hence the need for liquidity. Moreover, it looks like Bank of Cyprus will be restructured, while Laiki will be closed and its healthy assets transferred to a competitor.

As a result, many investors are concerned that European officials will continue to use this scheme in other problem countries. To make things worse, these officials are sending mixed messages: for example, Head of Eurogroup announced that the plan for saving Cyprus will be used as an example for other economies, while ECB commented that they do not agree with this point and that there is no reason to think that problems of Cypriot and French banks have anything in common. ECB also didn’t miss a chance to use the situation to once again announce, that they want to be an independent watchdog for European banks.

JPY declined vs most of major currencies as new Head of Bank of Japan gently starts promised economy interventions in an attempt to reach a 2% inflation level in the next 2 years. GBP was also under pressure after disappointing CBI retail sales data, which shows no growth in March compared to a year before. However, UK Finance Minister was able to affect the market mood by saying that he thinks that Cyprus saving plan is not completely thought-out as it would leave the island with quite a debt coupled with rapid GDP decline.

By MasterForex Company

Overview of the main economical events of the current day - 28/03/2013

EUR is still under serious pressure

EUR continues to decline on the situation in Cyprus and political uncertainty in Italy. Cypriot government plans to take aggressive steps in order to prevent a capital outflow from the country: starting today, for the next 7 days a special banking regime is taking place – all non-cash operation with foreign parties are prohibited, special limits on cashing and credit card operations will be placed and clients will not be able to withdraw their deposits before the maturity date. This is an unprecedented solution which surely makes market participants nervous, resulting in a sell-off of the European currency. Add a real possibility of Italy loosing its rating coupled with political battles in the country and a really weak EUR emerges.

GBP reached a 2 months high vs EUR as investors are looking for defensive options. Yet again we want to warn that a single piece of negative UK statistics might very well change investor’s view of the currency as a defensive asset. Indeed, despite showing growth vs EUR, GBP declined vs USD on quite poor 2012 GDP numbers – only 0.2% growth compared to a 1.0% gain in 2011. As a result, investors remain concerned that UK’s economy might enter a third recession in the last 5 years – hence the volatility of the currency as a defensive option.

By MasterForex Company