{"id":6850,"date":"2010-02-15T09:56:52","date_gmt":"2010-02-15T14:56:52","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=6850"},"modified":"2010-02-15T09:56:52","modified_gmt":"2010-02-15T14:56:52","slug":"forex-weekly-market-review-feb-15th-2010","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2010\/02\/15\/forex-weekly-market-review-feb-15th-2010\/","title":{"rendered":"Forex Weekly Market Review Feb 15th, 2010"},"content":{"rendered":"

There was a slight divergence in riskier assets last week as the US equity markets where able to rebound from their recent large selloff, while the Euro was punished for the lack of action by European countries. Commodities found ground and were able to rebound slightly, as both the petroleum complex and gold were able to attract some investor interest.<\/p>\n

The markets started the week on the defensive side as the prior week\u2019s selloffs continued to weigh on investors\u2019 minds.\u00a0 In addition, the U.K came into focus on Monday as market participants were forced to absorb weekend news that was not favorable to the sterling. There are now two major things that are weighing on the: Politics and economics. The risks of a hung parliament have been highlighted in the latest polls, and have spooked market participants. One must note, under the US presidential system, a divided government is sometimes seen as a positive development in terms of checks and balances.\u00a0 This does not hold in a parliamentary system where a hung parliament spells policy paralysis and confusion.<\/p>\n

In terms of economics, the disappointment over Q4 GDP and debt issues continued to linger on the markets throughout the week. Even though many are comparing the U.K\u2019s situation to those of Greece and Spain, there is still one important difference between the UK and euro zone members that is often lost in the polemics.\u00a0 The UK is a currency issuer while Greece and Spain are not.<\/p>\n

On Tuesday the market started to rebound as the Euro rallied together with the equity markets.\u00a0 Market participants pushed the markets higher as they were anticipating positive comments from European officials on Thursday.\u00a0 On the economic front,\u00a0 Germany reported a better than expected December \u00a0trade surplus but while the data looks good on the surface at EUR16.7 bln, it underscores a key source of tension in the euro zone.\u00a0 Officials from the major countries have long discussed the need to address global imbalances.\u00a0 These imbalances also exist within the euro zone itself.\u00a0 The German commitment to its export sector has enabled the country to export roughly 40% of its GDP (roughly in line with China).\u00a0 However, its successful hyper-competitiveness also forces other countries such as Greece to run trade deficits.\u00a0 The German seasonally adjusted trade surplus narrowed just EUR0.3 bln from EUR17.0 bln in November led by a 3.0% m\/m gain in exports (vs. 1.1% in November), more than offsetting a 4.5% gain in imports (after a downwardly revised -6.5% drop.)<\/p>\n

In contrast to Germany, the UK unexpectedly recorded a wider than expected trade deficit in December despite the weakness of the pound.\u00a0 The December visible trade deficit widened to GBP7.23 bln vs. GBP6.7 bln expected and from GBP6.8 bln in November.\u00a0 Additionally, the trade deficit with non-EU countries deteriorated despite evidence of growth in China and the US.\u00a0 The non-EU deficit widened to GBP3.5 bln from GBP3.1 bln. Imports from non-EU countries jumped 7.6% as aircraft orders and oil rose. \u00a0Still, on the export front, the ONS reported that total exports in 2009 fell by the most on record or 9.5% y\/y.<\/p>\n

On Wednesday the markets consolidated as investors awaited an impetus to move the markets forward.\u00a0 The US released its trade data which showed that the deficit widened in December, by more than expected. The deterioration was largely a function of oil imports.\u00a0 Simply put, the US imported oil products at higher prices.\u00a0 The non-energy deficit was largely steady at $16.7 bln from $16.5 in November.<\/p>\n

On Thursday the market rebounded on news that EU leaders pledged they would back Greece.\u00a0 The S&P 500 Index rallied 10 point to 1078 and the Dow moved up 106 points to solidly reclaim the 10,000 level.\u00a0 Euro-zone countries pledged to support Greece through its debt crisis, but stated that they don\u2019t need to provide financial support right now.\u00a0 The Euro initially rallied early in the trading day on the back of the news, but was not able to hold on to its gains throughout the trading session.<\/p>\n

In addition, Chinese inflation data captured headlines on Thursday, but even more importantly loan data that showed new Yuan loans surged in January, supported the PBOC\u2019s recent decision to tweak bill rates and tighten reserve requirements for some banks.\u00a0 New Yuan loans more than tripled to CNY1290 bln in January from CNY3798 bln in December likely reflecting a surge in borrowing ahead of perceived tightening later this year.<\/p>\n

After Thursday\u2019s bounce, the markets retraced on Friday. China\u2019s Central Bank raised its reserve requirement by a further 50bp (to 16.5% for big banks). It is the second time the central bank has tightened its monetary policy this year. The move came as a surprise to many. The PBOC move was also released only \u00a0a couple of days after the January trade figures confirmed a positive contribution to growth from external demand, but the surplus was actually weaker than expected, at $14.17bn (from $18.4bn) with export growth running at 21% y\/y (from +17% y\/y). While the economy is expected to expand by almost 10%, today\u2019s policy decision confirms the strong commitment to moderate buoyant lending growth. This could have a negative effect on the global markets, dragging them lower.<\/p>\n

Forex<\/strong><\/p>\n

Economic growth in the euro zone slowed in the final quarter of 2009.\u00a0 Combined gross domestic product in the 16 countries that use the euro rose by a weaker than expected 0.1% in the fourth quarter from the previous quarter, and was down 2.1% on a year-to-year basis, according to the European Union\u2019s statistics agency Eurostat. In the third quarter, GDP rose by 0.4%.<\/p>\n

\"112\"<\/a><\/p>\n

The Euro was punished on this news as well as the lack of specific action from European leaders, but managed to hold on around prior support. From a technical point of view the EUR\/USD is now flirting with prior support. Even though this chart is over extended a clear break to the down-side could lead to lower levels.<\/p>\n

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The Australian Dollar surged after Australian employers added the most workers in more than three years in January.\u00a0 The number of people employed rose 52,700 from December, more than three times the 15,000 median\u00a0estimate of economist surveyed. The\u00a0jobless rate fell to an 11-month low of 5.3 percent from 5.5 percent, the statistics bureau said in Sydney today. When observing the chart below, one can see that the Australian Dollar rallied after the employment figures, but is now trading on major resistance.<\/p>\n

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Daily Forex Market Analysis provided by eToro<\/a><\/strong><\/p>\n

Disclaimer: Trading in the Foreign Exchange market might carry potential rewards, but also potential risks. You must be aware of the risks and are willing to accept them in order to trade in the foreign exchange market. Don\u2019t trade with money you can\u2019t afford to lose.<\/p>\n

\u00a9 2009 eToro Blog.<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

By eToro – There was a slight divergence in riskier assets last week as the US equity markets where able to rebound from their recent large selloff…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-6850","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/6850","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=6850"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/6850\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=6850"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=6850"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=6850"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}