Forex-Metal Market review for 15 – 19. 11, 2010

The European debt crises continued to influence the trading dynamics during almost the whole previous trading week. Mainly, concerns over the possibility that Ireland would ask the European community for immediate financial help, continued to pressure the euro on Monday. And the EUR/USD pair decreased to the level of$1,3650 during the morning session. Minimum was set at the level of $1,3600. At the same time the sterling was under pressure as well, and the GBP/USD rate dropped to the $1,6045 mark. The released UK fundamentals had a negative influence on the sterling: the Rightmove House prices showed an unexpected decrease.

On Sunday and Monday strong economic data was published in Japan. The Gross Domestic Product for the 3-d quarter rose for 0.9%, against for the expected rise for 0.6%. The annualized GDP increased for 3.9% against the forecasted 2.5%. At the same time the Industrial production in Japan for September annualized increased for 11.5% compared to the 11.1% last month. These signs of the Japanese economy rehabilitation decreased the demand for the save-haven currencies, and the Japanese yen rate dropped.The USD/JPY pair traded around the level of Y83.00.

During the Seoul Summit the G-20 leaders came to a conclusion to avoid the race to currency depreciation. But they were far from determining the overall economic policy.

According to the published information on Monday, the US Advance retail sales for October turned out to be at the level of 1.2% against the forecasted 0.7%. At the same time the Empire Manufacturing index for November dropped to -11.14 against the expected level of 14.0.  Following these reports the US dollar weakened against its competitors.

On Tuesday the euro showed some stabilization, and the EUR/USD pair demonstrated growth to the $1,3650 mark. Positive forecasts for the European news’ releases supported the euro. According to the expectations, the Euro-zone fundamentals turned out to be positive. The Euro-zone Consumer price index for October resulted in 1.1%, when the forecasted level was 1.0%. The Euro-zone ZEW Survey (Economic Sentiment) for November demonstrated increase to the level of 13.8 against the forecast of 2.0.  Therefore, the euro showed considerable strengthening against the greenback. Therefore, the greenback lost its previously won positions.

On the same day the sterling showed some temporary positive rally, since the following UK fundamentals were released: the Consumer price index for October turned out to be 0.3% against the forecasts level of 0.2%. Therefore, the GBP/USD pair reached its maximum at the $1.6085 mark.

Meanwhile, the decrease at the Stock markets and the weakening of the US dollar resulted in the drop of the metals. Gold rate decreased to the level of $1355.85 per ounce and silver rate dropped to $25.44 per ounce.

Market participants were closely watching the European Finance ministers’ meeting, since no bailout amount for Ireland had been announced, and the situation was uncertain. Investors were left to speculate about the future.

Reinforced concerns over the uncertainty of the European budget crises continued to pressure the euro on Wednesday and rendered strength to the US dollar. The EUR/USD pair dropped to minimums of $1.3460. Wednesday saw temporary strengthening of the sterling, which was supported by the released UK economic publications and minutes of the Bank of England report. The UK jobless claims for October showed unexpected decrease for 3.7K amid forecasts of 6.0K.

The high-risk assets showed decrease against the greenback, due to the pressure by the growing concerns that the People’s Bank of China might reinforce monetary policies and raise principal rates. As a result, the New-Zealand dollar and the Australian dollar dropped.

The negative US economic releases during the second part of Wednesday resulted in a drop of the greenback against the euro and the yen. The consumer price index for October resulted in 1.2% compared to its forecast of 1.3%. The US housing starts for October dropped to 519K against the forecasted increase to 598K and previous month’s level of 588K. October building permits decreased as well.

The euro extended its rally from Wednesday and reached maximums at $1.3667 on Thursday. Market participants’ optimism was a result of the confirmation, that Ireland would be supported, which could prevent the spread of the debt crises in other European regions. Ireland central bank’s Governor stated, that the government would ask for the considerable financial aid from the IMF and the EC.  The greenback was weakening against the background of the euro strengthening and stabilization of the European financial aid situation with Ireland. The American dollar was also under pressure in anticipation of the US economic docket release later on Thursday. In particular, the increase of the initial jobless claims was forecasted.

The sterling followed the euro growth and the GBP/USD pair reached the maximums of $1.6028. The UK retail sales advanced for 0.3% in October against the forecasted growth for 0.2%. At the same time the public sector net borrowing grew above expectations.

By the end of the day the greenback managed to rehabilitate against the euro and showed growth against the yen after the release of the US fundamentals. Against the expectations, the initial jobless claims dropped and Philadelphia Federal index demonstrated considerable growth to 22.5 against the expected 5.0 level.

The released on Friday positive fundamentals managed to increase the investors’ optimism, which resulted in the temporary growth of the euro and the sterling. In particular, the German producer prices grew above expectations.  But the Peoples’ Bank of China increased its requirements for the commercial banks, which had a negative influence on the Stock markets, and the demand for the save-haven assets grew. By the end of the trading week, the EUR/USD pair traded below the $1,3700 level, and the GBP/USD pair dropped below the $1.6000 figure.