Browse
related articles
By Gaurav Kashyap, Alpari ME DMCC
Eurozone data releases improve, German GDP up
Judging by the improving data releases from the Eurozone this past week, one would have expected to see the EURUSD stage a recovery and pare some of its losses from the past few trading sessions. Barring Thursday's weaker industrial reading (MoM -0.2% act v 0.6% prev / YoY 5.3% act v 7.7% prev) the data flow from the Eurozone would point to a somewhat stronger recovery - German GDP readings showed improvements (QoQ 1.5% act v 0.4% prev / YoY 5.2% act v 3.8% prev) which teed up for an improved overall EU GDP reading (QoQ 0.8% act v 0.3% prev / YoY 2.5% act v 2.0% prev).
The EURUSD was able to rally slightly on the improved data flow, before sliding further to close the week at 1.4117, its lowest level in more than six weeks as the Ecofin meetings are scheduled to take place in Brussels starting from Monday (assuming the arrest of IMF Chief Dominique Strauss-Kahn doesn't hinder matters). Amongst the topics of discussions will be Greece's rescue plan and the details of Portugal's bailout.
Bank of England inflation report sets hawkish tone
In the other major release of the week, the Bank of England's inflation report set the tone for some gains in the GBPUSD pair, taking it past 1.6500 levels as the report carried slightly hawkish overtones. Amongst some of the major points in the report, inflation was expected to fall back to 1.9% over the next two years while growth should pick up during 2011, but at less than what was forecast in February. The hawkish sentiments were short lived, and the upward momentum ran out of steam, as Dollar shorts continued to be covered and the Pound moved lower on weakening equity markets, taking the GBPUSD below 1.6200 levels.
Australian Dollar weighed down by commodities sell-off
The Aussie was weighed down on deteriorating economic data and the commodities sell off. AUDUSD depreciated more than 1.30% on the week, triggered by a dismal employment report which showed that hiring shrank during the month of April. The Australian economy lost some 22.1K jobs, making it the largest drop in nearly two years. Worse still was the drop in full time employment, which showed a loss of -49.1K jobs as compared to a previous reading of 32.1K. It was the largest monthly decline since February 2009. The unemployment rate held steady at 4.9%.
The negative sentiments surrounding the weaker jobs report seemed to be reversed with the AUDUSD posting some gains on the back of a surprise announcement that China raised their bank reserves yet again on Thursday. In a largely unexpected move, the PBOC hiked rates by 50 basis points, despite a slew of weaker economic data from the day before. With Chinese CPI coming in a tick lower at 5.3% act v 5.4% prev and Chinese industrial production dropping to 13.4% act v 14.8% prev, many analysts expected no action from the PBOC on the soft patch of data. The AUDUSD was able to rally to just under 1.07 levels, before closing the week just above 1.05 levels on weakening commodity prices and risk aversion.
US inflationary data points to ongoing increase
And finally, inflationary data showed increases in price growth in the US. Year on year consumer prices increased to 3.2% act v 2.7% prev while month on month consumer prices (ex food & energy) increased to 0.2% act v 0.1% prev. The uptick in prices initially saw slight build ups in risk appetite, but failed to solidify the sentiment with US equities and currency markets moving back lower ending another week lower.
Staff
