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By Gaurav Kashyap, Head of DGCX desk at Alpari ME DMCC
After making an intraweek high of 1.3689, the Euro closed at 1.3388 against the US Dollar, the lowest level since January 2nd. The Australian Dollar slipped further during the week to close at 0.9661 against the US Dollar, its lowest level since 2011 and also the 100 week moving average in the cross.
Gold shed almost 2% last week, closing at 1623.50 after testing levels as low as 1532 while Crude Oil also closed below 79 levels per barrel. The end of the month, which also happened to be the end of the quarter sawn US equities close the week on a sluggish note; the S&P closing the week at 1,131.42m marking the worst quarterly performance since Q4 of 2008 for the S&P.
Euro crosses risk appetite soars on additional liquidity measures
Some of the positives to come out of the week were Merkel's success in getting the vote passed in Germany's lower house to double the EFSF's buying power to EUR440bn in a move that shows some signs of progress for the EU. This after Papandreou met with Merkel and issued additional deficit cut measures, particularly levying a new property tax which would see close to EUR1.8bn being shaved off the deficit.
Earlier in the week, it was announced that the special purpose vehicle would be launched to provide additional liquidity measures and this saw risk appetite, particularly in the Euro crosses soared, taking EURUSD as high as 1.37. The movement was short-lived however as the markets moved back to the fundamentals and a deteriorating growth outlook for the global economy. Data from the EUR showed that the economic confidence in the EU dropped to its lowest level in nearly two years to -19.1 (v -18.9 prev). Euro-zone economic confidence also dropped to 95.0 (v 98.4 prev), while there were drops in the EU business climate indicator (-0.06 act v 0.06 prev) and EU services confidence, which also dropped (-5.9 v -2.7 prev).
US GDP reading increase
Across the pond, the data was more mixed this past week with a slightly negative tone. US Durable goods orders, so often a strong bearing as to future US output levels, dropped to -0.1% (v 4.1% prev). A closer look at the number would suggest that the weaker reading was as a result of decreasing demand for large defence goods and autos while orders for tech goods increased to 5.5% (up from -7.3% in July) while orders for communication goods increased to 7.8% (up from -21.1% in June).
Thursday's US GDP reading showed an increase to 1.3% (prev 1.0%) while the Chicago Purchasing manager's index, a measure of the business conditions across Illinois, Indiana and Michigan, increased to 60.4 v 56.5 previously. A reading above 50 in the index usually signals growth and will be positive for the growth outlook in the US, especially with an expanded US GDP reading released the day earlier.
Personal income dropped to -0.1% v 0.3% prev while personal spending in the US also dropped to 0.2% v 0.8% prev. And finally, the US Michigan Consumer confidence reading increased slightly to 59.4 v 57.8 prev. Earlier in the week, housing data from the US showed that new home sales dropped to 295K v 302K prev, a drop of -2.3% MoM v -0.3% prev. And finally, the US jobless claims dropped 37K to 391K (423K prev) and the labor department on Thursday said that the US labor market added more than 192K jobs more than initially reported in a one year period ending March 2011.
Chinese manufacturing, Canadian GDP up
Elsewhere around the world, Chinese PMI manufacturing data increased to 51.2 v 50.9 prev.
Staff
