US data turned out better than preliminary forecasts. | IFCM
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US data turned out better than preliminary forecasts. - 3.1.2014

Yesterday's economic data on the US were better than the preliminary forecasts. This boosted the US dollar index (USDIDX). However a single movement was failed. The US dollar strengthened against European currencies and weakened against the Japanese yen, the Australian and Canadian dollars. The UK PMI turned out much worse than expected. It fell in December down to 57.3 points from its three-year high at 58.1 points in November. In this regard, there was a correction movement started on the British pound (GBPUSD), then on the Euro (EURUSD) and other European currencies. Another negative factor for the euro was joining Latvia the Eurozone. Market participants believe that it will cause additional spending.

USDIDX, Daily

GBPUSD, Daily

We note that yesterday's decline of the British pound vs. the US dollar was the greatest for the last 12 weeks. Representatives of major banks do not exclude that it may continue to around 1.62. According to their opinion, another role on it may be played by the plans of the British Prime Minister David Cameron to allocate mortgage loans totaling about 1 billion pounds for the lower rates in the real-estate market. Yields on English 10-year government bonds reached 3.08%. The highest level since July 2011. We note that today at 9-30 GMT (0) the UK data on loans, mortgages and construction PMI are expected. Preliminary forecasts are moderately negative.

We believe that market participants yesterday decided to use a weekend in Japan and gain profit on the strengthening of the yen vs. the US dollar (USDJPY). In previous reports, we noted that a number of large banks considered the rate (106 yen per dollar) acceptable. The correction started near this level. Prior to this, the yen has been rising (weakening against the US dollar) nine consecutive weeks. Probably its yesterday's drop was occurred due to profit-taking, as there were no major news. The Australian Dollar (AUDUSD), following the Japanese yen, also strengthened against the US dollar. As we suggested in yesterday's review, it may be caused by " technical " factors.

USDCAD, Daily

Strengthening of the Canadian dollar (USDCAD) was occurred due the positive US industrial production data. America is the main trading partner of Canada, that means there were some fundamental reasons. We note that the Canadian currency fell against the US dollar by 6.6% in 2013. This is the largest decline over the past five years.

The significant macroeconomic data in the US today are not expected. However, we are expecting the Fed Chairman Ben Bernanke’s speech at 19-30 GMT. Its hard to say whether it will affect currency markets. Bernanke leaves his post in late January. Janet Yellen will be the new Fed chairman. She will be the first female chairman.

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