“USD Ends Week With Falls”
The US Dollar ended a volatile trading week posting falls against most major currencies as a lower than expected GDP for Q4 came just two days after Fed warnings of no rate change until 2014. What had started as a strong week for the USD, as investors sought out safer positions in the currency markets, ended with falls in most currency pairs.
Although Q4 growth year on year was up 2.8%, much of that growth can be attributed from businesses replenishing inventories and not on purchases of capital goods, which indicates the economic recovery gathering pace. As a result of worse than expected news from the US and some serious profit taking by investors, the EUR/USD was up 0.847%, trading at 1.3220, putting real pressure on the 1.35 resistance level. The Euro was boosted by encouraging news from Greece, who now looks likely to meet their loan repayments due on March 20th and entitle them to the next tranche of funds from the bailout fund. Although a deal has yet to be finalized between Greece and its creditors, investors should look for a boost in the EUR when this happens.
In a week where world finance and business leaders are meeting at Davos, there was more troubling news coming from the Eurozone. In Spain, unemployment passed 5 million, with the rate rising to 22.8%, up from 21.5% – the highest in 17 years. The 22.8% is more than double the average unemployment rate in the Eurozone and despite the new Ruling party pledging reforms, the week ended in demonstrations against austerity reforms and unemployment.
There was more bad news in the Eurozone at the end of the week, Fitch, the credit ratings agency downgraded 5 Eurozone members as Italy and Spain lost two notches and Belgium, Slovenia and Cyprus lost one notch. The EUR/JPY was down 0.149%, trading at 101.38 as investors looked for a safe haven that wasn’t the USD.
The weakened greenback saw a push into commodities and investors should be looking at more of the same this week. Escalating tensions in Iran may push the price of Crude Oil up, it stands at 99.71 a barrel, but the real gains were made in precious metals. Despite some showing of a risk appetite, investors will wait and see what comes from Europe and Davos this week, whilst finding refuge in commodities.
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