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FX Weekly

Fx Weekly Wrap−up

Tue, Oct 27 2009, 15:52 GMT
by Alpari (US) Analyst team

Alpari (US), LLC

Market Focus

•Existing Home Sales (5.57 vs 5.37 exp.) and Beige Book point to gradual recovery in the US; Dow ends the week lower on profit taking and mixed bag of earnings.
•ECB Members re-iterate the need for action in regards to the US’s strong dollar policy
•European PMI figures show growth in manufacturing and services
•MPC votes 9-0 to keep rates unchanged; UK Retail Sales weaker (0.0% vs. 0.6%)
•UK GDP substantially lower (%-0.4 vs. 0.2% exp.); Sterling crushed in the aftermath


The Dow Jones Industrial Average finished off the week under the psychological 10,000 mark as investors and traders took some profits off the table heading into the weekend as the last bits of earnings were fairly mixed and lacked the necessary impact to push conviction in either direction. Overall, USD weakness continued in the face of increased risk appetite and was noticeably lower against a majority of currencies, except for the Yen and the Loonie. It seems that in light of such crushing losses against these two currencies in the last few months, we are in the midst of a correction that has seen USDJPY (1.24%) and USDCAD (1.38%) rise steadily over the course of last week and for the better part of this past month. Market players may continue to take risk off the table heading into next Thursday’s GDP report, which is expected to show expansion at a rate of 1% and 3% next year.

The main focus out of the UK last week was retail sales and the GDP. While the UK continued their struggle to show some growth in the retail sector, printing a 0.0% (vs. 0.6% exp.), the main focus heading into the last trading session was the GDP number and it didn’t disappoint in terms of a market reaction. The move immediately after the number was a jaw-dropping 200 pip GBPUSD sell off which singlehandedly erased most, if not all, of sterling’s gains going into the weekend. The carnage continued into the remainder of the US session, with GBPUSD closing almost 400 pips lower than the intraday high of 1.6692.

Europe provided some relief on the data front, with a majority of the PMI figures printing higher than the expected. EU manufacturing and services climbed steadily posting a better than expected 50.7 on the manufacturing end while the services printed above the 51.4 mark to 52.3. The German IFO was slightly lower, but marginally so. The actual vs. expected was 91.9/92.1. All in all, most of the data had little effect on the EUR as it continues to benefit from the risk trade.

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Published on  Tue, Oct 27 2009, 15:55 GMT