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5 March Forex daily review

Sergiy Zlyvko
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On Wednesday, the dollar index closed with a slight decrease. The single currency and the Swiss franc against the U.S. dollar closed virtually unchanged in the end of the day. Pound and the Australian dollar against the U.S. dollar closed with a growth. The day was not easy, because on Wednesday a lot of statistical data on the U.S. and Europe have been released. European statistics has been released positive, but it is ignored by bulls. American statistics could not able to provide a support for the dollar. Due to the dynamics of cross-rates, British pound and the Australian dollar were the winners of the day.

In February, the service business activity indexes rose in Germany, Spain, France, Italy and the Eurozone. Quarterly and annual GDP of the Eurozone for the 4th quarter of 2013 coincided with the forecast (0.3% q/q and 0.5% y/y). Retail sales have surpassed the predicted values, although the market reacted with sales of euros. Despite the positive data, EURUSD has made two attempts to pass the level of 1.3700. EURUSD rebounded from a minimum, fully recovered from intraday losses after the publication of weak ADP employment report and service ISM.

The index of business activity in the services sector in the UK was above expectations, reaching 58.2 vs. 58.0. The British pound received support from the reduction of EURGBP cross-rate and rose to 1.6735 mark. After the release of ISM, the pair reached an intraday highest point at 1.6740.

Last month, the U.S. private sector has created 139 thousand jobs vs. 160 thousand and 127 thousand – the previous result (revised from 175 thousand). Weak ADP is negative factor for the dollar, as it guided market participants ahead of the report on the U.S. labor market publication (Friday 13.30 GMT). According to the Institute for Supply Management, ISM index in February in the U.S. service sector fell to 51.6 from 54.0 in January (forecast was at 53.5). The employment index fell to 47.5 vs. 56.4 previously. The situation is bad.

Today’s meeting of the Bank of England (12.00 GMT) will be the key event of the day for sterling and for the euro – ECB meeting (12.45 GMT) with the press conference of Mario Draghi. Given the recent published inflation data for the Eurozone, PMI business activity in the EU, as well as weak data from the United States will prepare us for the dollar’s decline. Basic script for today is the press conference of Draghi. Australian dollar strengthened in Asia on strong data from Australia.

The Australian dollar rose after the published data on the trade balance and consumer spending in January significantly exceeded analysts’ forecasts. According to published statistics, the trade balance was the highest since August 2011 and amounted to 1.43 billion Australian dollars, while analysts expected a value of 100 million Australian dollars. The volume of retail sales rose by 1.2% in January. The result was three times higher than economists’ forecasts. In annual terms, retail sales rose by 6.2% – the fastest annual increase since November 2009.

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