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Last week’s Forex review

Sergiy Zlyvko
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Last week’s Forex review

Finished week was very eventful. A large number of macroeconomic reports caused high volatility. European currencies on the basis of five days were able to demonstrate the strengthening against the dollar, while USDJPY pair finished the week almost at the same levels as the beginning. The euro rose by 0.3%, the pound rose by 0.4%.

EURUSD during the week showed multidirectional movement. Insufficiently strong reports on the consumer price index in Germany and Eurozone pressured the euro, as a result, the pair of touched the minimum at the level of 1.3775, from which it quite quickly recovered. First, the fact that the Eurozone CPI though not held up to the forecast of 0.8% in April, but it showed an increase of 0.7% from 0.5% in March, suggesting that inflation is still groped the bottom. This means that the ECB would not interfere in monetary policy at the meeting in May. Second, the data on the German labor market, published a little earlier was a support factor for the euro. The number of unemployed in Germany fell more than expected (-25 000 vs. -10 000 projected). Thus, the first largest Eurozone economy remains the engine of the whole monetary unit.

GBPUSD was able to demonstrate growth and noted the highest point at 1.6920, despite the fact that the growth of the UK economy fell short of forecasts. Q1 GDP came in at 3.1% against expected growth of 3.2% year on year. Nevertheless, among the Group of Seven, UK is currently the leader in terms of growth, which makes the position of the pound is quite stable. In addition, data from the industrial sector pleased investors. The index of business activity in the manufacturing sector rose in April and reached 57.3 from 55.8 in March value. It was further a confirmation that the economy continues to gain momentum. PMI in the construction sector, though showed a slight decrease (from 62.5 to 60.8), but it is still in the growth zone.

USDJPY at the beginning of the week, slowly but surely moved up. Data on pending home sales, which came out better than expected supported it partly. But the growth was restrained by resistance at 102.70. In the future, the reports intervened in the case, which do not have benefited the dollar. Particularly, the pace of U.S. economic growth in Q1 amounted to 0.1% while the projected growth of 1.2%, although it is possible that temporary decline was as a background of difficult weather conditions in the United States. In general, U.S. data were contradictory. The number of initial claims for unemployment benefits rose by 344,000 vs. 319,000, while the index of business activity in the manufacturing sector (ISM) rose to 54.9 from 53.7 in March. Nonfarm payrolls (the main report of the week) was much better than expected. The number of jobs created was 288,000 while the total expected of 210,000. Unemployment in April demonstrated positive dynamics decreasing to 6.3% from 6.7% in March. It bounced a pair to the maximum of 103.00. However, concerns about the escalating growth of the Russian-Ukrainian conflict in connection with the Kiev operation in the eastern regions of the country at the end of the week provoked demand growth for safe-haven assets, which allowed the yen to recover most of the losses.

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