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2 January Forex daily review

Sergiy Zlyvko
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Yesterday European currency dropped significantly against the dollar despite the positive data on manufacturing activity in Germany and the Eurozone. Growth of the manufacturing sector lasted in the Eurozone in December and according to preliminary estimates published last month, it showed on Thursday the final results in Markit Economics study. Purchasing Managers Index rose for the third month in a row to a level of 52.7 in December. Value was unchanged from the preliminary estimate was higher than November’s 51.6 value.

In addition, the trading was affected by U.S. data. It showed that business conditions in the U.S. manufacturing sector improved at the fastest pace since January. Corresponding PMI rose to 55.0 in December compared with 54.7 in November and was higher than the preliminary estimate of 54.4.

Meanwhile, another report published by the Institute for Supply Management (ISM), showed that in December manufacturing activity in the U.S. fell slightly less than economists’ expectations. PMI index for the U.S. manufacturing declined this month to 57.0 vs. 57.3 in November. Note that the last reduction was weaker than economists’ forecasts, which are expected to decline to 56.8.

Data on the number of applications for benefits was also important. As it became known, the number of initial claims for unemployment benefits – a measure of layoffs – reduced by 2000 and totaled a seasonally adjusted 339,000 in the week ended December 28. Economists had expected 334,000 initial claims per week. The number of applications from the previous week was revised to 341,000 from 338,000.

The British pound has fallen against the dollar, which was associated with the publication of manufacturing activity index, which came out weaker than expected. Recovery of production in the UK continued to the end of 2013, data showed on Thursday by Markit Economics surveys.

However, the purchasing managers’ index from Markit/Chartered Institute of Purchasing & Supply fell to 57.3 in December from November’s 33-month high of 58.1. Value in November was revised from 58.4. A value above 50 indicates an increase in activity.

The pace of expansion in output and new orders remained among the highest in the 22-year history of the survey. As a result, the pace of job growth was the second in strength over the past two and a half years. On the price front, the average purchase and sale prices rose at a faster pace in December.

The yen has risen sharply against the U.S. dollar. Experts note that the main driver for the yen became the yield on U.S. assets, which reached multi-year highs above 3.0% with the pullback of U.S. stock indices.

In addition, the trading is affected by the rumors that Bank of Japan will continue its unprecedented stimulus program to support the economic strategy of Prime Minister Shinzo Abe.

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