Mid Week Summary Feb. 15, 2012

By: Nikoletta Panteli from easy-forex

EUR/USD

The Euro strengthened at the start of the new week against the US Dollar after Greece voted for a new austerity package in exchange for payments from the new bailout fund. The pair opened at 1.3240 and rose as high as 1.3283 but the relief did not last long as concerns regarding Greece’s ability to implement the new austerity measures weighed on the euro. Credit rating agency Moody’s also impacted risk appetite after it cut the ratings of six eurozone countries and put the rating of a number of others on a negative outlook, including Sterling. The planned meeting for European leaders was cancelled on Wednesday after eurozone officials said that Athens failed to show commitment to reforms and meet conditions demanded by lenders. This delays the approval of the new bailout fund necessary for Greece in order to avoid a catastrophic default next month when a 14.5 billion euro bond is due for repayment. The EU meeting is now rescheduled for Monday. The pair fell as low as 1.3079 as risk aversion dominated the markets but comments from the Chinese central bank governor gave the Euro a boost. He said that China would play a bigger role in helping the eurozone escape the deepening debt crisis and that he remains confident about the Euro. Investors’ eyes turn to Wednesday’s eurozone Gross Domestic Product data where any signs of further contraction will be revealed.

GBP/USD

The British Pound depreciated versus the US Dollar on the first day of the week, weighed by concerns over developments in Greece. The Bank of England announced last week the injection of an additional £50 billion into the economy in order to fight sluggish growth and stubbornly high unemployment. The stronger Dollar in combination with a heightened risk aversion in the market pushed the Sterling as low as 1.5644 on Tuesday, from a weekly high at 1.5827, a decline of 1.16%. Focus now turns to Wednesday’s employment data where a rise in the unemployment rate is expected. The Bank of England inflation report is also due which is expected to offer a better understanding on the central bank’s monetary policy direction and provide an insight into the bank’s growth forecasts.

EUR/JPY

The single currency rose to a two-month high versus the Japanese Yen on Wednesday after the Bank of Japan announced further monetary easing by asset purchases. Data revealed that Japan’s Gross Domestic Product shrunk in the fourth quarter of 2011 and this raised concerns about the country’s economy. This puts more pressure on the BoJ to act and support the economy as the governor said that they are now “in a severe state”. The BoJ also said that it remains ready to act in the currency markets in order to defend its currency as a strong Yen has a negative effect on the country’s exports. The pair opened at 102.90 this week and rose as high as 103.49 recovering from a low at 101.82.

EUR/GBP

The single currency declined against the British Pound this week. Hopes following the approval of a new austerity package by the Greek parliament failed to support the single currency which dipped to 0.8356 on Tuesday. The market will be dominated by developments over the new bailout fund required for the country to avoid a messy default. On Monday, the pair opened at 0.8391, rose to 0.8401 but later slid to 0.8356. This was a depreciation of 0.5%.

USD/CHF

The Greenback was stronger against the Swiss Franc as the week commenced. On Monday, the pair opened at 0.9137 and rose as high as 0.9229 yesterday recovering from a low at 0.9102. Switzerland’s Consumer Price Index data revealed this week showed that the country faces deflation pressures which put more pressure to the central bank to act and weaken the franc. Speculators argue that the Swiss National Bank may step in the currency market to stop the Franc from rising further. The SNB has set a floor at 1.20 for the Euro versus the Swiss Franc, and the pair is trading close to that. No major economic data is expected this week from Switzerland.

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