|ADVFN III||Weekly FOREX Currency REVIEW|
|Weekly Market analysis|
The Euro-zone will continue to be an important underlying focus as uncertainty surrounding the Spanish and Greek situation continues. Spain will continue to be under intense pressure to make an bailout request which would also facilitate the ECB bond buying programme. There will, however, be the threat of increasing tensions, especially with underlying tensions increasing. Growing fears over the implications of continuing recession and global growth fears will remain an important focus.
Key events for the forthcoming week
The US economic releases have maintained a generally mixed tone, but with a slightly more positive tone surrounding spending and employment. The Federal Reserve has clearly indicated that it will maintain an aggressive monetary policy to cut unemployment and the dollar will, therefore, find it difficult to gain strong support, but there will be expectations that the US economy will out-perform the Euro-zone in the short-term at least which will curb selling. Presidential polls will be watched closely, although the overall impact is likely to be limited. The US currency can still gain significant support from unease surrounding the global growth outlook, especially if Euro-zone fears intensify once again.
The dollar was able to resist further selling pressure during the week, but found it difficult to make much headway and retreated to near 1.30 against the Euro.
The headline US employment report was close to expectations at 114,000, although there were upward revisions to the previous two month’s data which provided some support. The principal talking point was the decline in unemployment to 7.8% from 8.1% previously, contrary to expectations for a small increase and this was the lowest rate since January 2009. The data boosted confidence surrounding the economy to some extent and there was also some political controversy that the data might have been manipulated. There was also a stronger than expected release for consumer credit which underpinned the spending outlook.
There were further concerns surrounding the global growth outlook following a downgrading of forecasts from the World Bank. The IMF also took a generally downbeat attitude towards growth in its latest report with a warning that the risks of a fresh downturn were very high. There were also concerns over the forthcoming US earnings season with expectations of a weaker results contributing to a generally negative attitude towards risk.
The US trade deficit widened to US$44.2bn for August from a revised US$42.5bn previously with a 1% decline in exports maintaining fears surrounding the global growth outlook. The jobless claims data received greater attention with a sharper than expected decline to a four-year low of 339,000 in the latest week from 369,000 previously, although there were reports that one state was missing key elements of its data which may have pushed the total artificially lower.