Geneva, CH -- (SBWIRE) -- 01/27/2014 -- Highlights for last week - Yen and Swiss Franc were clearly the strongest against other currencies last week as markets in developed countries were hit by the macroeconomic fears in emerging markets. Currencies of emerging market including Turkish Lira, Argentinian Peso, Mexican Peso, South African Rand tumbled amid political chaos in Turkey, Argentina and Ukraine; slowdown in China and other BRICS countries; and worries over the impact of Fed’s tapering. The biggest losers last week were Australian and Canadian Dollar.
Dollar fell to seven week lows against the Yen and Swiss Franc last Friday as investors dumped US Dollar and moved to the safe haven of Yen and Franc. The Dollar selloff was triggered by the selloff in emerging markets currencies. South Africa’s rand, the Russian ruble and the Argentine peso selloff accelerated on Friday after the Turkish lira fell to record lows against the Dollar after market intervention by Turkey’s central bank failed to halt its steep decline. Emerging market currencies have also been hit hard ever since the Fed announced plans last month to begin tapering its asset purchase program.
Australian dollar came under selling pressure last week following a bearish market sentiment over concerns of slowdown in China. Last Thursday’s preliminary reading of China PMI index fell to a six-month low in January. AUDUSD fell to a 3-year low.
Pound rose to a 2½ year highs against the dollar last week after retail sales data showed a jumped of 2.6% in December and unemployment rate in the UK fell to 7.1% in the 4th quarter of 2013, the largest drop since 1997. The unemployment rate is also just above BoE’s 7% threshold for the Central Bank to consider raising interest rates from the current record low of 0.5%. GBP ended lower against USD, AUD and Yen last Friday, sparked by the selloff in emerging markets.
The Euro was up against other major currencies last week after Markit PMI composite index for Eurozone rose to a 31-month high of 53.2 in January, up from December reading of 52.1. The report boosted the Euro, prompting the ECB to let the economy recover on its own and leaves the monetary policy unchanged instead of easing it further. EUR ended the session last Friday mixed against USD, down up against AUD and down against Yen.
The US Dollar hit a 4-year high against the Canadian dollar last week on weak Canadian job and unemployment data. The weakness continued after the unsurprising BoC’s decision on keeping the interest rate unchanged during its policy meeting last Wednesday. A series of weak economic data recently continue to raise doubts over Canada’s economy. USD ended lower against CAD last Friday on profit taking by investors.
In the week ahead, expectations for a reduction to USD65 billion from the current USD75 billion in the US stimulus program by the Fed during its policy meeting will be the main focus. Data from the US and the UK on Q4 GDP and Eurozone CPI will also be closely watched. RBA of New Zealand will also meet this Wednesday but is expected that interest rates will remain unchanged.
Market data for this week
Ahead of the coming week, below is a list of significant events likely to affect the markets.
Monday: BoJ to publish the minutes of its latest policy meeting; US new home sales
Tuesday: UK GDP; US durable goods orders
Wednesday: US Fed to announce its federal funds rate and interest rate decision; New Zealand interest rate decision
Thursday: Japan retail sales and CPI; Eurozone unemployment rate, Australia import and export prices; China PMI; Switzerland KOF economic barometer; US GDP, initial jobless claims and pending home sales; New Zealand trade balance.
Friday: Japan household spending, inflation, and industrial production; Australia PPI; Eurozone CPI and unemployment rate; Canada GDP; US consumer sentiment and personal spending
Markets outlook for this week
This week Dollar will continue to be under pressure from the emerging market currency selloff debacle and the uncertainties in the outcome of the Fed monetary policy meeting to further reduce its bond-buying program. Euro and Pound staged a strong rebound last week with bullish trend expected to persist. Technically, major currencies against Yen and Swiss Franc have broken the near term support last week and it is likely to remain bearish. We are likely see a deep fall in both currencies crosses as investors continue to seek safety in Yen and Franc. Aussie and Canadian Dollar weakness are still obvious despite a slight rebound last week. We expect both Aussie and Loonie continue to be under performing.
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