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Market Update 10/2/14

The last trading day of the week was pretty interesting even in the European session, we saw high volatility in connection with the decision of the German Constitutional Court. As a result, EURUSD came to an end of Friday to around 1.3635 mark and GBPUSD – to 1.6415.

In the first half of the week, the euro consolidated awaiting the ECB meeting and Friday’s employment report. On Thursday, the euro rose sharply against the U.S. dollar after the European Central Bank announced new measures of monetary policy easing and didn’t give solid hints that it may soon be done that has not met the expectations of some investors who had expected a rate cut. EURUSD held fairly quiet morning, consolidating near 1.3590, but the news that the German Constitutional Court has questioned the constitutionality of OMT program, conducted by the ECB, however, has not designated it as illegal, handing the decision to the Court of the European Communities in Brussels. News sent the euro down to a minimum at 1.3550, but further news from the U.S. helped the pair to recover the loss and achieve the week’s high on 1.3640.

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Growth of the British pound was supported by a report that showed that the volume of production in the manufacturing sector rose in December by 0.3 percent, which was significantly less than forecasts of 0.6 percent. Meanwhile, the total volume of industrial production, which accounts for about 15 percent of the British economy grew by 0.4 percent in December from November. GBPUSD also experienced a slight disappointment in the European session, as British reports showed conflicting results. Trade balance showed a significant recovery as the deficit fell to 7.7 billion instead of the forecast 9.3 billion. However, industrial production index has not pleased, missing expectations and once again confirming market fears about a slowdown in the British economy. Pair from the opening level of 1.6320 rolled to a minimum of the day 1.6300, but it was able to recover and consolidate above 1.6400 thanks to the rather poor data from the U.S.

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USDJPY showed an interesting dynamic in the last trading day of the week. If the pair initially yet responded to the weak employment figures within the NFP and rolled down to a minimum on 101.45, it is then rolled to a maximum of 102.55, focusing on reducing of unemployment rate and closed trading day at 102.30. Second consecutive month U.S. companies have demonstrated a moderate willingness to hire new workers: the employment rate rose by 113 thousand instead of planned 185 thousand, but pleased with the level of unemployment, which is now even closer to 6.5% target level from the Fed. Index fell from 6.7% to 6.6% in January.

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