FX.co ★ Forex market review

AUD
The increasing of investors risk appetite supported the Aussie\'s growth during the Asian session on Wednesday. The attention of market participants switched from the unexpected decision of the Reserve Bank of Australia to remain the interest rates at the previous level to the data on the retail sales in Australia which is to be published on Thursday.

On Tuesday the RBA surprised the market with its decision to keep the key interest rate at the level of 3,75%, so now the traders are waiting for the data on the retail sales as the force indicator of consumer spending, which is one of the main factor for the monetary policy of the Central Bank.

According to the economists forecast, the retail sales in Australia in December will have to rise by 0.1% from the previous month. Any higher result may push the Australian dollar up. The Aussie will be more sensitive to positive statistics rather than to negative one which will be released within the following weeks. These figures may surprise the market and point to the probability of the rates enhancing by the RBA in March. Moreover, the stock markets are still the key dynamic factor for the Australian currency.

NZD
The New Zealand dollar traded with gain at the end of the Asian session on Wednesday, having got the impact for growth from the part of the increasing of investors risk appetite, observed prior to the trades opening. Nevertheless, in expectation of major New Zealand and international events the kiwi continued to trade in the range.

The data on employment rate in New Zealand is in the limelight of the market, this index is to be released on Thursday. Following the economists predictions, this data will speak for the fact that the unemployment rate in Q4 reached 6.8%, as companies continued to suffer from the effect of the prolonged slowdown.

During last week the Central Bank remained the monetary rate at a record low level of 2.5%. It was noted in the bank that they hope to start to level the monetary stimulus approximately in the middle of 2010, if the economy keeps recovering in line with their expectations.

The market participants are still very cautious, in expectation of decisions regarding the rates of the European Central Bank and the Bank of England, which will be known later this week and before the scheduled release on Friday of Non – Farm payrolls data in the USA.

USD
On Wednesday the US dollar rose on the back of significant economic data, reinforcing conviction that the key report on the US employment rate, which will be announced on Friday, will speak for the job growth.

During the trades, the greenback reached a 2 – week high against the Japanese yen.

The Euro, having dropped under the weight of fears concerning weaker Euro – zone members, had fixed the low level of 1.3892, then it increased nearly to 1.39. The European currency lost almost 3% versus the American dollar this year. The dollar growth began to gather pace after the issue of more positive than it was expected data on ADP Employment Change in the USA for January and also after the survey which presented the improvement of activity in the American services sector. As a result, the greenback repaired losses entirely, incurred against the Euro before the North – American session opening. Now investors attention is focused on the report on Non – Farm payrolls in the USA fro January, which will be issued on Friday.

The signs of the US economy advance, moreover, will raise the possibility that the Federal Reserve System is going to twist the part of stimulation measures and, eventually, this will put up the interest rates. This will make the US dollar more attractive compared to other currencies.

The concerns, that the fiscal problems of Greece may spread to other countries of the Euro – zone, deepened the downward movement on the Euro on Wednesday.

On Wednesday the major trade union of Greece announced about the intension to hold the collective strike action on February, 24 in reply to salaries reduction, stated by the government in order to save the crisis-ridden national economy.

Meanwhile, the US labor market in January showed the signs of recovery. ADP Employment Change index reduced by 22 000 which has become the less significant lowering since February, 2008. The data presented on Wednesday by Data Processing Inc. and Macroeconomic Advisers companies speaks for it. At the same time, the activity index in the services sector continued to upsurge. Economists were looking for the lowering of ADP Employment Change index by 30 000 in January.

Also it became known on Wednesday that ISM Non-Manufacturing Composite in the USA in January grew to 50.5 from 49.8 in December and the PMI amounted to 52.2 against 53.2. It was predicted that this index would come to 51.0.

Best regards,

Analyst: Vladimir Donin.