The statements of the G20 finance ministers declared on the weekend, which confirmed that there would not be any forward withdrawal from quantitative easing programs, improved the market participants mood. Besides, the US dollar decreased and the euro grew during the European session on Monday.
The investors mood, probably, was also improved by the restoration of activity in the mergers and acquisitions market.
In the interim the high-yielding Australian and New Zealand dollars reached new maximum of the year.
The market mood was set on Friday evening when the last US employment data could not undermine the trades’ positive tone. Though reduction of non-farm workplaces number in August was less considerable, than it was predicted, the USA unemployment rate rose more significantly, than it was expected, and reached 9,7 % in August against 9,4 % in July. It was predicted that the unemployment rate would be 9,5 %.
Thus, the market limelight was turned to the G20 Finance Ministers summit and fear, that the group of industrially developed and developing countries can threaten the economic recovery in case of untimely withdrawal from programs of unconventional monetary and credit policy easing which was created last year in the light of the credit crisis.
Nevertheless, Finance Ministers decided to keep current stimulation measures. The Prime minister of Great Britain Gordon Brown said following: "Risks still remain. It would be a serious mistake to abort emergency measures right now".
It is even more reduces the probability that the Bank of England, Bank of Canada and Reserve bank of New Zealand will correct the interest rates this week.
However, the New Zealand authorities, probably, will remove any hints that they can reduce the key interest rate again, which is at level of 2,5 %. At present the risks balance is displaced towards weakening of obvious propensity to monetary and credit policy easing in New Zealand or its total disappearance.
It helped the New Zealand dollar/US dollar pair to reach a new annual maximum around 0,6940. The Australian dollar/US dollar pair ticked up to the maximum 2009 of 0,8565.
More positive investors mood concerning currencies was caused by growth of stock quotes, thus the increase in New York was followed by growth in Japan, China and Europe.
Moreover, optimism regarding the world economy also was strengthened by the German manufacturing industry data. From this data it is became known that number of orders in July jumped by 3,5 % in comparison with the last month, after growth of 4,5 % in June. The forecast assumed the indicator growth of 2,0 %.
Nevertheless, the analysts doubt that the major currencies will go beyond the ranges observed recently, in view of the USA Labor Day celebration. More considerable changes may take place, when many market participants will return after the summer vacations and will start to apply new trading strategy.
The pound was supported by news that Kraft Foods Inc. company suggested to buy manufacturer of sweets Cadbury PLC for 10 bln pounds. It is one of the largest deals for the markets lately.
Kind regards,
Analyst: Vladimir Donin
