Major Currency Pairs Analysis: July 09, 2013

European Central Bank President Mario Draghi said the Governing Council enhanced its communication last week by giving an outlook on interest rates, at a time when the euro-region economy remains weak. The ECB and the Bank of England both indicated on July 4 that they will keep benchmark interest rates low for longer than investors were betting, breaking new ground to protect their economies from a U.S.-led surge in bond yields. Draghi’s outlook represented a change in policy for an institution whose officials had until then consistently said that it “never recommits” on monetary policy. The euro increased a little.
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GBP/USD
The pound rose from near the weakest level in almost four months against the dollar, before data that analysts said will show industrial output expanded in May, adding to evidence the U.K. recovery is gathering pace. Britain’s currency snapped a two-day drop against the greenback after Capital Economics Ltd. said the nation may be in line for a period of “strong catch-up growth.” U.K. business confidence and output both rose to 13-month highs in June, BDO LLP said today. The Sterling slumped below $1.49 last week after Bank of England policy makers led by Governor Mark Carney signaled they will keep interest rates at a record low. U.K. government bonds were little changed. The U.K. currency rose 0.3 percent to $1.4940.
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USD/JPY
Since Prime Minister Shinzo Abe swept into power in December on promises to resurrect the economy by expanding stimulus measures and weakening the yen, the Japanese currency has whipsawed between 82.36 yen and 103.21 yen to the dollar. The yen’s 100-day volatility rose to 14.81 points in July, the highest since August 2009, and more than double the 6.97 figure at the start of the year., Japanese companies made the fewest acquisitions in a decade during the first half, as the yen’s volatility climbed to a four-year high, cooling buying interest. The number of deals announced in the first half of 2013 was 997, with a total value of $45.7 billion. This is the lowest number of deals and value since the first six months of 2004. Total deal value is 47 percent lower from the first half of 2012.
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USD/CAD
The Canadian dollar traded at an almost two-year low after the nation’s central bank released a survey showing Canadian business optimism about sales and investment faded in the second quarter. The currency fell versus the majority of its most-traded peers after a report showing the value of municipal permits rose 4.5 percent in May to C$7.32 billion ($6.93 billion), less than the revised 11.2 percent rise the month before, Statistics Canada said. The balance of opinion for sales growth during the next 12 months fell to 9 percentage points from 24 percentage points in the Bank of Canada’s survey of about 100 executives. The Canadian dollar rose 0.1 percent to C$1.0573 per U.S.
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