Forexpros Weekly Wrap-Up 10 August 2012

Closing the Week with Forexpros

by Forexpros Staff

The dollar traded lower against most major global currencies on Friday as investors sold the currency on sentiment that softer-than-expected Chinese export data and aslumping Europe will prompt the Federal Reserve to stimulate the economy to stave off a U.S. downturn.

In U.S. trading on Friday, EUR/USD was down 0.09% at 1.2295.China reported earlier that its trade surplus narrowed unexpectedly in July, dropping to USD25.1 billion from a USD31.7 billion surplus.  Economists were expecting a USD35.1 billion surplus.  Ebbing demand for Chinese exports spooked markets worldwide on fears the global economy may be battling stronger headwinds than once thought.

Meanwhile in Europe, the European Central Bank on Thursday trimmed its forecast for economic growth to 0.6% in 2013, down from 1% previously.

The ECB also forecast a 0.3% contraction in growth this year, slightly worse than its previous forecast for a 0.2% contraction.

The news cemented views that central banks around the world will take steps to stimulate their respective economies with monetary policy tools, which tend to weaken safe-haven currencies like the dollar and send higher-yielding currencies and stocks rising.

Federal Reserve officials have said they cannot rule out rolling out a third round of asset purchases from banks, a stimulus tool known as quantitative easing that pumps liquidity into the economy to spur recovery, weakening the greenback in the process.

European Central Bank President Mario Draghi has said monetary policy officials will do whatever it takes to bolster the economy, which kept the euro down against an otherwise weakening dollar.

The greenback, meanwhile, was down against the pound, with GBP/USD trading up 0.22% at 1.5672.

The dollar was down against the yen, with USD/JPY trading down 0.40% at 78.25, and up against the Swiss franc, with USD/CHF trading up 0.07% at 0.9767.

The dollar was mixed against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.07% at 0.9918, AUD/USD down 0.12% at 1.0567 and NZD/USD up 0.03% at 0.8124.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.06% at 82.63.

Gold

On the Comex division of the New York Mercantile Exchange, gold futures for October delivery were up 0.26% and trading at USD1,620.25 a troy ounce, up from a session low of USD1,606.35 and down from a high of USD1,626.85 a troy ounce early during the session.

Gold futures were likely to test support at USD1,606.35 a troy ounce, the earlier low, and resistance at USD1,626.85, the earlier high.

Elsewhere on the Comex, silver for September delivery was down 0.17% and trading at USD28.048 a troy ounce, while copper for September delivery was down 0.95% and trading at USD3.392 a pound.

Oil

On the New York Mercantile Exchange, light, sweet crude futures for delivery in September traded at USD92.81 a barrel on Friday, down 0.59%, off from a session high of USD93.53 and up from an earlier session low of USD91.72.

Soft demand for Chinese exports sent shudders across energy markets on fears the global economy may be battling stronger headwinds than once thought and will need less fuels to grow.  China, meanwhile, is importing less oil.

Natural Gas

Natural gas futures continued to fall Friday, on profit taking after spiking more than 5% Thursday, as U.S. government data revealed inventory levels rose less-than-expected last week, easing concerns over a supply overhang.

On the New York Mercantile Exchange, natural gas futures for delivery in September traded at USD2.796 per million British thermal units during U.S. morning trade, plunging 5.08%.

The Energy Information Administration reported natural gas in storage grew by 24 billion cubic feet to 3.241 trillion cubic feet for the week ended August 3.  Analysts had forecast an increase of 30 billion cubic feet.

Total natural gas inventories are now 13.5% above the five-year average of 2.855 trillion cubic feet for this week and 16.8% above last year’s level of 2.776 trillion cubic feet, according to the government data.

Stocks

European stocks closed mixed Friday, as concerns over the outlook for economic growth in the euro zone weighed on market sentiment, while hopes for fresh action by the European Central Bank to stimulate the economy began to fade.

At the close of European trade, the EURO STOXX 50 dropped 0.52%, France’s CAC 40 declined 0.48%, while Germany’s DAX 30 retreated 0.21%.

Stocks remained under pressure, after the ECB on Thursday revised down its forecast for economic growth to 0.6% in 2013, down from 1% previously and forecast a 0.3% contraction in growth this year, slightly worse than its previous forecast of for a 0.2% contraction.

In the U.S. stocks closed higher after opening sharply lower.