The first trading week of the new year was full of unpredictability and surprises. Traders have seen sharp rallies and fast drops and it it’s likely that quite a few of market participants experienced losses because of such volatility. The US dollar was also caught in the turmoil, emerging victorious against some currencies, but losing against others.
At first, it looked like the year has begun on the positive note as the issue of the US fiscal cliff was resolved and most currencies rallied, while the greenback tumbled. Yet on the very next day most gains were lost, while the US currency climbed sharply, as traders started to worry about yet another problem: the debt ceiling.
The traders started to worry were not helpful either, suggesting that the accommodative policy may end this year. That is in no way guaranteed and it is likely that the stimulus threshold will remain conditional and not tied to a specific date. Still, such change of stance (the Fed was promising in the previous statements that the asset purchase program will likely extend through 2014 or even 2015) was received by the market very poorly.
US non-farm payrolls returned a bit of optimism to the Forex market, but did not wipe out all the negativity completely. December’s employment growth was not bad at all, but it was not big enough to rescue the market from risk aversion.
EUR/USD fell from 1.3214 to 1.3079 this week, while USD/JPY rallied from 85.76 to 88.12 — the highest weekly close since July 2010. At the same time, AUD/USD climbed from 1.0366 to 1.0481 and USD/CAD declined from 0.9962 to 0.9868.
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