Daily Market Review by Tom Williams - 28/08/13


​Germany to Issue CPI Report for August

The figures assessing the Eurozone’s most prominent economy is set to be released tomorrow 29 August 2013, hopefully providing observers with a clearer picture of the state of the Euro Area’s economic health. At this time, forecasts predict that the German CPI will likely be reduced slightly, exhibiting an improved economic situation for consumers.

Germany has enjoyed a steady stream of positive report cards in recent weeks that point to a strengthened recovery that may help to prop up the overall European economic situation. That said, analysts remind readers that weak and failing economies in member states such as Greece, Spain and Portugal may serve to drag down the progress of the more northern countries.

Analysts point to Germany’s standing as the economic powerhouse of the Eurozone, and the influence that changes in the CPI can have on interest rates in the rest of the Euro Area.

It should be noted that the Euro has enjoyed a strong streak of gains against its rivals over the past week as has been reported in previous reports. Traders are advised to exercise caution amid speculation on the Euro in the lead up to the report. Some volatility can be expected in the coming days in trading for the Euro against peer currencies.

Dollar Makes Gains Following Week of Losses

It was reported today 28 August 2013 that the US dollar had succeeded in making gains against nearly all of its rivals as investors continue to flee from developing economies. This news follows earlier speculation by investors over concerns that the US economy may not be strong enough at this point to support the cuts to the $85 billion stimulus program that has been under the purview of the Federal Reserve. According to statements by the FOMC earlier this month, the cuts may come as soon as September.

As many investors continue to lose faith in the developing economies such as Turkey and India, they have been flocking back to the US dollar, which has regained its popularity in a significant way.

Analysts believe that the USD is likely to continue to rise in value over the coming term, while allowing room for fluctuations of adjustments in the market. That said, concerns over a looming conflict with Syria and continued unrest in Egypt may serve to disrupt the dollar’s progress.

Investors are advised to proceed with caution while trading the USD due to potential volatility that may arise in pairings against its peer currencies.

Syria Conflict Provides Boost for the Loonie

It was reported on 28 August 2013 that concerns over the looming conflict in Syria has helped the Canadian currency to climb out of its current rut and back into a favorable status. The drive out of the seven week low that the loonie had been suffering came as oil, Canada’s primary production export, rose significantly.

The spike stems from fears that an American led assault on the regime of Syrian President Bashar al-Assad may cut supplies of crude emanating from the Middle East. With these concerns, demand has shot up and has brought the loonie up with it. Analysts remind readers that the Canadian currency is closely linked with the country’s  oil industry, any shifts in the oil market can have a significant influence on the economy as a whole.

Analysts believe that any Western action that may be taken against the Syrian military in the coming days and weeks will likely have a major effect on oil prices for an undetermined period of time. While Syria is not an exporter of crude, general unrest in the region is generally known to cause disturbances to production and distribution of oil, thus pushing up prices.

The loonie will likely enjoy gains from the rise in oil prices over the coming period while remaining in check by its rival currencies, including the USD which has made considerable gains in its own value in trading. That said, traders are still advised to proceed here with caution in dealing with the CAD pairing against its rival currencies.