For the First Time in a Long Time the Dollar Stops Growing

The second week of February (from 9th to 16th) was marked by a growth against the dollar by leading currencies. The Euro managed to strengthen by 0.75%, whilst the British pound’s value increased by more than 1% against the dollar. The biggest gains of the week were made by the New Zealand dollar which grew by 1.5% against its US counterpart.

There haven’t been many new statistics released. The US published information on the number of applications for unemployment benefit for the week. The indicator surprised investors by having grown to 304,000 (+25,000) in comparison with the forecasted 278,000. However, so far this is the only aspect of a deterioration of the US labor market. The four-week average sits around the 289,700 level.

There was a complicated reaction to January statistics for retail sales. Last month the indicator decreased by 0.8%, thereby strengthening December’s tendency. Taking the seasonal factor into account, retail sales in December are estimated at $439.77. On the one hand, the fall in energy prices clearly influenced the stats. On the other hand, even if volatile commodity groups are excluded, the indicator remains the same when compared with December.

It’s worth looking at the preliminary data for the February confidence index from Thomson-Reuters and Michigan University. The index stands at 93.6 compared with a previous 98.1 and forecasted 98.2 points. So it seems American consumers aren’t in the best frame of mind and are looking at the current economic situation rather pessimistically.

The British pound took the large flow of statistical data on prices into account. Great Britain’s GDP in the final quarter of 2014 grew by 0.7% in contrast with the previous quarter’s growth of 0.5%. According to the NIESR, the British economy is forecasted to grow by 2.9% in the coming year, even when including the low cost of energy. Last week the Bank of England published its updated forecasts for the current and next year. According to the regulator’s calculations, in the next two years inflation in the Albion will be 2% (in fact, this is the inflation objective of the central bank), in contrast with today’s 0.5%. In 2015, inflation is expected to be half a percent and in 2016 is expected to grow to 1.8%.

Political upheavals and fluctuations in the price of oil are having a strong impact on the Russian ruble. The results of the Normandy 4’s meeting in Minsk are still to be analyzed for some time, but nevertheless we can see some results now. From 15th February a cease fire is in place in South-Eastern Ukraine. The Minsk negotiations lasted for over 16 hours. An agreement on the creation of a buffer-zone in the region and the withdrawal of heavy weaponry was also achieved by the meeting.

The IMF stated its readiness to supply the Ukraine with $17.5 billion worth of credit for 4 years. Overall, a $40 billion credit line between the fund and Kiev has been agreed, but it needs to be approved by the IMF’s board of governors.

The euro/dollar on the currency market had a short rest. The current correction doesn’t stray from the long-term tendency of the euro’s movement towards parity with the dollar.

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