Forex Intraday Round-Up:EUR Bulls Beaten Back by FOMC Minutes Release

January 4, 2013

**EUR/USD**

The euro continued this week’s decline against the US dollar during the intraday trading session on Friday and at 12.00 GMT was changing at 1.3005/06 or 0.33 percent lower than yesterday. The pair briefly went below the psychological level of 1.3000 but later rebounded following the release of the preliminary EMU CPI.
The EMU CPI remained unchanged at 2.2 percent in December, above the market consensus of moving lower to 2.1 percent. The Italian flash CPI also came higher than expected at 0.3 on monthly basis, and fell from 2.5 percent to 2.4 percent as expected on the yearly.

Euro bulls were once again disappointed after minutes from the Federal Open Market Committee (FOMC) showed an unusual hawkish tone, hinting that the ongoing quantitative easing might come to a halt or at least be reduced significantly. This means members of FOMC expect the US economy to strengthen giving support for a rallying greenback.
In Germany, Markit Services delivered yet another expansionary PMI at 52.0 in December from 49.7 in the previous month. The Spanish Markit Services PMI figure also improved from 42.4 to 44.3 and above market consensus of 42.8. Italy surpassed expectations as well with 45.6. Retail sales in Germany grew on a monthly basis by 1.2 percent and contracted less than expected on a yearly basis (-0.9 percent vs -1.2 percent).

In an interview with FXstreet.com, Ulrich Leuchtmann, Head of FX Research at Commerzbank, said he expects the EUR/USD to be around 1.3000 at the end of the first quarter. “In the short-term outlook, I do not think that EUR/USD will move significantly higher above 1.33 level this week and afterwards we might even see EUR/USD more close to 1.32 or 1.33.”

**GBP/USD**
The US dollar is dominating over the British sterling for a third consecutive day due to depressed risk appetite. The GBP/USD fell to 1.6010, just ten pips above the psychological level of 1.6000 but later clawed back some of its losses and at 12.25 GMT was trading at 1.6027/29 or 0.48 percent lower than yesterday.
!m[GBP Falls 380 Pips Against USD Since Beginning of 2013](/uploads/story/1124/thumbs/pic1_inline.png)

UK Market Services PMI showed a contraction in December from 50.2 to 48.9, and below market consensus of 50.5. UK net lending to individuals came in worse than expected in November at negative £0.1 billion. Consumer credit rose by £0.1 billion.
**USD/KRW**
A combination of the Federal Reserve hinting it is going to halt its monetary stimulus programme and the Bank of Korea signalling it will not be adding to last year’s two interest-rate cuts pushed the South Korean won from a 16-month high. At 12.45 GMT the USD/KRW was trading in positive territory at 1062.90/30 or 0.08 percent.
“A possible end to the Fed’s monetary stimulus is damping sentiment,” opinedYooHyen Jo, analyst at Shinhan Investment, as quoted by Bloomberg. “Additionally, there are concerns in the local market that authorities may try to stem the won’s appreciation.”
South Korea Finance Minister Bahk Jae Wan said this week he is concerned about herd mentality on the foreign exchange markets with the government seriously considering measures to reduce the volatility of the currency. The won has been Asia’s best-performing currency of 2012 with an 8.3 percent increase against the US dollar.

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