Speculations about Fed’s asset-purchasing program coming to an end led to an appreciation of the greenback on the Forex market. The euro lost more than 170 pips against the dollar and the EUR/USD ended the week at 1.3186. Additional ‘’stimuli’’ for the single currency sell-offs were triggered by the weak economic data coming from the Eurozone and the uncertainty surrounding elections in Italy. GBP/USD losses were even more depressing as the currency pair closed in Friday’s trading at 1.5245, or with a weekly loss of over 270 pips. The dark clouds over Britain are far from gone, particularly after rating agency Moody’s cut the UK from its highest rating to Aa1 as the market closed on Friday. The UK has been stripped from its top AAA rating for the first time since 1978 amid poor economic results and future outlooks as well as rising debt load. The sterling is expected to dip even further as the markets open on Monday.
Capital markets also reacted quickly to news of Fed’s possible plans to reduce the pace of asset purchasing. During Wednesday night’s trading session, one hour was enough for the major US indices to erase more than 1% of their value. However, by the end of the week, most investors’ concerns faded away and changes were minimal. The USSPX500 and the technological USTECH100 closed with minimal losses, while the blue-chip US30 crossed again the psychological level of 14,000 on Friday, closing at 14,003 points.
More optimism was surrounding the European indices. The EUGERMANY30 and the EUFRANCE40 rose by 1.26% and 1.83%, respectively, while the EUSPAIN35 and the UK100 increased their values by 0.10% and 0.69%, respectively.
Precious metals dipped further in their decline. Gold lost ground for another consecutive week – this time by 1.77% – settling at $1,580 per troy ounce at the end of the session. Silver experienced an even bigger fall, ending the week with more than a 3.5% loss, closing Friday’s session at $28.76.
This week offers a wide range of important economic and political events. The election results in Italy will be released on Monday. On Tuesday and Wednesday, Ben Bernanke is due to appear before Congress, particularly focusing on the QE (quantitative easing) program. His speech will be crucial for the market movements over the next few weeks. The GDP figures for both the UK and the US will be out on Wednesday and Thursday, respectively, which will further heat up the markets.
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