Market Review – 23/12/2010 21:27 GMT
Euro rebounds vs dollar on short-covering
The single currency ratcheted higher from Wednesday’s NY low of 1.3078 to 1.3152 on short-covering but euro retreated sharply and fell to 1.3055.
The single currency then rebounded strongly from there and reached 1.3141 due partly to cross-unwinding in eur/chf as the pair sky-rocketed to 1.2644 in thin NY trade. Although the single currency retreated sharply from 1.3141 after Fitch downgraded Portugal’s credit rating to A+ with a negative outlook, the single currency edged higher again as price was supported after S&P affirmed AAA rating for France.
Fitch cut the Portugal’s long term foreign currency rating issuer default rating to A+ from AA-, adding that the downgrade reflected slower reduction in the current account deficit and more difficult financing environment for government and banks. Later, S&P affirmed France’s rating at AAA/A-1+ with stable outlook, and this provided support to the single currency.
Earlier, the Greek parliament approved the 2011 budget by a vote of 156 to 142, which included 14 billion euros in spending cuts and additional revenue aimed at cutting the Greek budget deficit.
The greenback initially dropped to 82.85 versus the Japanese yen on Thursday, however, the pair stage a brief but strong rebound to 83.41. Dollar fell again after the release of a series of US economic data and traded sideways in NY afternoon.
On economic front, US jobless claims fell to 420,000 in the week of Dec 18 (consensus was 420,000) from 423,000 in prior week. US durables orders in November decreased by 1.3% versus consensus of -0.5% and -3.1% in October. Personal spending was +0.4% versus consensus of +0.5% while personal income rose by 0.3% versus consensus of +0.2%.
The British pound edged higher in Asia and reached 1.5437 but price fell from there and reached 1.5374 before staging a strong rebound. Cable eventually edged higher to 1.5438 before moving narrowly.
BOE’s Fisher said ‘not impossible’ that U.K. would see a quarter of negative growth in 2011, he added that the recovery would be on track but cautioned that ‘at this stage of recovery in a cycle it’s always going to be bumpy’. Daily Telegraph reported comments from BOE Markets Director Paul Fisher who said that U.K. rates will rise ‘to a normalized position’
The German, Swiss and US market will be closed on Friday.