Market Review – 24/08/2011 21:57 GMT
Dollar advances broadly on speculation Fed won’t provide more stimulus
The greenback rose across the board Wednesday as investors lowered their expectations that Fed Chairman Ben Bernanke will signal further stimulus this Friday in Jackson Hole, Wyoming. Spot gold price tumbled sharply by more than $100 to $1750.60/oz on Wednesday, one day after reaching an all-time high of $1911.40/oz.
Versus the Japanese yen, the greenback fell from 76.88 in Asian morning as Japanese Finance Minster Yoshihiko Noda did not explicitly mention currency intervention, instead focusing on other measures to stem the yen’s rise. Although the pair dropped to 76.48 in NY morning, the greenback rebounded after the release of better-than-expected U.S. durable goods data and climbed to 77.07 in NY afternoon due to dollar’s broad-based strength together with cross selling of yen as further actions by the Fed look less likely.
Earlier in Australia, Moody’s lowered Japan’s government rating from Aa2 to Aa3 with outlook stable. Moody’s said ‘frequent changes in administration have prevented government from implementing long-term economic and fiscal strategies.’
U.S. durable goods orders were 4.0% vs forecast of 2.0%, the previous figure was revised to -1.3%. U.S. durable goods ex-transport and ex-defense were 0.7% and 4.8% vs forecasts of -0.5% and 3.2% respectively.
The single currency extended its fall from Tuesday’s NY high at 1.4447 in Asia to 1.4379 in European morning after the release of weaker-than-expected German IFO data. However, price rose strongly to 1.4475 on talks of the ECB was buying Italian bonds and gained further to 1.4482 in NY morning before dollar’s broad-based strength sent euro sharply lower to 1.4389.
German IFO business climate and current assessment for August were reported at lower than expected 108.7 and 118.1 compared to forecasts of 111.0 and 120.0 respectively.
The British pound traded sideways in Asia and rose in tandem with euro to an intra-day high of 1.6535 in European morning. However, cable tumbled sharply to 1.6365 at NY mid-day on dollar’s broad-based strength together with active cross selling of sterling vs euro (eur/gbp rallied from 0.8725 to 0.8813) before stabilising.
The DJI rose by 143.95 points, or 1.29%, to 11320.71. The FTSE-100, CAC 40, and DAX surged by 1.49%, 1.79%, n 2.69%, respectively.
On the data front, eurozone June industrial orders M/M n Y/Y are reported at -0.7% n 11.1% against forecasts of 0.5% and 12.1% respectively. U.S. home prices in June were +0.9% m/m and -4.3% y/y, prior figures were +0.4% and -6.3%, respectively.
Data to be released on Thursday include:
U.K. consumer confidence, Germany Gfk consumer confidence, Switzerland employment level, ZEW index, U.K. CBI distribution trade, U.S. jobless claims.