Market Review – 29/07/2010 22:56 GMTEuro surges above $1.3100 on upbeat European economic dataThe single currency broke above the $1.31 level for the first time since May as German unemployment decreased while European confidence in the economic outlook rose to the highest level in more than two years this month.
Despite euro’s initial brief dip to an intra-day low of 1.2977 in Thursday’s Asian morning, the pair then rebounded from there and ratcheted higher on short-covering. The single currency’s intra-day rise accelerated after triggering huge stops above 1.3050 level in Europe and supportive EU and German economic data helped price to extend recent erratic upmove to a 12-week high of 1.3107 in NY morning before easing.
Eurozone economic confidence in July rose from 98.7 to a 28-month high of 101.3, better than the estimate of 99.1, while German unemployment fell in July for the thirteenth consecutive month by 20K and the jobless rate dropped to 7.6% from 7.7%. These figures suggest eurozone could overcome the sovereign debt crisis.
Versus the Japanese yen, the greenback remained under pressure in Asian morning and dropped below Wednesday’s low of 87.25 to 87.10 on selling by Japanese exporters before staging a recovery. However, renewed selling interest at 87.45 pushed dollar lower again (despite staging pullback after the release of U.S. jobless data) and the pair fell to an intra-day low of 86.57 in NY session, traded sideways afterwards.
U.S. jobless claims dropped slightly more than expected from the previous reading of 464K to 457K, compared to the estimate of a fall to 460K.
DJI pared most of the intra-day losses (once dropped about 100 points) and closed the day down by only 31 points, or 0.29% at 10467.
In addition, U.S. Dallas Federal Reserve President Richard Fisher said that any further monetary policy would have as little effect boosting the economy as ‘pushing on a string’ and lawmakers should act by providing certainty on rules and taxes.
The cable traded narrowly in Asian morning after Wednesday’s retreat from 1.5638 to 1.5572 but renewed buying interest on the back of broad-based dollar weakness lifted price from there and the gbp/usd ratcheted higher to a fresh 5-month high of 1.5663 in Europe. Later, despite cable’s brief but sharp retreat to 1.5580, sterling managed to recover to 1.5627 before stabilising in NY afternoon.
In other news, UK Chancellor George Osborne said that there is no tacit agreement between U.K. government and BoE’s King on keeping rates low, and always believes the greatest stimulatory effect on economy comes from monetary policy.
The Swiss franc surged against dollar and euro on Thursday on speculation that SNB was selling part of its $208billion reserves. Usd/chf tumbled from 1.0580 to a six-month low of 1.0374 in NY while eur/chf declined from 1.3755 to 1.3580.
Advisor of PBOC Zhou Qiren said the yuan can rise or fall under managed float but only in small steps. He added that the more flexible exchange rate regime would allow the PBOC to make more use of various monetary policy tools over the rest 2010.
Economic data to be released on Friday include: U.K. Gfk survey, Japan Manufacturing PMI, Household spending, National CPI, Tokyo CPI, National CPI (core), Unemployment rate, Industrial prod’n, Construction orders, Housing starts, Germany Retail sales, EU HICP flash , EU Unemployment rate, Swiss KOF indicator, Canada GDP, U.S. GDP annualised, GDP deflator, Personal consumption, PCE core, Employment Cost Index, Chicago PMI and U. Michigan survey.
