Market Review – 19/09/2010 23:00 GMTEuro falls on renewed concerns over European debt crisis
The single currency weakened against dollar on Friday on renewed market speculation that an Irish bank faced troubles on its debt and might need for external assistance.
Euro rose initially from 1.3060 in Asia and climbed to an intra-day high of 1.3160 in European morning after triggering stops above Thursday’s high of 1.3117. However, euro retreated from there after the release of lower-than-expected German PPI data, which came in at 0.0% m/m and 3.2% y/y versus the economists’ forecast of 0.2% m/m and 3.5% y/y, and extended its fall on concerns over European debt crisis together with the weaker-than-expected U.S. consumer confidence. Cross selling in euro also weighed on the pair as eur/chf tumbled from 1.3392 to 1.3140. Euro eventually dropped to 1.3020 in NY morning and then traded narrowly.
The single currency was pressured on speculation that an Irish bank needed external assistance for its debt. Later, Irish Finance Minister denied the rumours and IMF said it did not foresee that its financial assistance would be needed for Ireland and praised authorities’ policy efforts to prop up its banking system.
U.S. University of Michigan preliminary consumer sentiment fell to 66.6 (forecast was 70.0) in September from 68.9 in August.
Earlier in European morning, the single currency was supported by the release of eurozone current account, as eurozone current account balance came in at 3.7 billion euros in July versus 1.8 billion euros in June.
Although the greenback ratcheted lower to 85.59 against the Japanese yen in Asian morning, dollar rebounded from there and re-tested Thursday’s high of 85.94 on talks that Japanese authorities kept intervening together with long liquidation in yen by hedge funds. However, active selling from Japanese exporters limited dollar’s upside and the greenback dropped to 85.64 before stabilising.
Earlier in Asian morning, Japanese Finance Minister Noda said he was not targeting any specific forex level in intervention. He aimed at curbing excessive forex moves. He was aware of various opinion overseas and he had to explain to international community Japan’s stance that sustained yen rise would be bad for economy. He expected China to steadily carry out yuan reform. In addition, he added that he would work closely with BOJ to beat deflation, which could not be overcome by forex intervention alone and he hoped BOJ would take appropriate action when needed.
In other news, MOF Yoshihiko Noda said the government had to work closely with BOJ to beat deflation. Deflation cannot be overcome by FX intervention alone. Noda hoped BOJ would take appropriate action when needed.
Despite cable’s brief retreat to 1.5595 in Asia, the British pound found renewed buying interest there on the firmness in Asian stock markets (Nikkei-225 rallied by 1.23%) and then rose to an intra-day high of 1.5730. Later, sterling fell sharply in tandem with euro and dropped to 1.5612 in NY afternoon.
Economic data to be released next week include:
U.K. Rightmove hse prices, Canada Wholesale sales, U.S. NAHB housing mrkt index (Japan is closed for holiday) on Monday, Australia RBA’s Sept Minutes, Japan Leading indicators, Machine tools orders, Swiss Trade balance (chf), U.K. PS net borrowing, PSNCR, Canada CPI core, CPI, U.S. Building permits, Housing starts, Fed rate decision on Tuesday, New Zealand Current account, Australia Westpac leading economic index, Japan All industry index, U.K. BOE meeting minutes, EU Industrial orders, EU Consumer Confidence, Canada Leading indicators, Retail sales, ex. Autos, U.S. Home Price Index on Wednesday, New Zealand GDP, Germany Services PMI, Manufacturing PMI, EU Services PMI, Manufacturing PMI, U.S. Jobless claims, Existing home sales, Existing home sales, Leading indicators (Japan is closed for holiday) on Thursday, Germany Import price index, Ifo index, U.S. Durable goods, ex. Defense, ex. Transport, New home sales, New homes change on Friday.
