Market Review – 12/10/2010 23:02 GMTEuro rallies against dollar after release of Federal Reserve minutesEuro pared all of its early losses and rebounded strongly against dollar on Tuesday, as minutes of U.S. Fed’s latest meeting showed that the central bank believed further monetary easing would be needed to boost the U.S. economy.
Although the single currency fell from 1.3882 and hit an intra-day low of 1.3775, price rebounded from there and ratcheted higher in Europe, NY morning and rose further in NY mid-day due to ECB Governing Council member Axel Weber’s comments. He said that ECB’s bond buying programme has not worked and should be phased out permanently. The single currency eventually rallied to 1.3937 in NY afternoon after the release of minutes of FOMC. Cross buying in euro also gave support to the single currency as eur/gbp rallied from 0.8698 to 0.8822.
The minutes of FOMC meeting on 21 September showed that the central bank was ready to ease its monetary policy before long. The policymakers noted that it would be appropriate if growth is too slow to reduce jobless rate or if inflation continues to fall.
The greenback initially rose to 82.38 against the Japanese yen in Asian morning on wariness of BOJ’s intervention. Japanese Finance Minister Noda warned that the government would take decisive steps, including intervention, when needed. However, selling interest at there sent dollar to 81.80 in European morning. Later, dollar dropped further after minor recovery and hit an intra-day low of 81.66 in NY morning before stabilising.
Although the British pound rose to 1.5917 in Asia, selling interest at there pressured cable lower and sterling dropped in tandem with euro to 1.5795 in European morning after the release of U.K. inflation and trade data (U.K. CPI in September came in at 0.0% m/m and 3.1% y/y as expected, trade balance was -8.227B versus forecast of -8.1B). Later, cable dropped to an intra-day low of 1.5755 in NY afternoon on active cross selling in sterling especially versus euro.
MPC member David Miles said ‘not obvious what the next direction of monetary is; BOE may yet come to use QE; QE remains a potentially powerful tool.’ His comments might have contributed to cable’s intra-day decline as the general tone was on the dovish side.
Economic data to be released on Wednesday include:
Japan Machine orders, Australia W’pac consumer confi., Swiss Combined PPI, U.K. N’wide Consumer Confi., Avg. earnings 3m, Claimant count, ILO unemployment rate, EU Industrial prod’n, U.S. Import price index, Export price, Canada New housing price index.
