Market Review – 29/10/2010 21:11 GMTDollar falls to a fresh 15-year low against yen on Fed easing expectations
The greenback weakened to a fresh 15-year low against yen on Friday as lackluster U.S. GDP data reinforced market’s speculation that U.S. Fed would ease monetary policy further to support the economic recovery at next week’s FOMC meeting on Wednesday.
Dlr/yen fell from 81.08 to 80.53 in Asia on risk aversion together with cross-buying in yen (eur/jpy, gbp/jpy and aud/jpy tumbled from 112.99 to 111.53, 129.29 to 128.01 and 79.32 to 78.20 respectively). Later, the pair fell again after a minor recovery and extended its intra-day decline after the release of U.S. GDP data for Q3 (which expanded by a 2.0% annual rate as expected). Dollar eventually penetrated Monday’s low of 80.41 to a fresh 15-year low of 80.37 ahead of NY closing.
The single currency initially extended Wednesday’s rise fm 1.3734 to 1.3952 in Australia, however, price quickly fell at Asian opening on profit-taking as well as heavy cross selling versus yen, euro then tanked to an intra-day low of 1.3807 in Europe after the release of weaker-than-expected German retail sales (which fell by 2.3% in September versus the forecast of an increase of 0.5%). However, the pair rebounded strongly on renewed risk appetite (the 3 commodity currencies – aud, nzd and cad and gold also rallied) in U.S. session and climbed back to 1.3947 near NY closing.
Euro was also supported by U.S. GDP for Q3 (GDP deflator was 2.2% vs forecast of 1.9%) and stronger-than-expected U.S. Chicago PMI data which came in at 60.6 versus expectation of 58.0.
Although the British pound dropped to 1.5877 in tandem with euro in London morning trading following Thursday’s rally to 1.5979, sterling rebounded strongly and later penetrated 1.6000 level to as high as 1.6047 ahead of NY closing on dollar’s weakness together with cross buying in sterling versus euro (eur/gbp fell sharply from 0.8740 to 0.8670)
Economic data to be released next week include:
Australia House price index, Swiss PM, U.K. Hometrack Housing, PMI manufacturing , U.S. PCE core, PCE index , Personal income, Personal spending, ISM manufacturing, Construction spending on Monday, Australia RBA rate decision, Swiss Retail sales, Germany Manufacturing PMI, EU Manufacturing PMI, PMI construction on Tuesday, U.K. BRC Shop Price Index , PMI service, U.S. ADP employment, FOMC meets on rates, eco, Durable goods (rev.), ex. Defense (rev.), ex. Transport (rev.), Factory orders, ISM non-manufacturing, Fed rate decision on Wednesday, Swiss CPI, Germany Services PMI, EU Services PMI, PPI, ECB rate decision, U.K. BOE rate decision, U.S. Jobless claims, Labour cost, Productivity, Canada Ivey PMI on Thursday, U.K. PPI core, PPI input, PPI output, EU Retail sales, Germany Industrial prod’n, U.S. Avg. hourly earnings, Non-farm payrolls, Unemployment rate, Pending home sales, Canada Building permits, Employment change, Unemployment rate on Friday.
