Market Review – 20/12/2010 21:30 GMT
Euro falls as European debt worries grow
The euro tumbled broadly on Monday on lingering European debt worries as Moody’s downgraded two Irish banks to junk status.
Moody’s also warned that it could downgrade the debt ratings of Spanish banks that would require financial aid from the Spanish government. In addition, ECB expressed serious concerns that Ireland’s bailout package could affect the institution’s liquidity operations in the eurozone, prompting traders to sell the single currency broadly.
Euro was also pressured by the release of weaker-than-expected eurozone consumer confidence which came in at -11.0 in December versus previous reading of -9.4 in November. Despite euro’s initial gain to 1.3186, the single currency fell below Friday’s low of 1.3133 and reached 1.3094 in NY session. Cross-selling in euro also pushed price lower as eur/chf tumbled to a lifetime low of 1.2636 while eur/jpy slumped from 110.72 to 109.57.
Although the greenback ratcheted higher against the Japanese yen at Tokyo opening and climbed to 84.13 due to heightening of tension on the Korean peninsula after Reuters news reported that S. Korean marines had ordered residents of Yeonpyeong island to move to air raid bunkers in anticipation of a live-fire drill, the pair retreated from said intra-day high and fell to 83.63 before staging a recovery.
In other news, St. Louis Fed President James Bullard told the CNBC TV business channel that the Federal Reserve’s 600 billion bond buying program has been ‘at least successful’ so far. Bullard said nominal interest rates alone should not be used to judge the program’s success. He said economic growth would likely be stronger next year than was anticipated even a few months ago.
The British pound initially rose from 1.5478 to 1.5577 in Europe, however, the pair retreated sharply to 1.5480 before moving narrowly in NY afternoon.
Economic indicators to be released on Tuesday include:
Australia’s Board Minutes, Japan BOJ rate decision, Germany Gfk index, Swiss Trade balance, UK PSNCR, Canada CPI data and Retail sales.