Market Review – 02/03/2011 19:48 GMT
Euro strengthens to a 2011 high on ECB rate hike outlook
Euro rose sharply on Wednesday as higher-than-expected eurozone PPI fueled speculation that ECB may raise interest rate to curb inflation earlier than the Fed. Although euro dropped briefly below Tuesday’s low of 1.3762 to an intra-day low of 1.3744 in Asian morning, price then ratcheted higher n intra-day rise gathered momentum after eurozone PPI surged to 1.5% M/M vs forecast of 1.1% whilst Y/Y figure jumped to 6.1%, the highest lvl since September 2008. The single currency eventually rose abv 1.3862 (Feb) to a fresh 2011 high of 1.3890 in NY mid-day on dlr’s broad based weakness b4 retreating on profit-taking.
The British pound also rallied to a fresh 13-month high on Wednesday on dlr’s broad-based selloff. Despite initial weakness to 1.6216 in Asian afternoon, cable rebounded n jumped to 1.6300 after release of stronger-than-expected UK construction PMI, Feb figure came in at 56.5 vs forecast of 52.8, Feb PMI was the highest in 8 months according to Markit/CIPS, citing news UK business growth. The pound eventually climbed to a fresh 13-month high of 1.6344 in tandem with euro in NY morning b4 stabilising.
The dollar blipped up to an intra-day high of 82.13 against the Japanese yen after the release of much better-than-expected U.S. ADP employment in NY morning, the usd/jpy pair then tumbled to as low as 81.57 b4 recovering in NY afternoon. The Swiss franc strengthened to a fresh lifetime low of 0.9202 in NY mid-day as the continued unrest in Libya n Middle East prompted investors to flock to the swissy as a safe-haven asset.
The nzd tanked fm 0.7482 to 2011 low of 0.7385 on Wednesday after Prime Minister John Key said he would ‘welcome’ an interest rate cut to boost the economy following last month’s earthquake in Chrischurch.
The European Central Bank will hold its policy meeting on Thursday at 12:45GMT. Although the ECB is widely expected to keep interest rates unchanged at 1.0%, pay attention to the press conference after the rate decision as the ECB chief Jean-Claude Trichet may sharpen its anti-inflation rhetoric.
Data to be released on Thursday include:
Australia building approvals, Swiss retail sales, Germany, U.K. n eurozone services PMI, eurozone GDP, retail sales, ECB rate decision, U.S. jobless claims, productivity n ISM non-manufacturing.