Market Review – 12/04/2011 20:26 GMT
Euro retreats from 15-month high as commodity prices tumble
Euro retreated from a fresh 15-month high on Tuesday as the selloff in commodity prices together with the worsening of Japanese nuclear leakage situation dampened risk appetite.
Japan’s Nuclear and Industrial Safety Agency raised the severity rating of the Fukushima Daiichi crisis to 7, on par with Chernobyl, in early Asian session.
Despite euro’s initial fall to a day’s low of 1.4377 in Asian morning as Japan upgraded the severity of its nuclear crisis, buying interest there lifted price and cross-buying in the single currency lifted euro higher in European session. Later, the pair penetrated Monday’s high of 1.4489 to a fresh 15-month peak of 1.4520 in New York morning, however, the single currency then fell sharply in tandem with commodity prices before staging a recovery from 1.4437 to 1.4496 in late New York trading.
The euro was also supported by news that China, the world’s second largest economy, was willing to purchase more Spanish debt.
The British pound tumbled as the surprise drop in U.K. CPI data dented speculation that the Bank of England would be under pressure to raise its lending rates in near term. Cable ratcheted lower in Asian session following early rise to 15-month high of 1.6430 last Friday and price then fell briefly to an intra-day low of 1.6227 after UK Consumer Prices Index (CPI) rate of inflation came in at 4.0% in March, sharply lower from 4.4% in February and back to the level seen in January, the Office for National Statistics (ONS) said. Street forecast was for CPI rate to hold at 4.4%. Later, despite staging a euro-led rebound to 1.6330 in New York morning, renewed selling interest there pushed the pound lower again in New York midday before trading sideways. Eur/gbp also strengthened to a near six-month high of 0.8916.
The Japanese yen and the Swiss franc rose across the board on safe-haven demands. Usd/jpy tumbled from 84.78 to 83.41 in Asian morning and despite staging a strong rebound to 84.43 in European morning, the pair then retreated sharply again in New York morning. Eur/jpy, aud/jpy, gbp/jpy tanked from 122.41 to 120.16, from 89.11 to 86.89 and from 138.64 to 135.79 before staging a recovery. Usd/chf also fell sharply from 0.9077 to 0.8942 while eur/chf tumbled from 1.3096 to 1.2960.
Oil prices dropped sharply for a second day following Goldman Sachs ‘s call for a fall of almost $20 in Brent crude oil in May. Spot gold and silver prices tanked from 1466.40 to 1444.00 and from 40.81 to 39.72 respectively.
Data to be released on Wednesday include:
Japan domestic CGPI; Swiss combined PPI; U.K. claimant count, ILO unemployment and average earnings; EU Industrial production; U.S. retail sales and business inventories on Wednesday.