Market Review – 14/06/2011 21:35 GMT
The single currency rises on improved risk appetite
Euro resumed previous session’s gain on Tuesday and rose to as high as 1.4498 in New York afternoon in part due to improved risk appetite after the release of Chinese and U.S. economic data. Chinese data showed economic activity was only moderating but would not suffer a hard landing, whilst U.S. retail sales fell less than forecast in May.
Active cross-buying in euro due to renewed risk appetite lifted price higher from 1.4379 in Asia and the single currency later penetrated Monday’s top of 1.4430 to a session high of 1.4498 in New York trading before retreating. Euro also strengthened against the Japanese yen, sterling and Swiss franc and these pairs rose from 115.25 to 116.69, from 0.8785 to 0.8843, and from 1.2012 to 1.2255 respectively.
Euro-led rally also pushed sterling higher against the greenback in Asia and early European trading, cable rose to a session high of 1.6443 in European morning before retreating after release of UK CPI data in May, which came in as widely expected at 0.2% m/m and 4.5% y/y, and showed that the Bank of England might not raise interest rates any time soon, price traded around 1.6370 near New York closing.
China consumer price inflation ticked up to 5.5% y/y in May, in line with median forecasts, rising from 5.3% in April and staying above 5% for a third straight month. China investment growth in May was slightly stronger than expectations at 25.8% y/y versus the median forecast of 25.2%. China industrial output in May ticked down only slightly to 13.3% y/y in May versus the median forecast of 13.1%. U.S. retail sales showed a modest decrease in the month of May, a 0.2% decline from April, marking the first drop since June 2010 but was smaller drop than the 0.3% decrease generally expected.
Versus the Japanese yen, the greenback pared initial losses and rose after China released its economic data to 80.46 in European morning and later touched a session high of 80.63 in New York morning on improved risk appetite after the release of U.S. economic data. Bank of Japan finished its 2-day monetary policy meeting and announced to keep overnight call rate target unchanged at 0-0.1% by unanimous vote. Bank of Japan said ‘to increase size of loan scheme targeting growth industries; upgrades assessment of Japan’s economy; Japan’s economy to remain under downward pressure for time being’.
In global stock markets, FTSE-100, CAC-40 and DAX rallied by 0.51%, 1.50% and 1.69% respectively. Dow Jones Industrial Average rose by 123 points to 12,076. S&P 500 rose by 16 points to 1,287.
In other news, China Central Bank (PBOC) raised banks’ required reserved ratio (RRR) by 50 bps to 21.5% but kept its one-year lending rate at 6.31% and one-year deposit rate at 3.25%.
Federal Reserve Chairman Ben Bernanke said ‘failure to raise debt ceiling could lead to ratings downgrades, damage special role of dollar, U.S. treasury market; failure to raise debt ceiling would push up interest rates, making deficit problem worse.’
Data to be released on Wednesday include:
U.K. Nationwide consumer confidence, claimant count, ILO unemployment rate and average earnings 3m; Australia Westpac consumer confidence; Japan machine tools orders; Swiss combined PPI; EU industrial production; U.S. CPI, real earnings, foreign treasury buys, net LT TIC flows, capacity utilisation, industrial production and NAHB housing market index.