Market Review – 15/06/2011 21:33 GMT
The greenback rallies across the board on renewed Greek debt contagion fear
The greenback rose sharply against its major counterparts on safe-haven demand due to Greek default worries.
Euro came renewed selling pressure in Australian session when Moody’s had placed France’s BNP Paribas, Societe Generale and Credit Agricole on review for possible downgrade citing their holdings of Greek debt and the rating agency later reviewed ratings of subsidiaries of Portuguese Banks in Brazil in New York morning on review for possible downgrade.
Renewed concerns over Greek debt boosted safe-haven demand for usd and greenback strengthened across the board on Wednesday, pushing eur/usd sharply lower from 1.4451 to a session low of 1.4156 before stabilising. Risk aversion pressured euro crosses with eur/jpy, eur/gbp and eur/chf also tumbling from 116.48, 0.8823 and 1.2245 to 114.56, 0.8750 and 1.2081 respectively.
The dollar Index, which measures the USD against a basket of six currencies, rose to as high as 75.66 in New York session. Usd/jpy and usd/chf extended recent gains and climbed to session highs of 81.08 and 0.8552 respectively in New York session. Apart from greenback’s broad-based firmness, speculation that the Swiss National Bank (SNB) would keep interest rates unchanged at its monetary policy meeting on Thursday also helped usd/chf rally from 0.8443 to 0.8552 in New York afternoon before easing.
Renewed Greek debt concerns also damped demand for higher-yielding assets such as Australian dollar and New Zealand dollar. Aussie and kiwi fell sharply from 1.0715 and 0.8209 to 1.0535 and 0.8035 respectively whilst loonie rose sharply from 0.9671 to 0.9829.
The British pound nose-dived after the release of lower-than-expected U.K. claimant count data (U.K. Office for National Statistics reported that the U.K.’s jobless claims rose by 19,600 in May from a revised 16,900 increase in the prior month and versus economists’ forecast of an increase of 6,500) and cable extended intra-day losses from Australian high of 1.6383 to 1.6168 in New York trading.
In global stock markets, FTSE-100, CAC-40 and DAX fell by 1.04%, 1.49% and 1.25% respectively. Dow Jones Industrial Average closed down 178 points at 11,898. S&P 500 also closed down by 22 points to 1,266.
In other news, to prevent financial disaster for Greece, euro zone officials might forge a compromise by a June 23-24 EU summit. Reuters also reported a meeting would take place in Berlin on Friday between German Chancellor Angela Merkel and French President Nicolas Sarkozy, where the outlines of a final deal could be sketched out.
On the data front, the U.S. consumer-price index in May increased 0.2%, versus economists’ forecast of 0.1%. The core measure, which excluded more volatile food and energy costs, climbed 0.3%, the biggest increase since July 2008. Swiss producer prices fell by 0.2% m/m n 0.4% y/y in May versus the consensus forecast of 0.0% m/m and -0.2% y/y respectively.
Data to be released on Thursday include:
Japan Tankan manufacturing; Swiss industrial production and SNB rate decision; U.K. retail sales; EU employment and HICP final; U.S. current account, housing starts, building permits, jobless claims and Philadelphia Fed survey.