Market Review – 06/08/2011 01:09 GMT
Euro surges on hopes of expanded ECB bond buying programme
The single currency rallied on Friday’s news that the ECB is likely to buy bonds from troubled Italy and Spain to reduce eurozone contagion risks and to restore investors’ confidence. Better-than-expected U.S. jobs report data failed to ease worries about the global economy.
Earlier, although euro extended Thursday’s selloff to 1.4055 in Australia, the single currency ratcheted higher on short-covering in Asian and European sessions and rose to 1.4232 in NY morning after the release of better-than-expected U.S. jobs data. Later, despite euro’s retreat to 1.4146, the pair surged to a session high of 1.4297 in NY afternoon on reports the ECB will buy Italian and Spanish sovereign bonds if they accelerate their fiscal reforms.
U.S. July non-farm and private payrolls came in better-than-expected at 117K n 154K vs forecasts of 85K and 115K whilst the unemployment rate is 9.1% in July vs forecast of 9.2%. Average hourly earnings were up 0.4% m/m and 2.3% y/y vs expectations of 0.2% and 1.9%.
Versus the Japanese yen, the greenback edged lower from 79.34 in Australia due to renewed cross buying of yen. Later, despite dollar’s brief spike to as high as 79.41 on talks of interventions by Japanese authorities, the pair fell again to 78.31 as a Japanese senior official denied to give comment on whether Japan intervened in the currency market at Asian midday. Although usd/jpy rose to 79.08 after the release of better-than-expected U.S. jobs data, renewed selling pressured the pair down to around 78.50 in late NY session.
Although the British pound continued its selloff in previous day to 1.6229 in Australia, cable ratcheted higher in tandem with euro on short-covering in Asian and European sessions and rallied to 1.6397 at NY midday due to cross buying gbp vs euro (eur/gbp rebounded strongly from 0.8643 to 0.8732) before retreating to 1.6334 in NY afternoon.
Data to be released next week includes:
Japan trade balance, current account, economic watch DI, BOJ monthly report, Swiss jobless rate, EU sentix investor confidence on Monday;
UK BRC retail sales, RICS house prices, Australia NAB business confidence, China CPI, PPI, industrial production, retail sales, fixed assets investments urban, Japan consumer confidence, machine tool orders, Swiss consumer confidence, Germany export, import, trade balance, current account, UK industrial production, manufacturing production, trade balance, Canada housing starts, U.S. Fed rate decision on Tuesday;
Japan domestic CGPI, Australia Westpac consumer confidence, China exports, imports, trade balance, Germany CPI final, HICP final, U.S. wholesale inventories, Fed budget on Wednesday;
Japan machine orders, Australia employment change, unemployment rate, Canada new housing price index, trade balance, exports, imports, U.S. jobless claims on Thursday;
Japan capacity utilisation, EU industrial production, U.S. retail sales, retail sales less auto, U. Michigan consumer sentiment survey, business inventories on Friday.