Market Review – 15/07/2010 21:33 GMTEuro rallies above 1.2900 on weak U.S. manufacturing data
Although the single currency rose from 1.2708 to 1.2765 in Asian morning after the release of China’s GDP, H1 came out first at 11.1%, the pair then retreated when Q1 y/y released ‘later’ at 10.3% (lower than the economists’ forecast of 10.5%) which showed Chinese economic growth slowed in Q2. Euro dropped to 1.2717 in European morning before renewed buying interest lifted price again and the pair penetrated previous session’s high of 1.2778 on strong Spain’s bond auction, rallied above 1.2900 for the first time since May to a high of 1.2955 in late NY due to weak manufacturing data from New York and Philadelphia that added concerns over the strength of the U.S. economy.
The New York Federal Reserve Bank’s ‘Empire State’ general business conditions index fell from 19.57 to 5.08 in July, the lowest since December 2009, while the Philadelphia Fed survey in July dropped from 8.0 to 5.1, the lowest since August 2009.
Spain’s debt sale drew strong demand as Spain sold 3 billion euros of 15-year bonds, compared with the target of 2-3 billion.
The single currency was supported by strong U.S. corporate earnings as JP Morgan Chase, the second-largest U.S. bank by assets said its earnings jumped to $1.09 per share, much better than the estimate of $0.67 per share.
Versus the Japanese yen, the greenback extended this week’s fall in Asia on weakness in Asian bourses (Nikkei-225 eased by 1.12% to 9685.53) after China released its Q2 GDP, showing economic recovery is slowing and the lackluster debut of Agricultural Bank of China’s $22 billion IPO has triggered risk aversion activities and dropped below Tuesday’s low of 88.02 to 87.82. Although the pair then rebounded to 88.27 on short-covering, the dollar tumbled to an intra-day low of 87.23 in NY morning after the release of weak manufacturing and inflation data before stabilising.
U.S. PPI fell by 0.5% for the third straight month in July while U.S. weekly Jobless claims dropped more than expected to 429K, the lowest level in nearly 2 years.
In other news, Fed’s Vice Chairman nominee Janet Yellen said it would be important to guard against inflation and that the central bank would need to pull back its easy money policies cautiously when the time is right.
Although the British pound briefly dipped to an intra-day low of 1.5236 at Asian opening, cable then rebounded on short-covering and rallied in tandem with euro in European and NY sessions, touched an intra-day high of 1.5473 in late NY trading before easing.
BOJ left key overnight call rate unchanged at 0.1% and it said policy board decision on rate was unanimous and would maintain very easy monetary conditions. BOJ also raised Japan’s growth forecast for the year ending March 2011 to 2.6% from 1.8% estimated in April but cut next year’s from 2% to 1.9%.
Economic data to be released on Friday include: New Zealand CPI, Japan Tertiary industry index, EU Trade balance, U.S. CPI, CPI core, Real earnings, NET LT TIC, U. Michigan survey Prel. and Canada Leading indicators.