AceTraderFx Oct 17: Dollar pares early gain after Senate deal

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Market Review - 16/10/2013 22:19GMT

Dollar pares early gain after Senate deal


Dollar strengthened against other major currencies on Wednesday but this gain was limited after U.S. Senate reached a bipartisan deal. U.S. Senate majority leader Reid said 'bipartisan compromise reached in Senate to raise debt limit and reopen government.’

Although euro rose from 1.3506 in Asia and ratcheted higher in European trading, it climbed to a session high at 1.3567 in New York morning, dollar's broad-based rebound on optimism that the U.S. debt ceiling pressured price sharply lower and euro tumbled to a fresh 2-week low of 1.3472 before stabilising.
Later, the single currency rebounded after U.S. Senate reached a bipartisan deal and it climbed back to 1.3550 in New York afternoon.

With Japanese yen, the greenback retreated after rising to 98.63 in the Asian morning and then dropped to 98.25 in Europe. However, dollar's broad based rebound lifted price and the pair penetrated Tuesday's high of 98.71 in New York morning, then it surged to a session high at 98.98 before easing. Dollar later retreated to 98.60 in New York afternoon after Senate reached a bipartisan deal before stabilising.

Although cable rebounded after finding renewed buying interest at 1.5966 in Asia, it posted a brief rally to a session high of 1.6064 in Europe due to the release of better than the forecast U.K. job claimants data (-41.7K in September versus forecast of -25.0K). With active cross-selling of pound versus euro pressured price sharply lower from there and cable later tumbled on the back of greenback's broad-based rebound, it dropped to a fresh near 4-week low at 1.5894 in New York morning. But the British pound rose in tandem with euro in New York afternoon and it climbed back to 1.5970 before easing.

In other news, Bank of England's Spencer Dale said that '7% unemployment rate is not a target for Bank of England but a convenient point to consider on whether to raise rates; forward guidance increases monetary policy's effectiveness by making it more predictable. The U.K. economy looks set to grow even more quickly in H2 2013 than in H1 & the latest indicators suggest U.K. economy growing at annualized rate of 3-4%; with the levels of output and employment, not the growth rates, are the things that matter for monetary policy.
' The beige book from Federal Reserve stated 'U.S. economic activity continued to expand at a modest to moderate pace through September to early October but business contacts cautiously optimistic on outlook of the government shutdown, debt ceiling had increased uncertainty.'

On the data front, eurozone CPI for September came in at 0.5% m/m, & is as the expectation of 0.5%.
U.S. NAHB housing market index in October came in at 55, is worse than economists' expectation of 57.

Data to be released on Thursday:

ANZ consumer confidence index.
Australia NAB business confidence.
Japan machine tools orders.
EU current account; U.K. retail sales.
U.S. housing starts, building permits, jobless claims, industrial production, capacity utilization and Philadelphia Fed survey.
 
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