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Market Review - 31/07/2013 22:20GMT
Dollar drops on dovish Fed statement
The greenback tanked against euro and sterling on Wednesday as the statement from the Federal Reserve did not give any hints about a reduction in its stimulus measures.
The single currency went through a roller-coaster session on Wednesday. Although euro rose strongly from 1.3241 to 1.3301 in European morning after the release of better-than-expected Germany's unemployment rate (12.1% versus the forecast of 12.2%), failure to penetrate Tuesday's top at 1.3302 prompted profit-taking and price tumbled to a low at 1.3210 in New York morning on dollar's broad-based strength due to the better-than-expected U.S. ADP employment change and GDP data, which came in at 200K and 1.7% q/q, versus the forecasts of 180K and 1.0%.
Later, active cross buying of euro versus yen lifted euro and price rallied to 1.3299 at U.S. midday. Later, the pair rose above 1.3302 to a fresh 1-month top at 1.3345 in U.S. afternoon after the release of dovish Fed statement.
The Federal Reserve kept fund rate at 0-0.25% unchanged and released a statement which said 'will buy longer-term treasury securities at pace of $45 billion a month, agency MBS at 40 billion a month; recognizes inflation consistently below 2% goal, could pose risks to economic performance; anticipates inflation will move back toward objective over medium term, current inflation rate partly reflects transitory influences; economic activities has expanded at modest pace in first half 2013, labour market conditions have shown further improvement in recent months; to keep fund 0-0.25% as long as jobless rate above 6.5%, 1-2 year projected inflation no more than 2.5%, longer-term inflation expectations well anchored; housing sector has been strengthening, but mortgage rates have risen somewhat, fiscal policy is restraining growth.'
Versus the Japanese yen, although the greenback dropped from Asian top at 98.16 to a 1-month low at 97.59 in European morning, the pair rose strongly to a high at 98.57 in New York morning after the release of strong U.S. ADP employment change and GDP data but later fell sharply to 97.68 in late New York due to the dovish Fed statement.
The British pound edged lower from Asian top at 1.5245 due to active cross selling of sterling versus euro and then tanked to a low at 1.5125 in New York morning on dollar's strength, however, price staged a recovery in tandem with euro and rose to 1.5220 in U.S. afternoon after the release of dovish Fed statement and rose further to 1.5254 on dollar's weakness.
On the data front, German retail sales in June came in at -1.5% m/m and -2.8% y/y, worse than the forecast of 0.0% and 0.4%. EU unemployment rate in June came in at 12.1%, stronger than the forecast of 12.2%. U.S. Chicago PMI in Jul came in at 52.3, worse than the forecast 54.0.
Data to be released on Thursday:
Australia New home sales, China manufacturing PMI, Italy manufacturing PMI, France manufacturing PMI, German manufacturing PMI, EU manufacturing PMI, ECB rate decision, BOE Rate decision, U.S. Jobless claim, construction spending, ISM manufacturing.
Dollar drops on dovish Fed statement
The greenback tanked against euro and sterling on Wednesday as the statement from the Federal Reserve did not give any hints about a reduction in its stimulus measures.
The single currency went through a roller-coaster session on Wednesday. Although euro rose strongly from 1.3241 to 1.3301 in European morning after the release of better-than-expected Germany's unemployment rate (12.1% versus the forecast of 12.2%), failure to penetrate Tuesday's top at 1.3302 prompted profit-taking and price tumbled to a low at 1.3210 in New York morning on dollar's broad-based strength due to the better-than-expected U.S. ADP employment change and GDP data, which came in at 200K and 1.7% q/q, versus the forecasts of 180K and 1.0%.
Later, active cross buying of euro versus yen lifted euro and price rallied to 1.3299 at U.S. midday. Later, the pair rose above 1.3302 to a fresh 1-month top at 1.3345 in U.S. afternoon after the release of dovish Fed statement.
The Federal Reserve kept fund rate at 0-0.25% unchanged and released a statement which said 'will buy longer-term treasury securities at pace of $45 billion a month, agency MBS at 40 billion a month; recognizes inflation consistently below 2% goal, could pose risks to economic performance; anticipates inflation will move back toward objective over medium term, current inflation rate partly reflects transitory influences; economic activities has expanded at modest pace in first half 2013, labour market conditions have shown further improvement in recent months; to keep fund 0-0.25% as long as jobless rate above 6.5%, 1-2 year projected inflation no more than 2.5%, longer-term inflation expectations well anchored; housing sector has been strengthening, but mortgage rates have risen somewhat, fiscal policy is restraining growth.'
Versus the Japanese yen, although the greenback dropped from Asian top at 98.16 to a 1-month low at 97.59 in European morning, the pair rose strongly to a high at 98.57 in New York morning after the release of strong U.S. ADP employment change and GDP data but later fell sharply to 97.68 in late New York due to the dovish Fed statement.
The British pound edged lower from Asian top at 1.5245 due to active cross selling of sterling versus euro and then tanked to a low at 1.5125 in New York morning on dollar's strength, however, price staged a recovery in tandem with euro and rose to 1.5220 in U.S. afternoon after the release of dovish Fed statement and rose further to 1.5254 on dollar's weakness.
On the data front, German retail sales in June came in at -1.5% m/m and -2.8% y/y, worse than the forecast of 0.0% and 0.4%. EU unemployment rate in June came in at 12.1%, stronger than the forecast of 12.2%. U.S. Chicago PMI in Jul came in at 52.3, worse than the forecast 54.0.
Data to be released on Thursday:
Australia New home sales, China manufacturing PMI, Italy manufacturing PMI, France manufacturing PMI, German manufacturing PMI, EU manufacturing PMI, ECB rate decision, BOE Rate decision, U.S. Jobless claim, construction spending, ISM manufacturing.
