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Market Review - 18/12/2013 14:58GMT
U.S. dollar fluctuates wildly after the Fed decides to taper bond purchases
U.S. dollar fluctuated wildly after the Fed decided to taper bond purchases, reducing the QE toal to 75 billion from 85 billion. Euro rose to 1.3799 before retreating strongly to 1.3702. U.S. dollar dropped to 102.71 versus Japanese yen b4 rallying strongly to 103.67. The British pound tumbled to 1.6344 before rallying to 1.6486.
Fed said ‘to reduce bond buying to $75 billion per month, split as $35 billion MBS and $40 billion treasuries; will hold rates near zero as long as jobless rate above 6.5%, projected inflation not more than 2.5%; likely will keep Fed funds rate at 0-0.25% well past the time jobless rate falls below 6.5%, especially if projected inflation below 2 percent; will likely further reduce pace of asset purchases in measured steps if data shows ongoing improvement in labor market, inflation moving toward long-run objective; fiscal policy restraining economic growth, extent of restraint may be diminishing; risks to economic outlook, labor market have become more nearly balanced; inflation persistently below target could pose risks to economy, monitoring inflation developments carefully for evidence inflation will move back toward its objective. Fed vote in favor of policy was 9:1, Rosengren dissents because believes unemployment rate still elevated, inflation rate well below target; to reduce bond buying to $75 billion in bonds per month, split as $35 billion MBS and $40 billion treasuries.’
The single currency edged higher against the dollar in Asia and hit an intra-day high of 1.3778 in European morning before cross-selling of euro (especially versus sterling) pressured price lower to 1.3732 in New York morning, however, renewed risk appetite lifted price again later in the day and euro climbed back to 1.3799 before FOMC rate decision. Price later retreated briefly to 1.3702 and then rallied above 1.3811 to a fresh 6-month high at 1.3812 before tumbling to 1.3674 near New York close.
Versus the Japanese yen, dollar traded sideways in Asia after rebounding strongly from Tuesday's New York low of 102.50 to 103.03 due to a 2% gain in Nikkei 225 index. The pair found support at 102.82 in European morning on cross-selling in yen and then briefly rose to 103.28 in New York morning after the upbeat U.S. housing starts data. The pair later retreated briefly to 102.71 after FOMC and then penetrated last Friday's 103.92 peak to a fresh 5-year high at 104.35 near New York close.
U.S. housing starts rose to 1.09 million units last month, from 0.89 million in October, highest since February 2008 and posted a largest rise since January 1990, increased by 22.7%, however, U.S. building permits fell 3.1% to 1.01 million units in November, from 1.04 million units the previous month.
Cable edged higher after finding support at 1.6262 in Australia and then rallied in European morning after data showed that the U.K. unemployment rate unexpectedly fell to a four-and-a-half year low in the three months to October, price rose to a high of 1.6370 and then retreated to 1.6344 in New York trading after FOMC before rallying to a high of 1.6486.
U.K. unemployment benefit claimant fell by 36,700 in November, better than expectations for a decline of 35,000. October’s figure was revised to a drop of 42,800 people from a previously reported decline of 41,700. A separate report from ONS showed U.K. unemployment rate fell to 7.4% in the three months to October, the lowest level since April 2009.
Bank of England said on Wednesday 'recent sterling strength reflects better data but further substantial appreciation may hurt recovery; recent data suggest burgeoning recovery; some signs of greater investment but net trade weak; government steps to limit energy price rises may lower CPI by 0.15% if fully passed on by utilities; CPI inflation now seen at or near 2% target in early 2014, depending on timing of energy price changes; lack of productivity improvement despite stronger growth is puzzling, data may be misleading; too soon to draw conclusions about response of supply capacity to greater demand; forward guidance remains in place as inflation expectations well anchored, CPI outlook lower, FPC not concerned on stability.'
Data to be released on Thursday:
New Zealand GDP, Japan all industry index, leading indicators, Swiss trade balance, EU current account, U.K. retail sales, U.S. jobless claims, Philadelphia Fed survey, existing home sales, leading indicators..
U.S. dollar fluctuates wildly after the Fed decides to taper bond purchases
U.S. dollar fluctuated wildly after the Fed decided to taper bond purchases, reducing the QE toal to 75 billion from 85 billion. Euro rose to 1.3799 before retreating strongly to 1.3702. U.S. dollar dropped to 102.71 versus Japanese yen b4 rallying strongly to 103.67. The British pound tumbled to 1.6344 before rallying to 1.6486.
Fed said ‘to reduce bond buying to $75 billion per month, split as $35 billion MBS and $40 billion treasuries; will hold rates near zero as long as jobless rate above 6.5%, projected inflation not more than 2.5%; likely will keep Fed funds rate at 0-0.25% well past the time jobless rate falls below 6.5%, especially if projected inflation below 2 percent; will likely further reduce pace of asset purchases in measured steps if data shows ongoing improvement in labor market, inflation moving toward long-run objective; fiscal policy restraining economic growth, extent of restraint may be diminishing; risks to economic outlook, labor market have become more nearly balanced; inflation persistently below target could pose risks to economy, monitoring inflation developments carefully for evidence inflation will move back toward its objective. Fed vote in favor of policy was 9:1, Rosengren dissents because believes unemployment rate still elevated, inflation rate well below target; to reduce bond buying to $75 billion in bonds per month, split as $35 billion MBS and $40 billion treasuries.’
The single currency edged higher against the dollar in Asia and hit an intra-day high of 1.3778 in European morning before cross-selling of euro (especially versus sterling) pressured price lower to 1.3732 in New York morning, however, renewed risk appetite lifted price again later in the day and euro climbed back to 1.3799 before FOMC rate decision. Price later retreated briefly to 1.3702 and then rallied above 1.3811 to a fresh 6-month high at 1.3812 before tumbling to 1.3674 near New York close.
Versus the Japanese yen, dollar traded sideways in Asia after rebounding strongly from Tuesday's New York low of 102.50 to 103.03 due to a 2% gain in Nikkei 225 index. The pair found support at 102.82 in European morning on cross-selling in yen and then briefly rose to 103.28 in New York morning after the upbeat U.S. housing starts data. The pair later retreated briefly to 102.71 after FOMC and then penetrated last Friday's 103.92 peak to a fresh 5-year high at 104.35 near New York close.
U.S. housing starts rose to 1.09 million units last month, from 0.89 million in October, highest since February 2008 and posted a largest rise since January 1990, increased by 22.7%, however, U.S. building permits fell 3.1% to 1.01 million units in November, from 1.04 million units the previous month.
Cable edged higher after finding support at 1.6262 in Australia and then rallied in European morning after data showed that the U.K. unemployment rate unexpectedly fell to a four-and-a-half year low in the three months to October, price rose to a high of 1.6370 and then retreated to 1.6344 in New York trading after FOMC before rallying to a high of 1.6486.
U.K. unemployment benefit claimant fell by 36,700 in November, better than expectations for a decline of 35,000. October’s figure was revised to a drop of 42,800 people from a previously reported decline of 41,700. A separate report from ONS showed U.K. unemployment rate fell to 7.4% in the three months to October, the lowest level since April 2009.
Bank of England said on Wednesday 'recent sterling strength reflects better data but further substantial appreciation may hurt recovery; recent data suggest burgeoning recovery; some signs of greater investment but net trade weak; government steps to limit energy price rises may lower CPI by 0.15% if fully passed on by utilities; CPI inflation now seen at or near 2% target in early 2014, depending on timing of energy price changes; lack of productivity improvement despite stronger growth is puzzling, data may be misleading; too soon to draw conclusions about response of supply capacity to greater demand; forward guidance remains in place as inflation expectations well anchored, CPI outlook lower, FPC not concerned on stability.'
Data to be released on Thursday:
New Zealand GDP, Japan all industry index, leading indicators, Swiss trade balance, EU current account, U.K. retail sales, U.S. jobless claims, Philadelphia Fed survey, existing home sales, leading indicators..
