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Market Review - 26/07/2010 22:59 GMT
Euro surges above 1.30 as solid US economic data boosts risk appetite
Euro's choppy moves were seen in Monday's Asian morning following Friday's volatile price action in NY after the stress-test results were released. Although euro dipped briefly to 1.2856 in NZ trading as weekend news reported that European regulator CEBS had accused Germany and its banks of reneging on a deal to publish full details of a bank-by-bank disclosure of risk holding of sovereign debts, short-term speculators quickly took profits on lack of follow through selling and traders bought euro vs usd, yen, gbp and chf, lifting the pair to 1.2944 and then 1.2959 before retreating briefly to 1.2889.
However, price then managed to rebound strongly again and euro rose to an intra-day high of 1.3006 after triggering stops above 1.2960/70 on active cross-buying in the single currency in late NY session. The release of stronger-than-expected new U.S. home sales, which jumped 23.6% to 330K in June versus the forecast of 3.3% increase and the previous reading of 32.7% decrease, boosted risk appetite and provided support to euro. Cross-buying in euro lifted the eur/gbp from 0.8325 to 0.8396, while eur/jpy and eur/chf rebounded strongly from 112.21 to 113.32 and from 1.3546 to 1.3632 respectively. Strength in stocks also lifted price as DJI surged by 0.97% and ended the day at 10525.43.
In other news, German Finance Ministry spokeswoman said that the German government believes the market reaction to European banks stress test results showed they had achieved their goals and there was no need for further action on banks. However, she confirmed that Finance Minster Wolfgang Schaeuble saw the need for further consolidation in the Landesbank sector.
Versus the Japanese yen, the greenback edged higher initially and rose above Friday high of 87.51 to 87.78 in NZ due to escalation of tension on the Korean peninsular after North Korea declared 'sacred war' on U.S. and South Korea as a result of the 2 countries' joint military exercise over the weekend. However, the greenback eased after failure to penetrate the said intra-day high despite broad-based rebound in Asian stocks and fell to as low as 86.82 in Europe on risk aversion due to the initial softness in European equities and U.S. stock futures. Although the greenback bounced to 87.40 in NY morning after the release of stronger-than-expected new U.S. home sales, the pair retreated again and ended the day at 86.88.
In addition, Chief Cabinet Secretary Senoku said the cabinet will ask ministers to cut 2010/11 budget spending by 10%. PBOC's deputy governor Hu Xialian was quoted as saying 'a more flexible exchange rate will help China to keep a lid on inflation and nip asset bubbles in the bud' in her third essay on the central bank's website.
The British pound traded with a firm undertone after showing muted reaction to Hometrack report, which came out before Asian opening. The report showed that U.K. House asking prices in July saw their first fall in 15 months and sterling rose above July's top at 1.5473 to a 3-month high of 1.5521 in NY morning before stabilising.
Economic data to be release on Tuesday include: Japan CSPI, Germany Gfk index, Import price index, U.K. CBI distribution trade, U.S. Consumer confidence, Midwest manufacturing.
Euro surges above 1.30 as solid US economic data boosts risk appetite
Euro's choppy moves were seen in Monday's Asian morning following Friday's volatile price action in NY after the stress-test results were released. Although euro dipped briefly to 1.2856 in NZ trading as weekend news reported that European regulator CEBS had accused Germany and its banks of reneging on a deal to publish full details of a bank-by-bank disclosure of risk holding of sovereign debts, short-term speculators quickly took profits on lack of follow through selling and traders bought euro vs usd, yen, gbp and chf, lifting the pair to 1.2944 and then 1.2959 before retreating briefly to 1.2889.
However, price then managed to rebound strongly again and euro rose to an intra-day high of 1.3006 after triggering stops above 1.2960/70 on active cross-buying in the single currency in late NY session. The release of stronger-than-expected new U.S. home sales, which jumped 23.6% to 330K in June versus the forecast of 3.3% increase and the previous reading of 32.7% decrease, boosted risk appetite and provided support to euro. Cross-buying in euro lifted the eur/gbp from 0.8325 to 0.8396, while eur/jpy and eur/chf rebounded strongly from 112.21 to 113.32 and from 1.3546 to 1.3632 respectively. Strength in stocks also lifted price as DJI surged by 0.97% and ended the day at 10525.43.
In other news, German Finance Ministry spokeswoman said that the German government believes the market reaction to European banks stress test results showed they had achieved their goals and there was no need for further action on banks. However, she confirmed that Finance Minster Wolfgang Schaeuble saw the need for further consolidation in the Landesbank sector.
Versus the Japanese yen, the greenback edged higher initially and rose above Friday high of 87.51 to 87.78 in NZ due to escalation of tension on the Korean peninsular after North Korea declared 'sacred war' on U.S. and South Korea as a result of the 2 countries' joint military exercise over the weekend. However, the greenback eased after failure to penetrate the said intra-day high despite broad-based rebound in Asian stocks and fell to as low as 86.82 in Europe on risk aversion due to the initial softness in European equities and U.S. stock futures. Although the greenback bounced to 87.40 in NY morning after the release of stronger-than-expected new U.S. home sales, the pair retreated again and ended the day at 86.88.
In addition, Chief Cabinet Secretary Senoku said the cabinet will ask ministers to cut 2010/11 budget spending by 10%. PBOC's deputy governor Hu Xialian was quoted as saying 'a more flexible exchange rate will help China to keep a lid on inflation and nip asset bubbles in the bud' in her third essay on the central bank's website.
The British pound traded with a firm undertone after showing muted reaction to Hometrack report, which came out before Asian opening. The report showed that U.K. House asking prices in July saw their first fall in 15 months and sterling rose above July's top at 1.5473 to a 3-month high of 1.5521 in NY morning before stabilising.
Economic data to be release on Tuesday include: Japan CSPI, Germany Gfk index, Import price index, U.K. CBI distribution trade, U.S. Consumer confidence, Midwest manufacturing.
