Daily Market Outlook by AceTrader

Euro rebounds in New York after initial fall in Australia following surprise Fed’s discount rate hike- 20/02/2010 01:49GMT


The single currency fell to a 9-month low of 1.3443 against the greenback in Australia following the surprise after-market quarter-point discount rate hike to 0.75% by the Fed. The single currency stabilized in Asia as St. Louis Fed President James Bullard said ‘market belief in rate hike chances this year overblown’ sparked a brief wave of short-covering and Atlanta Fed President Dennis Lockhart also said ‘the decision does not signal a tightening of policy’.   

  
Euro later ratcehted higher in European morning after the release of better-than-expected February German and eurozone manufacturing PMI data which came in at 57.1 and 54.1 versus the economists’ forecast of 53.9 and 52.6 respectively although German and eurozone services PMI for February was 51.7 as well as 52.0 which was lower than consensus forecast of 52.4 and 52.5. Euro extended the upmove at U.S. opening after a government report showed U.S. consumer prices rose less-than-expected in January. U.S. CPI rose by 0.2% m/m versus the expectation of a rise of 0.3% m/m and the core CPI dropped by 0.1% instead of economists’ forecast of a rise of 0.1%, adding some credence to the commentary from Bullard and Lockhart. The intra-day rise gathered momentum and euro climbed to as high as 1.3619 in U.S. afternoon on active short-covering as well as cross- buying vs yen and sterling (eur/jpy rallied from 123.81 to an intra-day high at 124.80 and eur/gbp rose to 0.8803).  
  
Versus the Japanese, dollar initially rallied to 92.10 in Australia trading and retreated in Asian session on selling by Japanese exporters and cross buying in yen due to risk aversion as the Nikkei and Hang Seng lost over 2% after Fed’s surprise discount rate hike. However, dollar met renewed buying at 91.68 and the pair later rose marginally to a fresh one-month high of 92.16 as U.S. stocks pared initial losses and rebounded (DJI closed up 9 points), however, weekend profit-taking pushed dollar lower and price closed lower at 91.52.  
  
The British pound extended Thursday’s decline and tumbled to a fresh 9-month low low at 1.5345 in European morning following the release of much weaker-than-expected U.K. January retail sales data which came in at -1.8% m/m and 0.9% y/y versus the consensus forecast of -0.5% as well as 1.1% y/y respectively, implying the Bank of England may be forced to continue measures to revive Britain’s economy Sterling pared its intra-day losses against the dollar after the release of worse-than-expected U.S. CPI data and ended the day at 1.5475.  
  
Economic data to be released next week include: U.S. Chicago Fed NA index on Monday, Germany Ifo index, U.K. CBI distribution trade, U.S. Consumer confidence on Tuesday, Japan CSPI, export import, trade balance, Germany GDP, Gfk index, Exports, Imports, EU Industrial orders, U.S. New home sales, Treasury’s Geithner testifies, Fed’s Bernanke speaks on Wednesday, Germany Unemployment rate, EU Business climate, Economic sentiment, Consumer confidence, U.S. Durable goods, Jobless claims, House Price Index on Thursday, New Zealand Imports, Exports, Trade balance, Japan Manufacturing PMI, Tokyo CPI, National CPI, Industrial production, Retail sales, Japan Construction orders, Housing starts, U.K. Nationwide hse price, Gfk survey, GDP, EU HICP final, Swiss KOF indicator, U.S. PCE core, Personal consumption, GDP annualised, GDP deflator, Chicago PMI, U. Michigan survey Final, Existing home sales and Canada Current account on Friday.