Market Review – 09/06/2010 21:25 GMTEuro pares early gains after U.S. stocks retreatAlthough the single currency moved narrowly in Asia, euro rose sharply in Europe on short-covering after triggering stops above previous day’s high of 1.2010 and surged to as high as 1.2074 in NY morning as early rally in U.S. stocks boosted risk appetite. Euro was also supported as Reuters reported that China’s export data for May surged and Asian stock markets jumped after the news with China’s Shanghai Composite rising sharply by 2.8%. The single currency, however, retreated sharply from said 1.2074 high and ended the day at 1.1980 as DJI erased all of its early gains (more than 100 points) and closed the day down by 40.73 points at 9899.25.
Versus the Japanese yen, the greenback moved sideways in Asian and early European sessions inside the range of 91.25-91.62. Although the dollar rose to an intra-day of 91.67 in NY morning, the pair retreated swiftly from there and fell to 91.06 as DJI turned into the negative territory and prompted investors to buy yen.
In other news, the Fed said in its Beige Book that U.S. economic activity improved nationwide last month but worries over Europe’s debt crisis dented confidence. Many districts described pace of growth as modest and the labour market conditions improved slightly as permanent employment levels edged up in most districts. However, Fed said commercial and industrial lending remained weak in most districts.
In addition, Federal Reserve Chairman Ben Bernanke said U.S. has ‘a little more breathing space’ on fiscal front because of its size and importance. He also said Fed will ‘absolutely’ respond if banks fail to adjust compensation practices. Bernanke indicated U.S. economy would grow by 3.5%-4% next year and U.S. dollar would still be the dominant reserve currency and U.S. treasuries remain very attractive.
Despite the British pound’s initial sideways movement in Asia, cable rose sharply and reached 1.4608 in NY morning on dollar’s broad-based weakness. Cable then retreated from there in tandem with euro and ended the day at 1.4528.
The nzd/usd pair rose from 0.6670 to 0.6715 after the Reserve Bank of New Zealand lifted official cash rate to 2.75% from 2.50% as expected. The central bank also said that further rate hikes would depend on economic and market developments. The pair then traded with a firm undertone as the central bank hinted that rate-hike cycle would be restarted.
Economic data to be released on Thursday include: Japan Domestic CGPI, GDP, Germany CPI, U.K. BOE rate decision, EU ECB rate decision, U.S. Jobless claims, Canada Trade balance, U.S. Fed budget.