Market Review – 10/06/2010 21:34 GMTEuro rallies on optimism over global economic recoveryEuro surged as strong demand for Spanish bonds eased worries if the country could fund its debt in the market while a sharp rise in Chinese exports suggested that Europe’s debt crisis would not derail global growth. The solid Australian jobs data also boosted risk appetite. Although euro briefly dipped to 1.1957 in Asian morning, the single currency rebounded from there and rose sharply in Europe. Euro managed to climbed above resistance 1.2110 and reached 1.2143 in NY afternoon after triggering the stops at 1.2110/15. The single currency gained support as Spanish bonds were sold at the top of the expected range and Germany’s high court rejected an attempt to block German guarantees for eurozone financial aid.
Euro was also supported after the release of a series of upbeat economic data as Australian employment change came in at +27K versus the forecast of +20K and China posted a massive exports growth of 48.5% y/y in May ( vs forecast of 32.0% ) while Japan’s Q1 GDP rose by 1.2%, better than economists’ forecast of 1.0% rise. The head of China’s national pension fund said the single currency would weather Europe’s debt crisis and his comments lifted up the euro further.
ECB kept its benchmark interest rate on hold at a record low of 1.0% for the thirteenth month. ECB’s Trichet said latest information confirmed that recovery continued in H1 2010 and monetary would do what is needed to keep price stable and indicated that growth rates in coming quarters would be uneven. ECB’s Nowotny said central banks were successful in crisis management.
The British pound traded with a firm undertone throughout the day and despite brief dip to 1.4509, cable then edged up and eventually reached 1.4509 on dollar’s broad-based weakness in US session. Earlier, Bank of England kept interest rate unchanged at 0.5% as widely expected and made no change to its 200 billion pounds quantitative easing target after putting it on hold four months ago.
Investors returned to buy assets linked to growth as China’s strong exports data boosted risk appetite. U.S. crude futures for July delivery settled to $1.1 higher at $75.48 per barrel. Aud/usd also rose to 0.8510 from 0.8269 while nzd/usd jumped to 0.6879 from 0.6696 and usd/cad dropped from 1.0452 to 1.0287. Riskier assets like stocks also rose as DJI surged by 2.76% or 273 points above the 10000 points level and ended the day at 10172 while FTSE 100 climbed by 0.92%, CAC 40 surged by 2.03% and DAX jumped by 1.20%.
Versus the Japanese yen, the greenback moved narrowly within the range of 90.85 and 91.48 as the market focus was on other currencies.
Economic data to be released on Friday include: Germany WPI, U.K. Industrial production, Manufacturing production, PPI, U.S. Retail sales, U. Michigan Survey, Business inventories, Canada Capacity utilisation.