Market Review – 02/11/2010 23:07 GMTEuro rallies against dollar on speculation of Fed easing
The single currency surged against dollar on Tuesday as investors forecasted that U.S. Fed will announce the second round of quantitative easing on Wednesday. The Australian dollar penetrated parity after RBA raised it cash rate by 25 basis points to 4.75%, the first increase in six months.
Although euro dropped briefly to 1.3882 in Asian morning, the pair rebounded and ratcheted higher due to RBA’s surprise rate hike. The pair rose strongly in Europe after early report of semi-sovereign name bidding euro. The release of upbeat German and eurozone PMI data also gave support to the single currency. Euro eventually climbed to an intra-day high of 1.4058 in NY afternoon.
German PMI for manufacturing sector in October came in at 56.6 versus the forecast of 56.1 and 55.1 in September while the same data in eurozone came in at 54.6 versus the expectation of 54.1 and 53.7 in September.
The greenback retreated from 80.76 against the Japanese yen in Asian morning due to RBA’s surprise rate hike after initial rise from 80.47. However, dollar rebounded to 81.00 in Europe due to active cross-selling in yen versus euro and aud (eur/jpy and aud/jpy rallied from 111.78 to 113.49 and 79.48 to 81.01 respectively) before retreating in NY session on dollar’s broad-based decline.
The British pound edged higher in tandem with euro to 1.6080 in European morning. However, cable fell sharply to 1.5962 on long liquidation after the release of weaker-than-expected U.K. PMI for construction sector (which came in at 51.6 for October versus the forecast of 53.0) and then staged a recovery in NY session.
The Australian dollar jumped from 0.9866 after Australia’s central bank increased its key cash rate by 25 basis points to 4.75%. Aud/usd eventually penetrated parity to 1.0025, the highest since it was floated in 1983, in NY morning.
Market awaited the release of the policy statement after the U.S. Federal Reserve’s 2-day meeting ends at 18:15GMT on Wednesday.
Economic data to be release on Wednesday include:
Swiss Retail sales, U.K. BRC Shop Price Index, PMI service, U.S. ADP employment , Durable goods (rev.), ex. Defense (rev.), ex. Transport (rev.), Factory orders, ISM non-manufacturing, Fed rate decision.