Market Review – 01/12/2010 21:41 GMT
Euro rises on speculation of ECB’s extra bond purchase
Euro rebounded from an intra-day low of 1.2970 in Asia on Wednesday after early selloff in the previous session as traders reduced bearish bets on euro before the ECB’s meeting on Thursday and the single currency traded with a firm undertone and eventually rose to 1.3183.
The single currency was lifted by speculation of ECB’s extra buying in bonds issued by the bloc’s troubled nations together with a report that US would support an increased contribution to the IMF for the European stabilization fund, however, such report was denied by a US Treasury Department spokesman later. Euro retreated from said high and moved narrowly in NY afternoon. In addition, the yield spreads between Portugal, Spain vs Germany tightened earlier and this also supported the single currency.
On economic front, German retail sales rose by 2.3% in October, much better than the economists’ forecast of a rise of 1.3%, whilst retail sales were down 0.7% annual basis.
Although the greenback remained under pressure versus the Japanese yen in Asia initially and fell to 83.38, the pair rebounded strongly and rallied to 84.40 before staging a pullback. Strength in US stocks boosted risk appetite as DJI rose by 2.27% and ended the day at 11255. In addition, US’s ADP employment came in at 93K in November versus the forecast of 69.0K while construction spending rose by 0.7% in October versus the expectation of falling by 0.4%.
Fed said in the Beige book that housing markets remained depressed while commercial real estate conditions were mixed, final goods prices were fairly stable, hiring activity showed some improvement but employers were waiting for clearer expansion signal.
The British pound edged higher in Asian morning initially and then rose sharply to 1.5649 in Europe, however, cable swiftly retreated sharply from there and reached 1.5548 before recovering in NY afternoon.
Earlier, cable jumped after the release of a much stronger-than-expected U.K. PMI for the manufacturing sector in Nov. The index beats market’s forecast of 54.7 and came out at 58.0, the strongest in 16 years, indicating British manufacturing activity grew strongly last month and employment also rose at a record pace.
Economic data to be released on Thursday include:
Australia trade data, retail sales, Swiss GDP, UK PMI, EU GDP, PPI, US pending home sales.