Market Review – 03/03/2011 20:24 GMT
Euro rallies as ECB’s President signals rate hike next month
Euro soars broadly on Thursday after European Central Bank’s President Jean-Claude Trichet said in a press conference following rate decision that ‘rate hike in April is possible’. The central bank kept benchmark rates unchanged at record low of 1.0% as widely expected.
Trichet also said that inflationary risks are to the upside n ‘strong vigilance’ is required. He added that it is not appropriate to see big rate hike in April n it is certainly not start of series of rate hike.
Despite the initial choppy trading below Wednesday’s high of 1.3890 in Asian n European sessions on Thursday, the single currency jumped across the board immediately after Trichet’s hawkish remarks n the single currency eventually climbed to a near 4-month high of 1.3976 (EBS) in NY morning b4 trading sideways. Eur/jpy, eur/gbp n eur/chf rallied fm 113.10 to 115.18, 0.8480 to 0.8584 n 1.2788 to 1.3023 respectively.
The British pound went through a roller-coaster session on Thursday. Although the British pound traded sideways after rising to a fresh 13-month high of 1.5344 on Wednesday, cable tanked immediately after the release of weaker-than-expected UK Feb Services PMI, which fell to 52.6 fm the reading of 54.5 in Jan. Later, price rebounded swiftly fm 1.6261 to 1.6315 in tandem with the single currency, however, cross-selling in sterling versus the euro pressurised the pound again to a day low of 1.6254 in NY mid-day b4 stabilizing. Earlier, BoE Deputy Governor Charles Bean said that inflation next year may be higher than the Bank of England currently forecast, but that does not mean it shud necessarily tighten policy faster than markets currently expect.
The dollar strengthened against the Japanese yen n the Swiss franc on Thursday after a reported showed the U.S. claims for unemployment benefits fell last week to their lowest lvl in more than 2 1/2 year, fueling speculation that U.S. non-farm payrolls data due on Friday wud be stronger than expected. Usd/jpy rallied fm 81.73 to 82.53 whilst usd/chf surged fm 0.9232 to 0.9329 b4 easing in NY.
Data to be released on Friday include:
U.S. average hourly earnings, non-farm payrolls, unemployment rate n factory orders, Canada Ivey PMI.