Market Review – 14/03/2011 20:14 GMT
Euro strengthens as EU leaders widen the scope of rescue plan
The euro extended its Friday’s rally on Monday as the EU leaders surpassed all expectations by agreeing to widen the scope of the euro zone rescue fund, allowing it to spend its full 440 billion euros capacity as well as to buy bonds directly from governments on Saturday. They also agreed to make its loans cheaper and lower the interest rate on funds extended to Greece.
Earlier, although the euro retreated after rising to a high of 1.3986 in (NZ/AUS) as EU leaders finally struck a deal in the early hours on Saturday, buying interest at 1.3905 in European morning lifted the single currency again and price eventually climbed to 1.4003 in NY mid-day after Eurogroup Chairman Jean-Claude Juncker expressed concerns on inflation caused by recent continued high commodity prices.
The British pound also strengthened against the greenback on Monday as Fitch affirmed Britain’s ‘AAA’ rating. Despite a brief drop from 1.6100 (AUS) to 1.6028 in European morning, cable then rebounded after finding renewed buying there and intra-day rise accelerated after the affirmation of the UK’s sovereign rating by Fitch. Price eventually climbed to 1.6200 before retreating in NY mid-day. Cross buying in sterling versus euro also supported the British pound as eur/gbp cross pair retreated from 0.8692 to 0.8636.
Fitch affirmed United Kingdom at ‘AAA’ rating underpinned by high value-added wealthy and flexible economy.
The dollar went through a roller-coaster session versus Japanese yen on Monday, having tanked to a four-month low of 80.60 in Australian morning on concerns over Japanese earthquake-related repatriations before staging a strong rally to 82.47 on short-covering due to intervention fear, however, renewed selling there capped dollar’s intra-day gain and price later ratcheted lower in European and NY sessions.
Japan’s central bank doubled its asset buying scheme to 10 trillion yen and held interest rates at 0-0.1 percent after it earlier said it would pump a record 15 trillion yen into the banking system.
Data will be released on Tuesday include:
Australian RBA’s board minutes, Japan machine tools orders, U.K. DCLG house prices, Eurozone employment, Germany ZEW index and current situation, U.S. import/export, foreign treasury buys, Net LT TIC flows, NAHB housing market index and Fed rate decision.