Market Review – 03/05/2011 20:02 GMT
Euro little changed against the dollar after Portugal reached an agreement with EU and IMF
Euro showed little reaction against the dollar on Tuesday after Portugal reached an agreement with European Union (EU) and International Monetary Fund (IMF) on a three-year bailout loan. Earlier in the day, the single currency was under selling pressure following the sharp retreat from Monday’s 17-month high of 1.4903 and although renewed selling interest at 1.4845 pushed price to an intra-day low of 1.4755 in European morning, euro rallied from there and eventually climbed to 1.4890 in New York morning before retreating again.
Portugal’s Prime Minister Jose Socrates was quoted as saying that ‘Portugal reached an agreement with EU/IMF on bailout loan; still need final talks on bailout with opposition parties; EU/IMF bailout is for 3 years; bailout plan gives more time to meet budget deficit targets’.
The British pound tanked against the dollar and the euro as the worse-than-expected manufacturing data fueled speculation that the Bank of England would maintain its key lending rates at a record low later this week. Despite cable’s brief recovery from 1.6585 to 1.6648, price then tumbled sharply to 1.6467 in European midday before staging a strong recovery in tandem with eur/usd to 1.6550. However, selling interest there limited the pound’s upside and cable ratcheted lower to a day’s low 1.6464 in late New York session. Eur/gbp rallied above 0.8942 (October 2010) to as high as 0.9007 in New York morning before trading sideways.
U.K. April CIPS manufacturing PMI came in at 54.6, its slowest pace in 7 months, versus economists’ expectation of 57.0 and downwardly revised reading of 56.7 in March.
The Japanese yen and the Swiss franc strengthened against most of their counterparts as selloff in equities and commodity prices prompted investors to flock toward these ‘safe haven’ currencies. Despite the usd/chf pair’s strong recovery to 0.8674 after resumption of recent descent to a low of 0.8619 in European morning, selling interest there pushed price lower again and the pair eventually dropped to a fresh lifetime low of 0.8595 in New York morning before trading sideways. Eur/chf also tumbled from 1.2839 to 1.2762. The dollar also extended recent decline against the Japanese yen to an intra-day low of 80.70 before staging a recovery while eur/jpy, aud/jpy and gbp/jpy tumbled from 120.59 to 119.21, from 88.95 to 87.58 and from 135.38 to 132.97 respectively.
Data to be released on Wednesday include:
U.K. Nationwide house prices; German services PMI; EU services PMI and retail sales; U.K. mortgage approval and PMI construction; U.S. ADP employment and ISM non-manufacturing.