Market Review – 16/06/2011 21:57 GMT
Euro rebounds in NY on improved risk appetite as U.S. stocks gain
The single currency staged a modest rebound in New York afternoon session after falling to a three-week low of 1.4073 against the dollar in Europe and a fresh lifetime low of 1.1946 versus Swiss franc on Thursday due to political turmoil in Greece and euro-bearish comments from ECB members.
During the day, despite euro’s initial sideways trading above Wednesday’s low of 1.4156, renewed selling at 1.4204 checked intra-day gain in Australia and price later tumbled to 1.4090 ahead of European opening, euro then dropped to a three week low of 1.4073 in European morning after bearish comments fm European Central Bank Governing Council member Nout Wellink. However, the single currency ratcheted higher to 1.4188 in New York morning on short covering and active cross buying in euro together with better-than-expected US economic data, price eventually rose to sesion high of 1.4224 in late New York trading as U.S. stocks rebounded. Dow Jones Industrial Average closed up 64 points to 11,961 and Standard and Poor’s 500 gained 2 points to 1,267.
European Central Bank Governing Council member Nout Wellink was quoted by Dutch newspaper Het Financieele Dagbled as saying a planned European aid fund might need to be doubled before rebound to take place as eurozone sources said ‘expect International Monetray Fund to pay next Greek aid tranche on basis of European Union commitment to support Greece further out’.
More euro-bearish comments from ECB council Yves Mersch in NY trading who said ‘disorderly insolvency of Eurozone member state would have devastating consequences for it and whole Eurozone’. Euro fell briefly fm 1.4188 to 1.4135 before rebounding on renewed buying by soveriegn names.
Eurozone debt concerns pressured the single currency against the Japanese yen and especially, Swiss franc. Eur/jpy retreated from 114.97 to 113.51 whilst eur/chf hit all-time low at 1.1946 before staging a recovery.
The pound weakened against the dollar and cable ratcheted lower from Asian high of 1.6225 after the release of weaker-than-expected U.K. retail sales data, dampening speculation that BoE would raise interest rates anytime soon. Cable eventually fell to a day’s low of 1.6078 in NY morning before staging recovery in tandem with the euro.
U.K. retail sales came in at -1.4% m/m and 0.2% y/y in May, much weaker than the economists’ forecast of -0.6% m/m and 1.5% y/y respectively) before stabilising.
In other news, Swiss National Bank held target range for 3-month Swiss franc LIBOR unchanged at 0.0-0.75% and SNB intended to keep the LIBOR within the lower part of the target range at around 0.25%. Swiss National Bank said ‘sees lower growth due to appreciation of Swiss franc.’
On the data front, U.S. jobless claims decreased to 414,000 versus economists’ forecast of 420,000 and previous upwardly revised reading of 430,000. U.S. housing starts rose by 3.5% to 0.56 million whilst building permits increased by 8.7% to 0.612 million. Philly Fed factory activity unexpectedly shrank to minus 7.7 in June, its lowest level in nearly two years, from positive 3.9 the month before.
Data to be released next week include:
EU trade balance; Canada wholesale sales; U.S. U. Michigan survey Final and leading indicators on Friday.