Market Review – 28/06/2011 21:30 GMT
Euro rises on optimism Greek austerity plan will be approved
The single currency strengthened broadly on Wednesday on speculation that Greek parliament would pass the austerity plan this week and comments from China’s premier Wen Jiabao also gave support to euro as he aimed to double German-China trade flows in five years.
During the day, despite euro’s intra-day retreat from Australian high of 1.4330 to a session low of 1.4237 against the greenback in early European trading, buying interest emerged partly due to rise in global equity markets and euro supportive comments from European Central Bank President Jean-Claude Trichet who reiterated that ‘we are in strong vigilance mode on inflation.’ The single currency rallied in New York morning and then penetrated Monday’s high of 1.4330, price climbed to a session high of 1.4397 after the Portuguese government said ‘planning to be scrupulous in meeting terms of bailout; hoping to regain confidence of financial markets’ before trading sideways.
The single currency strengthened across the broad and rose strongly against the Japanese yen, pound and Swiss franc. Eur/jpy, eur/gbp and eur/chf jumped from session lows of 115.13, 0.8929 and 1.1863 to as high as 116.67, 0.8984 (near eight-week high) and 1.1960 respectively.
The Swiss franc strengthened against the greenback and usd/chf reached a another lifetime low of 0.8276 in New York morning due partly to US dollar’s initial weakness before recovering on cross-selling in Swiss franc, the pair traded around 0.8320 near New York closing.
Sterling fell in tandem with euro from Australian high of 1.6001 to as low as 1.5912 in European morning after the release of weak UK GDP data and dovish comments from Bank of England policymakers, however, euro-led rebound gave a boost to cable and price later jumped to a session high of 1.6045 in New York morning before easing.
In other news, Bank of England Deputy Governor Paul Tucker said ‘economy has turned out softer this year than expected’. Bank of England Monetary Policy Committee member David Miles said ‘monetary policy stance now as loose as current bank rate might suggest; further asset purchases may be warranted at some point in future; see risk of extended period of low economic growth’. International Monetary Fund board selected France’s Christine Lagarde as new IMF Managing Director. IMF board said Lagarde to begin her five-year term as IMF Chief on July 5.
On the data front, UK Q1 current account balance came in at -9.354 billion pounds versus economists’ forecast of -4.90 billion pounds and previous reading of -12.956 billion pounds in Q4. UK final GDP are 0.5% q/q and 1.6% y/y. U.S. consumer confidence unexpectedly fell in June, decreased to a seven-month low of 58.5 from a revised 61.7 reading in May.
Data to be released on Wednesday include:
Japan industrial production; U.K. mortgage approval; Eurozone business climate, economic, industrial and consumer sentiment; Swiss KOF indicator; Canada CPI; U.S. pending home sales.