[B]Market Review[/B] - 03/04/2014 [I]23:06GMT [/I]
[B]Euro tumbles on Draghi’s dovish comments[/B]
The single currency tumbled against the greenback on Thursday after ECB President Mario Draghi reiterated the central bank is ready to use unconventional methods, if needed to battle low inflation in the region.
Mario Draghi, in his press conference, said ‘recent information consistent with expectation of prolonged low inflation; to maintain accommodative monetary policy stance for as long as necessary; expects to keep rates at current or lower levels for an extended period of time; expectation based on subdued medium-term inflation outlook; inflation outlook based on weak economy, high degree of slack; we haven’t finished with our non-conventional measures; all instruments fall within the mandate, including QE; we discussed the possibility of negative deposit rate; negative deposit rate received good deal of attention at today’s discussion.’
Earlier in the day, euro traded sideways in Asia and showed muted reaction to ECB’s decision to leave its rate unchanged at 0.25%. Despite a brief spike to session high at 1.3808 as Draghi began his press conference, the single currency tumbled to an intra-day low at 1.3698 in New York morning as the President said negative deposit rates were also considered.
Versus the Japanese yen, the greenback maintained a firm undertone throughout Asia and Europe on Thursday and rose to an intra-day high at 104.11 in New York morning. Later, price pared some of its gains and retreated to 103.82 before stabilizing.
The British pound rebounded to session high at 1.6661 in Asian morning before retreating to 1.6625. Later, cable re-tested 1.6661 in early European morning, however, price fell sharply 1.6581 after data showed a drop in UK services PMI. Cable later weakened to an intra-day low at 1.6570 in New York morning in tandem with euro before recovering.
U.K. Mar service PMI falls to 57.6 from 58.2 in Feb, weaker than the forecast of 58.2.
In other news, UK Chancellor of Exchequer George Osborne said ‘must stay vigilant on household debt levels even as household assets rising more quickly than debt; not seen evidence that help to buy plan has bumped up house prices; foreign exchange manipulation issues are potentially very, very serious.’
On the data front, U.S. jobless claims rose to 326K from previous revised figure of 310K. Eurozone Feb retail sales came in at 0.4% m/m and 0.8% y/y, better than the forecast of -0.5% and 0.7%, previous reading are revised to 1.0% and 0.8% respectively.
[B]Data to be released on Friday: [/B]
Germany factory orders, Canada employment change, unemployment rate, Ivey PMI, U.S. hourly earning, private payroll, non-farm payroll and unemployment rate.