[B]Market Review[/B] - 13/08/2013 [I]22:06GMT[/I]
[B]Dollar rallies against yen and euro on strong U.S. retail sales data[/B]
The greenback rose strongly against yen and euro on Tuesday as the U.S. retail sales outside of cars, gasoline and building materials rose at its fastest pace in seven months, fueling expectation that the Federal Reserve will soon reduce its stimulus measures.
Versus the Japanese yen, the greenback traded with a firm undertone throughout the day. Despite dollar’s brief retreat from 97.44 to 97.15 in Asian morning, active cross selling of yen versus other currencies due to the rumour of corporate tax cut in Japan lifted the pair in European session. Dollar’s broad-based strength due to the U.S retail sales later pushed the pair further higher to 98.25 in New York morning before easing.
U.S. retail sales and retail sales excluding cars, gasoline and building materials came in at 0.2% and 0.5% respectively, versus the forecast of 0.4% and 0.3%. The previous readings were revised to 0.6% n 0.1% respectively.
The single currency rebounded from Australian low at 1.3289 to 1.3316 in European morning but retreating to 1.3282. Later, despite euro’s marginal gain to 1.3317 after the release of better-than-expected German economic sentiment (42.0 versus the forecast of 39.5), the pair nose-dived in New York morning on dollar’s strength due to the U.S. retail sales and price eventually hit a 1-week low at 1.3234 before stabilizing in U.S. afternoon.
Although the British pound edged higher in tandem with euro from Asian low at 1.5448 to 1.5482 in European morning, the pair fell to 1.5432 but then staged a strong rebound to 1.5490 after the release of U.K. CPI data, however, price dropped to a low at 1.5427 in New York morning on dollar’s broad-based strength. Later, despite cable’s swift rise to 1.5513, renewed selling interest sent the pair to 1.5448 and the pound traded inside the range for the rest of the day.
U.K. CPI in July was released at 0.0% m/m and 2.8% y/y, same as the forecast. U.K. RPI in July came in at 0.0% m/m and 3.1% y/y, same as expectation. ONS house price in Jun came in at 3.1% y/y, lower than the forecast of 3.5%.
In other news, ZEW economist said ‘sentiment is highest since March 2013; first signs of end of recession in important euro zone countries may have contributed to indicator’s rise; economic optimism is supported by German domestic demand; significant increase for euro zone expectation, good sign that worst of recession might be over; ECB will have more room for earlier increase of interest rates due to calming of crisis; there is a tendency for the Eurozone to get out of recession in Q2.’
On the data front, German CPI in Jul came in at 0.5% m/m n 1.9% y/y, same as expectation. Eurozone industrial production came in at 0.7% m/m and 0.3% y/y, vs the expectation of 1.0% and 0.3% respectively
[B]Data to be released on Wednesday:[/B]
New Zealand retail sales, Australia consumer confidence, France GDP, HICP, CPI, U.K. BOE MPC minutes, claimant count, unemployment rate, average earning, Germany GDP, EU GDP, Swiss Zew index, U.S. PPI.