[B]Market Review[/B] - 28/08/2013 [I]21:21GMT [/I]
[B]Dollar strengthens broadly amid escalating tension in Syria[/B]
The greenback climbed against yen and euro on Wednesday due to demand for safe-haven currencies as prospect of Western military actions in Syria increases.
Earlier in Asia, although the greenback extended recent decline versus the Japanese yen to a 2-week low at 96.82 in Australia, the pair staged a rebound in Asia as Japanese stocks pared initial losses, the pair ratcheted higher to 97.60 in Europe and then climbed to 97.84 in New York morning on dollar’s broad-based amid Syria tension.
The single currency fell from Asian top at 1.3398 on dollar’s broad-based strength and weakened to 1.3336 in European session. Later, despite brief but strong recovery to 1.3373, active cross selling of euro versus sterling pressured the pair below Tuesday’s low at 1.3323 to 1.3305 in New York morning before stabilising.
The British pound ratcheted lower in tandem with euro from Australian top at 1.5552 in Asia and dropped to 1.5448 in Europe on cross selling of sterling versus euro. Later, although cable fell to a fresh 2-week low at 1.5430 in New York as soon as BoE Governor Carney began his first public speech, price swiftly rallied to a high of 1.5553 before trading sideways for the rest of the day.
BoE’s Carney said ‘consider more stimulus if financial conditions tighten, recovery risks falling short of strong growth; upward move in market expectations of BOE rates could, at margin, affect real economy; forward guidance was clear that we would provide more stimulus if necessary; signs are that U.K. recovery is broad-based, set to continue; period of robust growth needed to begin to reduce spare capacity meaningfully; depressed output, temporary inflation factors mean it is right to bring inflation back to target more slowly; nobody should assume 7% unemployment is a trigger for raising rates; BoE to reduce required liquid asset holdings for major banks, building societies meeting 7% capital threshold; liquidity change could lower total required holdings by 90 bln pounds, helping lending.’
On the data front, U.S. pending home sales came in at -1.3% m/m, versus the forecast of -0.5% and the previous -0.4%. U.K. CBI distributive trades came in at 27, better than the forecast of 20.
In other earlier news, BOJ deputy governor Iwata said ‘aim to achieve 2% inflation target as soon as possible with 2 year time frame in mind; will continue with QE until inflation stabilizes at 2%; there are signs that prices for goods are bottoming out or starting to rise; if inflation expected to overshoot target then BOJ will not purchases JGBs even if asked by government; increase in inflation expectations can spur consumer spending and demand for foreign currencies and help weaken the yen; decline in real expected interest rates can lead to higher capital expenditure; will take some time for BOJ policy to work, so fiscal policy is needed to support growth; may take 1 or 2 years to see real increase in bank lending due to large cash reserves in corporate sector.’
[B]Data to released on Thursday : [/B]
New Zealand ANZ business confidence, Australia HIA new home sales, Japan retail sales, France business climate, Italy consumer confidence, Germany unemployment change, unemployment rate, CPI, HICP, U.K. business barometer, U.S. GDP, jobless claims, personal consumption, PCE core, Canada PPI.