[B]Market Review[/B] - 17/12/2013 [I]21:54GMT [/I]
[B]The Japanese yen strengthened on risk aversion ahead of Wednesday’s U.S. rate decision[/B]
The greenback rose initially against euro before rebounding in late NY on short-covering on Tuesday as market sentiment remained subdued ahead of the outcome of the Federal Reserve’s two-day policy meeting on Wednesday, amid ongoing uncertainty over when the bank will announce a reduction in the pace of its USD85 billion-a-month asset purchase program.
During the day, the single currency rebounded from Asian low at 1.3752 and then climbed to 1.3782 in European morning after reports showed that the ZEW index of German economic sentiment rose to the highest level since April 2006 at 62.0 in December from November’s reading of 54.6, however, dollar’s broad-based rebound together with cross-selling of euro versus yen pressure price lower later in the day and euro dropped to a session low at 1.3723 in New York before rebounding strongly to 1.3775 on short-covering ahead of important Wed’s FOMC rate decision…
Versus the Japanese yen, dollar moved in a relatively narrow range of 102.87-103.12 in Asia n Europe and then tumlbed to a session low at 102.50 on renewed risk aversion on Tuesday due to concerns that the subdued inflation outlook could prompt the Fed to keep its stimulus program in place for longer. Later in the day, reports showed U.S. CPI came in at 0.0% month/month and 1.2% year/year in November.
Although cable rebounded after finding support at 1.6290 in Australia and then rose in tandem with euro in Asia to an intra-day high of 1.6336 in European morning, price fell after data showed that the annual rate of inflation in the U.K. fell to a four year low in November and eased pressure on the Bank of England to tighten monetary policy. Cable later dropped to a fresh 3-week low at 1.6256 ahead of New York before staging a brief recovery but only to fall to a session low at 1.6214 but buying interest above 1.6200 level lifted price to 1.6281 in late New York.
Bank of England’s Carney says 'inflation within a hair’s breadth of 2% target, recovery has taken hold; return to growth is not yet a return to economic normality; business people understand forward guidance well; FPC paying particular attention to housing market risks, “graduated and profortionate” steps reduce need for larger actions in future.
On the data front, U.K. Office for National Statistics reported the annual rate of CPI in the U.K. rose by 2.1% in November, slowing from 2.2% the previous month. It was the smallest increase since November 2009, while CPI rose 0.1% in November from a month earlier, below expectations for a 0.2% increase.
In other news, RBA minutes stated ‘A$ remains uncomfortably high, lower level needed for balanced growth; see further signs that past rate cuts are stimulating economy; expects below-trend economic growth over next year, pick up thereafter; mining investment to decline over next few years; sees other business investment rising from current weak levels but will take time; labor market remains soft but there are tentative signs of a stabilization; household consumption growth looks to have picked up a little since Q3; Chinese economy appeared a bit stronger in H2 versus H1.’ Australian Treasurer Joe Hockey added later that ‘government determined to fix problems Government inherited; Australia government will deliver stronger economy; deterioration in budget not just a short-term problem; spending reform will require “difficult choices”; Transition to non-resource sector slower than expected.’
[B]Data to be release on Wednesday: [/B]
New Zealand current account, business confidence, business confidence, Australia Westpac leading economic index, Japan trade balance, export, import, Germany Ifo business climate, current assessment, expectation, U.K. MPC minutes, claimant count, unemployment rate, average earning, CBI distributives trade, Swiss Zew index, Italy current account U.S. housing starts, building permits and Fed rate decision, Canada wholesale sales.