[B]Market Review[/B] - 05/12/2013 [I]22:39GMT [/I]
[B]Euro strengthens to a fresh 1-month peak after Draghi’s comments[/B]
The single currency surged to fresh 1-month peak at 1.3677 against the dollar on Thursday after ECB kept key interest rate unchanged at 0.25% together with ‘euro-supportive’ comments by ECB President Mario Draghi at the news conference after the ECB’s monthly policy meeting.
Mario Draghi said the bank’s policy stance was to remain accomodative for as long as necessary and that key interest rates are likely to remain at current or lower levels for an extended period of time.
During the day, although the single currency penetrated last Friday’s high of 1.3622 to 1.3640 ahead of European open, active cross-selling in euro pressured price from there and price tanked to an intra-day low of 1.3543 in New York morning on dollar’s broad-based rebound after release upbeat U.S. jobless claims and GDP data. Later, euro-supportive comments from ECB President Mario Draghi at post-rate decision news conference dampened traders’ hopes for more aggressive easing measures in the euro zone and euro swiftly surged to a fresh 1-month high at 1.3677 before easing.
U.S. preliminary GDP increased at a seasonally adjusted annual rate of 3.6% in the three months to September, above expectations for growth of 3.0% and up from a preliminary estimate of 2.8%. In a separate report, U.S. Department of Labor showed jobless claims fell by 23,000 to a seasonally adjusted 298,000, from 321,000 in the previous week whose figure was revised up from 316,000.
Versus the Japanese yen, despite a rebound from Wednesday’s New York low at 101.82, dollar retreated after meeting renewed selling interest at 102.44 at early Asian trading and then dropped to 101.85 in European morning. Dollar briefly rebounded to 102.33 in New York morning after release of a slew of better-then-expected U.S. economic data and then nose-dived to an intra-day low at 101.62 in late New York.
Although cable traded closely with euro in Asia and touched an intra-day high of 1.6403 in European morning, active cross-selling in sterling pressured price after the Bank of England held its monetary policy and cable later tumbled to a fresh 1-week low at 1.6300 in New York morning after strong U.S. economic reports supported demand for the greenback.
The Bank of England kept monetary policy unchanged on Thursday, keeping its commitment to hold interest rates at a record low 0.5% and QE asset purchase total at 375 billion pounds until Britain’s recovery is more firmly established.
In other news, Atlanta Fed President Dennis Lockhart said ‘once the Federal Reserve finally trims its bond-buying program, it should then commit to an effective schedule that would wind it down completely; Fed should consider taking the first step in reducing its $85-billion monthly bond-buying program, known as quantitative easing, “in the coming meetings” of its Federal Open Market Committee given the overall positive economic activity of late.’ Later, he added '‘Q3 has a “strong quarter” given fresh reading but that doesn’t make a trend; QE GDP does not suggest U.S. has had breakout in growth; estimates pretty low; undecided on question of lowering 6.5% unemployment threshold; adjusting forward rates guidance is on the table at Dec policy meeting; QE taper question should be on the table at December meeting.’
[B]Data to be released on Friday: [/B]
Japan leading indicators, France trade balance, Swiss CPI, Germany factory orders, U.S. non-farm payrolls, private payrolls, unemployment rate, average hourly earnings, personal income, personal spending, PCE, University of Michigan consumer confidence and Canada unemployment rate.