Market Review[/B] - 14/02/2014 [I]18:35GMT [/I]
[B]Euro strengthens versus dollar on Friday after upbeat German and French GDP[/B]
The single currency strengthened against the dollar and rose to a fresh 2-1/2 week at 1.3715 on Friday after release of upbeat German and French economic growth data, while recent disappointing U.S. economic reports still weighed on demand for the greenback.
Despite euro’s sideways trading below Thursday’s high of 1.3692 in Friday’s Asian session, price rebounded from 1.3674 and then rose to 1.3713 after better-than-expected German and French GDP in Europe and then marginally higher to 1.3715. However, lack of follow through buying prompted profit-taking and the single currency later retreated to 1.3683 in thin New York morning.
Preliminary data showed that German GDP rose 0.4% in the fourth quarter, exceeding expectations for a 0.3% expansion, and after a 0.3% rise in the 3 months to September. A separate report showed that French GDP expanded by 0.3% in the last quarter, compared to expectations for a 0.2% rise, after a 0.1% contraction in the third quarter.
Versus the Japanese yen, although dollar rose briefly to 102.40 in Asia after the announcement on implementation of Japan’s stimulus program, active cross-buying in yen knocked price down to 101.57 before recovering to 101.99 in European morning. Later, dollar chopped inside the range of 101.57-101.99 for rest of the day.
Japan’s ministry of finance said that 70% of country’s JPY 5 trillion stimulus will be implemented by the end of June and 90% by end of September.
Cable found support at 1.6644 ahead of European morning and continued its recent rally after the Bank of England revised up its U.K. economic growth forecast for 2014 to 3.4% from 2.8% on Wednesday. Price rallied above Thursday’s 2-1/2 year peak at 1.6675 to 1.6718 in European midday and then further to 1.6731 before easing.
On the data front, U.S. official data showed that U.S. industrial production fell 0.3% in January, compared to expectations for a 0.2% rise, after a 0.3% increase the previous month. Later, the University of Michigan said its consumer sentiment index remained unchanged at 81.2 this month, higher than expectations for a fall to 80.6.
In other news, RBA Assistant Governor Christopher Kent told the Committee for Economic Development of Australia in Sydney on Friday that the decline in the Australian dollar over the past year may lead to balanced growth. "The Bank has noted for some time that lower levels of the exchange rate, if sustained, will assist in achieving balanced growth in the economy and bring about a quicker return to trend growth,” he said while adding that, “it will also add a little to inflation, for a time.”
Bundesbank President Jens Weidmann said ‘the Bundesbank feels encouraged by the decision of Germany’s top court to ask the European Court of Justice whether a key European Central Bank crisis-fighting programme is compatible with EU law.’ Weidmann said ‘Germany’s Constitutional Court broadly shared the German central bank’s concerns in its decision last week to refer the complaint against the ECB’s bond-purchase programme to the European court.’