[B]Market Review[/B] - 19/02/2014 [I]21:43GMT[/I]
[B]Euro eases from a fresh 6-week peak against the dollar on Wednesday[/B]
Although the single currency rose marginally above Tuesday’s high at 1.3770 to 1.3773 shortly after Asian opening on Wednesday, cross-related selling of euro especially versus Japanese yen pressured price lower to 1.3739 in New York morning before rebounding. Later, euro fell briefly to 1.3725 after the release of FOMC minutes that suggested policymakers would keep up the pace of a withdrawal of monetary stimulus.
Dollar retreated versus yen after meeting renewed selling interest at 102.42 in Australia and the pair continued to edge lower in early European trading on active cross-buying of yen due to falling Nikkei futures. Price dropped further to 101.84 in New York morning and then rebound to 102.47 after the release of FOMC minutes.
Bank of Japan released its monthly economic report, which stated ‘prices are rising moderately, first such description since Oct 2008; overall economic view unchanged, economy recovering moderately; rises view on exports; raises view on employment situation.’
Despite cable’s brief rise to 1.6734 in European morning, the pair retreated sharply to 1.6662 after data showed that the U.K. unemployment rate unexpectedly ticked higher in the three months to December. Cable eventually fell to 1.6637 ahead of New York open but short-covering emerged and lifted price back to 1.6725 in late New York.
The Office for National Statistics said on Wednesday that the rate of unemployment in the U.K. ticked up to 7.2% in the three months to December from 7.1% in the previous three months. A separate report showed the claimant count fell by a seasonally adjusted 27,600 last month, compared to expectations for a decline of 20,000 people. December’s figure was revised to a drop of 27,700 people from a previously reported decline of 24,000.
Bank of England released its February’s meeting minutes and stated ‘Carney did not ask MPC vote on new forward guidance policy on Feb 6; MPC judged there was scope to absorb spare capacity before raising rates, rates rises would be gradual; note FX strategists attribute recent sterling appreciation to stronger U.K. demand outlook; past month’s news strengthens sense of momentum in U.K. economy, see 0.9% Q1 growth, similar in Q2; upside news about euro zone periphery must be balanced against heightened risks from emerging economies; CPI to be lower than expected due to sterling appreciation, low global inflation pressures, fading one-off effects; strong short-term bounce in productivity unlikely, but normalizing banking sector may help; MCP voted 9-0 to keep QE bond purchase total at 375 bln pounds; MPC voted 9-0 to keep rates at 0.5%.’
On the data front, U.S. showed that the number of building permits issued last month declined by 5.4% to a seasonally adjusted 937K units from December’s total of 991K, while housing starts plunged by 16% in January to hit a seasonally adjusted 880K units from December’s total of 1.048 million.
FOMC minutes stated ‘several Federal Reserve policymakers wanted to drive home the idea that their asset-purchase program would be trimmed in predictable, $10-billion steps unless the economy’s performance surprises them.’ Beyond the expected cut to bond buying, the Fed at the meeting made no changes to its other main policy plank: its pledge to keep interest rates low for some time to come.
[B]Data to be release on Thursday:[/B]
New Zealand PPI, consumer confidence, Japan trade balance, imports, exports, China manufacturing PMI, Germany PPI, manufacturing PMI, services PMI, France CPI, manufacturing PMI, services PMI, EU manufacturing PMI, services PMI, UK CBI trends, U.S. CPI, jobless claims, manufacturing PMI, Philly Fed survey and leading index.