[B]Market Review[/B] - 24/02/2014 [I]21:25GMT[/I]
[B]Dollar rises broadly Monday on safe haven demand[/B]
The dollar strengthened against other major currencies on Monday as safe haven demand increased after data showed that Chinese home prices fell for the first time in 14 months in January and added to fears that the world’s second largest economy is slowing as the government tries to tackle bad loans and weak lenders.
During the day, although euro rose to a session high of 1.3772 after reports showed German business confidence rose more than expected this month, investors shrugged off the upbeat data and long-liquidation in ‘delayed’ reaction to ‘negative’ deposit rate comments by ECB Visco pressured price below New Zealand bottom at 1.3729 to a fresh session low of 1.3709 in New York morning before rebounding.
Ifo German business climate index came in at 111.3 in February, the highest level since mid-2011, up from 110.6 in January, meanwhile, the future expectations component of the index ticked down to 108.3 from 108.9 in January, but was ahead of expectations for a decline to 108.1. A separate report showed that the annual rate of euro zone inflation came in at 0.8% in January, unchanged from the previous month and slightly higher than the preliminary estimate for 0.7%.
ECB Goverrning Council member Ignazio Visco (also Governor of Bank of Italy) said on Monday that ‘if needed, we’re ready to consider negative deposit rate, Danish experience with this was not bad.’
Versus the Japanese yen, dollar dropped extended losses from Friday’s near 3-week high of 102.83 to 102.17 in Asia but traded higher in European session due to the rebound in Nikkei futures. Later, dollar rose to 102.61 in New York morning on dollar’s broad-based firmness before easing.
Cable fluctuated wildly on Monday, despite a brief selloff below last Friday’s low at 1.6610 to 1.6598 in European morning, lack of follow-through selling lifted price from there and price later rebounded strongly to 1.6679, helped buy active cross-buying of sterling. Later, dollar’s broad-based firmness knocked price down to a fresh near 2-week low at 1.6583 in New York morning before rebounding to 1.6670 in late New York.
News over the weekend worth noting, Bloomberg reported Bank of England Governor Mark Carney on the sidelines of the weekend G20 meeting, gave an interview with Australian newspapers published Sun and said a new phase of forward guidance is intended to give assurance that officials will support the economic rebound. He said ‘we will not take risks with the recovery,’ and ‘we are going to set the path of monetary policy in a way that ensures that we see sustainable growth in jobs n incomes n in spending.’ Carney said the revised framework for forward guidance that he introduced earlier this month reflects the necessity for a ‘more complex set of judgments’ than was needed in the first phase, where there was a link to the unemployment rate. The bank changed its approach after the jobless rate fell faster than officials had forecast toward the 7% threshold for considering an interest-rate increase.
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Data to be release on Tuesday: [/B]
Germany GDP, exports, imports, Italy retail sales, consumer confidence, U.K. CBI trends, U.S. house price index and consumer confidence.