[B]Market Review[/B] - 16/01/2014 [I]22:17GMT [/I]
[B]Dollar falls after lower than Fed’s target inflation data[/B]
The greenback erased early gains and weakened broadly on Thursday after data showed U.S. consumer prices in December remained below the Federal Reserve’s 2 percent target, supporting the central bank’s pledge to keep rates at a record low.
During the day, although euro briefly dropped to 1.3586 against the dollar at Asian open, price climbed back to 1.3628 ahead of European opening on cross-buying of euro and then fell to 1.3597. The pair edged higher in early European trading as comments by European Central Bank governing council member Jens Weidmann lent support to the pair. Later, euro dropped again ahead of New York open but rebounded strongly from 1.3593 to 1.3649 as data showed U.S. inflation was still below Fed’s 2% target.
ECB’s Weidmann said on Thursday that ‘agree with Draghi that have no reason to foster irrational inflationary fears; deflation risks in euro zone are limited; sees German economic upswing continuing this year and next; light at end of tunnel for most euro zone crisis countries; buying government bonds risks blurring line between monetary fiscal policy.’
U.S. December CPI came in at 0.3% m/m and 1.5% y/y, same as market’s expectations.
Versus the Japanese yen, although dollar extended gain above Tuesday’s high of 104.70 in to session high at 104.92, cross-buying of yen capped intra-day gain there and price later fell to 104.66 and the further to 104.15 in New York morning after U.S. inflation data.
Cable went trough another day of choppy trading on Thursday as despite falling from Asian high of 1.6375 to a fresh 4-week low of 1.6316 in European morning in part due to cross-selling of sterling, price rebounded to 1.6384 in New York morning on dollar’s broad based weakness and then tanked to 1.6322 before trading sideways.
In the commodity currencies, the Australian dollar tumbled to a fresh 3-1/2 year low of 0.8777 on Thursday after data showed that the economy shed 22,600 jobs in December, compared to expectations for new jobs growth of 10,000. A separate report showed Australia’s unemployment rate remained unchanged at 5.8%, in line with forecasts.
On the data front, Philadelphia Fed business conditions came in at 9.4 in January versus December 6.4. U.S. NAHB housing market index 56 in January versus revised 57 in December.
In other news, SNB Chairman Thomas Jordan said 'the Swiss National Bank’s lid on the Swiss franc will remain at the centre of monetary policy for the foreseeable future, and the value of the safe-haven currency is still high."
[B]Friday [/B]will see the release of Japan consumer confidence, U.K. retail sales, U.S. housing starts, building permits, industrial production, capacity utilization and University of Michigan consumer confidence.