Market Review - 23/01/2014 21:52GMT
Euro rallies on Thursday as QE from ECB diminishes after data
The single currency strengthened against the dollar on Thursday as expectations for further monetary easing by the European Central Bank diminished after stronger-than-expected data on euro zone private sector activity.
During the day, although euro traded sideways after retreating from Wednesday’s high of 1.3584 to 1.3530 at Asian open, price jumped sharply to 1.3647 in European morning as data showed recovery in the euro area is strengthening due to a larger than expected increase in euro zone private sector activity this month. Later, euro rose further to 1.3685 in New York morning after the number of continuing jobless claims in U.S. remained above the three million mark for the second successive week before easing. Price extended gain to 1.3699 near New York close due to the sell off in global stock markets.
Market reported on Thursday that the euro zone’s composite output index rose to a 31-month high of 53.2 in January, up from a final reading of 52.1 in December, as growth picked up in Germany and the rate of decline eased in France. A separate report showed Germany’s Manufacturing PMI expanded at the fastest pace since May 2011 in January , record at 56.3 versus 54.3 in previous month.
Versus the Japanese yen, despite dollar’s initial bounce to 104.84 shortly after Asian opening, price came under pressure and retreated to 104.21 in European morning on declining Nikkei 225 index. The greenback later met another round of selling in part due to active cross-buying of yen and dropped to 103.49 in New York morning on poor U.S. jobless claims and manufacturing PMI data. The pair weakened further to 102.97 in near New York close due to the sell off in global stock markets.
U.S. initial jobless claims rose to 326,000, up from the previous week’s revised total of 325,000. The number of people filing continuing unemployment claims rose to 3.056 million up from 3.022 million in the week to January 11. Another report showed that the U.S. manufacturing PMI declined to 53.7 this month from a final reading of 55.0 in December.
Cable rose in tandem with euro on Thursday after finding support at 1.6557 in Asia and price then penetrated previous high of 1.6605 (January 2nd) to a fresh 2-year peak of 1.6637 in New York morning n then 1.6644 near NY close on dollar’s broad based weakness.
In other news, BoE’s Fisher said on Thursday that ‘output growing too slow to support rapid real wage rise and big fall in unemployment; inflation pressures diminishing but strong GDP growth not guaranteed; no immediate need to tighten when unemployment falls to 7%, must allow economy to grow strongly for some time; “still some way off” from raising interest rates, MPC must avoid choking off recovery.’
Data to be release on Friday:
U.K. BBA mortgage approvals and Canada CPI.