[B]Market Review - 12/07/2013 [I]23:35GMT[/I][/B]
[B]Dollar retreats on weak U.S. consumer confidence[/B]
The greenback pared its early gains against its peers on Friday as release of weaker-than-expected U.S. University of Michigan consumer confidence fueled expectations that the Federal Reserve will keep its stimulus measures by the end of this year. In U.S. afternoon, the single currency briefly fell after the downgrade of France’s credit rating by ratings aganecy Fitch but price swiftly staged a rebound.
The single currency traded narrowly in Asian session, then dropped to 1.3037 in European morning on dollar’s broad-based strength. The pair fell further to session low of 1.2999 in New York morning on active cross selling of euro versus yen before staging a recovery to 1.3065 due to the weaker-than-expected U.S. University of Michigan consumer confidence, which came in at 83.9 versus the expectation of 85.0.
Later, although euro climbed to intra-day high at 1.3091 in U.S. afternoon, price dipped to 1.3033 after the downgrade of France’s rating by Fitch but then swiftly rebounded to 1.3083 and last traded near 1.3066 near New York close.
Fitch downgraded France’s sovereign rating from AAA to AA+ and outlook was stable. Fitch said ‘downgrade reflects higher forecast for general government gross debt peak; risks to fiscal projections lie mainly to the downside on uncertain growth and euro zone crisis; French economic output and forecast are substantially weaker than previously; the French economy faces a number of structural challenges.’
Versus the Japanese yen, although the greenback dropped briefly to 98.68 in Asian morning, the pair rebounded to 99.32 due to the rise in the Nikkei 225 index before trading narrowly in Europe. Later, although the pair rose to 99.70 in New York morning on broadd-based strength of dollar, price fell to session low of 99.88 after the release of weak U.S. consumer confidence but then rebounded to 99.53 on cross selling of yen versus euro.
The British pound traded narrowly in Asian session and ratcheted lower in tandem with euro to 1.5123 in Europe. The pair dropped further to a low of 1.5076 in New York morning but then rebounded to 1.5132 due to the rise in euro.
In other news, Fed’s Bullard said ‘“psychological shift” in housing markets; sees “a little bit of a mixed” on labour data; Fed revert a “bit” to “date-based” policy guidance; concerned about “very low” inflation; wants more Fed efforts to combat disinflation’ opposes dialing down stimulus amid disinflation; predicts housing market will improve in future.’ Fed’s Plosser said ‘Fed should begin to taper QE in September; Fed should halt QE by end of this year; Fed must beware of QE’s unintended consequences; “we don’t want to create another housing boom”; QE risks growing with size of Fed balance sheet.’ Portugal opposition socialist leader said ‘need to consider renegotiating terms of bailout; must focus on economic growth to cut unemployment, debt; to boost growth must abandon focus on austerity.’
On the data front, eurozone industrial production in May came in at -0.3% m/m and -1.3% y/y, versus the forecast of -0.2% and -1.3% respectively. U.S. PPI in June was released at 0.8% m/m and 2.5% y/y, stronger than the expectation of 0.5% and 2.1% respectively.
[B]Data to be released next week: [/B]
China GDP, Industrial production, fixed asset investment Urban, retail sales, U.K. Rightmove house prices, U.S. Empire State manufacturing, retail sales, business inventories on Monday. Japan’s financial markets will be closed due to public holiday.
Australia RBA minutes, U.K. CPI, PPI, RPI, ONS house price, German ZEW economic sentiment, current condition, Italy trade balance, EU ZEW economic sentiment, trade balance CPI, U.S. CPI, retail sales, net LT TIC flows, industrial production, capacity utilization, NAHB housing market index on Tuesday.
Australia Westpac leading economic index, U.K. BOE MPC minutes, Claimant count, average earning, ILO employment rate, EU current account, Swiss ZEW index, U.S. housing starts, housing permit, Canada rate decision on Wednesday.
New Zealand ANZ consumer confidence, Australia business confidence, Swiss trade balance, EU current account, U.K. retail sales, U.S. jobless claim, Philadelphia Fed survey, leading indicators, Canada wholesale sales on Thursday.
Japan leading indicators, Germany PPI, Italy industrial orders, U.K. public sector net cash requirement, public sector net borrowing, Canada CPI on Friday.