[B]Market Review - 08/07/2013[I] 22:20GMT[/I][/B]
[B]Dollar retreats on profit-taking[/B]
The greenback fell against majority of its peers on Monday as traders booked profits after dollar’s recent upmove. The single currency was supported in New York morning as the European Central Bank President Draghi said ‘euro area economic activity should stabilise and recover over the course of this year, although at a subdue pace.’
The single currency traded narrowly above New Zealand low at 1.2808 in Asian session and rose to 1.2859 in European session on cross buying of euro versus yen. Dollar’s broad-based weakness together with the comments by ECB’s Draghi pushed the pair further higher to 1.2879 in New York morning before stabilising.
ECB President Draghi said ‘hard to disagree that low rates for long pose risk; higher rates aren’t warranted currently; fit has many undesired consequences for monetary policy; must expect increase in Greek non-performing loans; prolonged recession is main systemic risk; economy is still weak, financial market fragmentation remains; our policy is greater toward accommodation, policy stance will remain accommodative as long as needed; euro zone economy should stabilize and recover in course of year, albeit at subdued pace; we see our baseline scenario of recovery being confirmed; with forward guidance, ECB injected downward bias in interest rates; rate will stay at present level or lower for foreseeable future.’
Versus the Japanese yen, although the greenback extended recent upmove to 5-week top at 101.53 in Australia, cross unwinding of yen versus other currencies pressured the pair to 100.93 in European morning. Later, despite brief recovery to 101.39, dollar’s broad-based weakness sent price to 100.79 in New York afternoon.
Despite cable’s initial weakness to 1.4859 ahead of Asian open, failure to penetrate last Friday’s 3-1/2 month low at 1.4858 prompted short-covering, price edged higher in European session and climbed to 1.4956 in New York afternoon on dollar’s broad-based weakness before stabilising.
In others news, officials said euro zone finance minister agreed to make staggered payments of aid to Greece starting with a 2.5 billion euros instalment from eurozone countries in July. Central banks in Eurosystem would contribute 1.5 billion euros in July and 500 million euros in October. The IMF would give 1.8 billion euros in August. ECB said ‘Troika sees Greek macroeconomic outlook remains broadly in line with programme projections; Troika sees prospects for gradual return to growth in Greece in 2014, but outlook uncertain.’
On the data front, euro zone Sentix investor confidence in July came in at -12.6, worse than the expectation of -10.0. German industrial production in May was released at -1.0% m/m and -1.0% y/y, worse than the expectation of -0.5% and -0.5% respectively.
[B]Data to be released on Tuesday: [/B]
Australia NAB business condition, NAB business confidence, Japan machine tools orders, China CPI, PPI, Swiss retail sales, U.K. BRC retail sales, RICS house price, industrial production, manufacturing production, trade balance, Canada housing starts, U.S. Redbook retail sales.