[B]Market Review[/B] - 10/03/2014 [I]22:57GMT[/I]
[B]Dollar trades mixed against other major currencies on Monday[/B]
The greenback traded mixed versus other major rivals on Monday as poor Chinese trade data and downbeat economic reports from Japan weighed on sentiment.
Data released over the weekend showed that exports from China fell 18.1% on a year-over-year basis in February, confounding expectations for a 7.5% increase, following a rise of 10.6% in January. A separate report on Monday showed that Japan posted record current account deficit of 1.589 trillion yen in January and fourth quarter growth was revised down.
Versus the Japanese yen, although the greenback opened sharply lower on Monday to 102.83 in New Zealand morning from Friday’s New York close near 103.25, renewed buying quickly emerged and lifted the pair higher to 103.30 at Asian open. However, dollar retreated again to 102.98 in Tokyo morning, weighed down by the release of weaker-than-expected Japan GDP data together with the decline in Nikkei-225 index and then further to 102.94 in European morning before rebounding to 103.40 due partly to cross-selling in yen. Later, dollar chopped inside 102.83-103.41 for rest of the New York session, ended around 103.27 near New York closing.
Japan’s economy grew 0.2% in the final three months of 2013, in line with market expectation. On a year-over-year basis, the economy expanded by 0.7%, compared to an initial estimate of 0.9%.
The single currency found renewed buying at 1.3869 in New Zealand and strengthened to 1.3892 in early Asia. Price later rose marginally higher to 1.3897 in European morning, near last Friday’s fresh 2-1/4 year peak at 1.3915, but broad-based rebound in greenback pressured euro to 1.3868 ahead of New York open in part due to risk aversion on falling major shares markets. Later, the single currency dropped further to 1.3662 in New York afternoon before trading narrowly.
The British pound tumbled against euro and U.S. dollar on Monday as unexpectedly weak trade data from China prompted concerns over the outlook for the global economic recovery. Cable retreated versus dollar after meeting renewed selling at 1.6745 in New Zealand and then dropped below Friday’s low at 1.6706 to 1.6683 in European morning. The pair fell further to 1.6625 and then 1.6622 in New York morning after comments from BoE’s Bean before stabilising.
In U.K., Bank of England Deputy Governor Charles Bean said ‘Further sterling strength “would not be particular helpful” for U.K. exports; advises against “getting too hung up on precise date at which bank rate first rises”; likely to learn a lot about recovery between now and spring 2015 when market prices in rate hike; there is more scope for housing investment to continue driving growth; BoE keeping a “beady eye” on housing market, in case low housing supply and high mortgage lending creates risks; reasonable grounds to expect business investment to take over from household demand as driver of U.K. recovery; reasonable to believable U.K. to pre-crisis productivity growth, uncertain when; most obvious risk to U.K. recovery is euro zero clearly concerns about emerging markets; main domestic risk to U.K. recovery is that it runs out of steam, and possibility that housing market becomes over-exuberant; Scottish independence could at minimum create a period of uncertainty; important review of banks in euro zone is conducted well, in a way that enhances confidence; current level of sterling fine if it stays where it is; if sterling appreciates further, lower inflation pressures may keep policy looser for longer.’
ECB policymaker Christian Noyer said on Monday ‘monetary policy should remark active because persistent low inflation threatens price stability; there are “permanent and deep forces” pushing inflation down at both the euro area and global level; there is no deflation in euro area today, inflation expectation are firmly anchored in positive territory; money market yield curve needs to remain lows; shrinking of ECB balance sheet “not a problem”; euro zone banks can always draw more liquidity.’
Chicago Fed President Charles Evans told reporters at Columbus State University that ‘the Federal Reserve should revamp its so-called forward guidance by reinforcing that interest rates will stay low for “quite some time” and that much will depend on continued improvement in the labor market.’ Evans said “It ought to be something that captures well the fact that (rates are) going to continue to be low well past the time that we change the language; Tick through the different labor market indicators: payroll employment, unemployment, labor force, vacancies, job openings and things like that; we somehow want to capture that general improvement in labor market indicators, but that is hard.” Evans added “we’re going to have accommodation for really quite some time.”
[B]Data to be released on Tuesday:[/B]
Australia NAB business confidence, NAB business conditions, Japan rate decision, Germany trade balance, exports, imports, current account, Italy GDP, U.K. sales like-for-like, industrial production, manufacturing production, U.S. wholesale inventories and wholesale trade sal