[B]Market Review[/B] - 19/03/2014 [I]22:56GMT [/I]
[B]U.S. dollar rallies broadly on hawkish remarksfrom Fed Chair Janet Yellen[/B]
U.S. strengthens broadly against its major peers after the Federal Reserve continued to unwind its monetary stimulus as widely expected together with hawkish remarks by Fed Chair Janet Yellen who said the Fed will probably end its massive bond-buying program this coming fall, and could start to raise interest rates around six months later.
Despite euro’s initial firmness in Asia after rebounding from Tue’s New York low at 1.3880, the single currency retreated to 1.3905 in European morning on cross-selling of euro versus sterling before staging a brief recovery to 1.3930, however, renewed selling emerged and pressured the pair lower to 1.3899 in New York morning. Euro later tumbled sharply to 1.3810 after Fed’s tapering move together with hawkish comments from Fed Chair Janet Yellen.
The British pound traded narrowly in Asia and strengthened in European morning, eventually rising to an intra-day high at 1.6655 ahead of New York open, helped by the upbeat economic picture painted by the Bank of England in its minutes. However, profit-taking there pressured price lower and cable retreated to 1.6608 in New York morning. Sterling later nose-dived to as low as 1.6508 after Federal Reserve cut its monthly bond-buying program and hawkish remarks by Fed Chair Janet Yellen.
BoE’s minutes stated ‘latest revisions to GDP data suggest UK recovery becoming more balanced but some way to go before sustainable; BoE notes 1.5% rise in sterling in month b4 Mar meeting, market contacts cite better UK growth outlook, Ukraine tension; stronger sterling has tightened UK monetary conditions, risk of further strength if UK growth outlook strengthens compared to other countries.’
Versus the Japanese yen, despite initial retreat to a session low at 101.30 in Asian morning, the greenback rebounded to 101.64 ahead of European open and then edged higher to 101.69 in European morning on dollar’s broad-based strength. U.S. dollar jumped to as high as 102.69 (penetrated Tuesday’s high at 101.94) after hawkish comments from Fed Chair Janet Yellen.
In other news, UK FinMin George Osborne said ‘UK economy is recovering faster than forecast; country is borrowing too much, not exporting or saving enough; escalation of tensions in the Ukraine risk causing lower growth n higher inflation in UK; OBR have revised down UK underlying deficit in every year of forecast.’
On the data front, Japan all industry activity index came in at 1.0%, worse than the forecast of 1.1%, previous reading is revised to -0.3%.
[B]Data to be released on Thursday: [/B]
New Zealand GDP, Swiss trade balance, import, export, rate decision, Germany PPI, Italy current account U.K. CBI trend total orders, U.S. initial jobless claims, Philadelphia Fed business outlook, existing home sales, leading index.