[B]Market Review [/B]- 31/10/2013 [I]17:37GMT[/I]
[B]Euro tumbles on sharp fall in euro zone inflation and record high unemployment[/B]
The single currency tumbled against other major currencies on Thursday due to weak euro zone data showing that inflation in the euro zone declined sharply to the lowest level in four years in October together with the record high unemployment rate in September, adding speculation that the European Central Bank may ease monetary policy.
Euro zone unemployment rate in September came in at 12.2%, higher than economists’ forecast of 12.0%, previous reading is revised to 12.2%; euro zone CPI estimate in October came in at 0.7% y/y, lower than the forecast of 1.1%.
The single currency met selling interest at 1.3739 in Asian session and ratcheted lower in European session after the release of weak euro zone data. Euro tumbled to 1.3632 ahead of New York open and weakened further due to dollar’s broad-based strength after the release of stronger-than-expected Chicago PMI (65.9 versus forecast of 55.0). The pair nose-dived to a session low at 1.3575 near New York afternoon.
Versus Japanese yen, the greenback met selling interest at 98.57 in Australia and then ratcheted lower in European session. The dollar further dropped to a session low at 98.08 in New York afternoon before recovering.
Although the British pound dropped to a session low at 1.6006 ahead of European open, failure to penetrate Wednesday’s low at 1.5999 prompted profit-taking. Cable ratcheted higher in European session and rose to a session high at 1.6070 on short-covering in New York morning.
In other news, Bank of Japan’s semiannual report stated 'Japan’s economy likely to continue to expand at pace exceeding its potential; BoJ to maintain its QE programme until needed to stably achieve 2% inflation; BoJ ready to make necessary policy adjustments while scrutinising upside, downside risks to economy, prices; CPI likely to reach BoJ’s 2% target around end of fiscal 2014 through fiscal 2015.’
On the data front, U.S. initial jobless claim came in at 340K, worse than the forecast of 339K. Italy unemployment rate in September came in at 12.5%, worse than the forecast of 12.2%, previous reading was revised to 12.4%. Germany Gfk consumer confidence in November came in at 7.0, versus the forecast of 7.2.
[B]Data to be released on Friday: [/B]
Australia PPI, China manufacturing PMI, HSBC Markit manufacturing PMI, Swiss PMI, U.K. manufacturing PMI, U.S. Markit manufacturing PMI, ISM manufacturing and construction spending on Friday. France financial market is closed due to public holiday.