[B]Market Review[/B] - 14/10/2013 [I]22:20GMT[/I]
[B]Dollar weakens on concerns over U.S. default [/B]
Dollar weakened against other major currencies on Monday as potential of U.S. sovereign default after U.S. lawmakers and the White House over the weekend failed to agree on a spending package needed to reopen the government and lift the debt ceiling continued to weigh on demand for the greenback. Trading volume was thin in American session due to U.S.'s Columbus Day holiday.
Although euro opened higher to a session high at 1.3566 against the dollar in New Zealand morning then climbed marginally higher to 1.3569 in Asian session, cross-selling of euro versus sterling pressured price and the pair dropped to 1.3546 in European morning. Later, dollar’s broad-based weakness on concerns over U.S. default lifted price in New York morning and euro surged to a high of 1.3598 before retreating to 1.3560 on hopes for reaching agreement on debt ceiling.
The British pound also opened higher at 1.5981 in New Zealand and then rose to 1.5989 in Asian trading but retreated in tandem with euro and fell to 1.5955 in European morning. However, renewed buying interest emerged there and cable later rose to 1.6015 and then further to 1.6018 in New York morning before retreating to 1.5979 in part due to the comments from Bank of England deputy governor Designate Cunliffe.
BoE’s Deputy governor Designate Cunliffe said on Monday that ‘forward guidance mitigates risk of premature expectations of tighter monetary policy; unusual amount of uncertainty about potential for firms to increase output without talking on additional employees; abrupt normalization of interest rates could threaten financial stability; U.K. property market will be a key area of financial policy committee’s domestic focus; expects firms to use up existing capacity before starting to hire when demand recovers; assets; do not agree we entering into a housing bubble; house prices need to be watched very carefully, should be dealt with if threatens financial stability; BOE may need loan to value powers in future, but stiff test first to see if only way to deal with house prices; second stage to help buy scheme may possibly create risk housings borrowing too much; need to keep a very close eye on lending standards under help to buy.’
Versus Japanese yen, dollar opened lower at 98.09 in New Zealand before rising Nikkei 225 index lifted price in Asia. Dollar rebounded to 98.35 and then traded sideways in Europe but cross-buying of yen pressured price to 98.09 again in New York morning but only to rise to 98.48 at New York midday on speculation for reaching agreement on U.S. debt ceiling.
In the other news, ECB’s Asmussen said ‘rolling over Greek gov’t bonds would infringe ban on monetary financing of governments.’
On the data front, EU industrial production (Aug) came in at 1.0% m/m and -2.1% y/y, better than the forecast of 0.8% m/m and -2.4% y/y, previous reading revised to -1.0% m/m and -1.9% y/y.
[B]Data to be released on Tuesday: [/B]
Australia RBA minutes, Japan industrial production, Capacity utilisation, France HICP, CPI, UK CPI, RPI, PPI, ONS house price, EU ZEW economic sentiment, Germany ZEW current condition, ZEW economic sentiment, U.S. Empire state manufacturing, Redbook retail sales, Canada existing home sales.