[B]Market Review[/B] - 02/10/2013 [I]22:14GMT[/I]
[B]Euro strengthens to a fresh near 8-month peak against the dollar on Wednesday[/B]
The single currency rose to a fresh near 8-month peak against the dollar on Wednesday after Italy’s prime minister survived a confidence vote, while comments by ECB President Mario Draghi also boosted the pair. Italian Prime Minister Enrico Letta survived a vote of confidence in parliament on Wednesday, after Silvio Berlusconi dropped his opposition to the coalition, in a surprise U-turn after announcing Saturday that he was pulling his ministers out of the government.
During the day, although euro edged lower from Tuesday’s high of 1.3589 in early Asian trading, the pair found support at 1.3507 and then rebounded to 1.3539 in European morning. Later, euro briefly dropped to 1.3505 after ECB kept interest rate on hold at 0.50% but ‘euro-supportive’ comments by ECB’s President Mario Draghi lifted price sharply higher to a fresh multi-month high at 1.3608 in New York morning before easing.
ECB’s Draghi said 'underlying price pressures in Euro zone expected to remain subdued; confidence indicators confirm expected gradual improvement in economy; ECB monetary policy stance geared towards maintaining warranted degree of monetary accommodation; ECB monetary policy stance will remain accommodative for as long as necessary; ECB expects key interest rates to remain at present or lower levels for extended period; will remain particularly attentive to implications to monetary policy stance; ‘inflation path is developing as expected; will have to look through medium-term inflation and decide about interest rates, or other steps’
Versus the yen, dollar remained under pressure in Asia on the back of decline in Nikkei 225 index and then fell to 97.26 before recovering, however, another round of selling on dollar due to a combination of political deadlock in the U.S. and a weak private sector jobs report weighed on greenback and dollar later dropped to a fresh session low of 97.15 in New York morning.
U.S. ADP in September came in at 166K, worse than the forecast of 180K.
Although the British pound initially fell to session low 1.6162 in Asian morning, cross-related buying of sterling versus euro lifted price to 1.6227 in European and cable later climbed higher in tandem with euro to 1.6252 (near Tuesday’s 8-1/2 month peak at 1.6260) in New York morning on dollar’s broad-based weakness after disappointing U.S. jobs data.
In other news, BoE’s Fisher says ‘unemployment could hit 7% a year earlier or later depending on small changes in assumptions; “extremely serious” if U.S. shutdown means debt interest paid; better to hold QE in reverse in case economy falters.’
[B]Data to be released on Thursday: [/B]
China non-manufacturing PMI, Italy service PMI, France service PMI, Germany service PMI, U.K. service PMI, EU service PMI, retail sales, U.S. jobless claims, factory orders, ISM non-manufacturing, durable goods on Thursday. China and Germany financial market is closed due to public holiday.