[B]Market Review[/B] - 07/10/2013 [I]22:19GMT
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[B]Data to be released on Tuesday : [/B]
Australia NAB business condition, NAB business confidence, Japan Current account, Economic watch DI, China HSBC Markit Service PMI, Swiss Unemployment rate, CPI, retail sales, UK BRC retail sales, RICS house prices, Germany Trade balance, current account, export, import, factory orders, France trade balance, Canada housing starts, trade balance, exports, imports, US trade balance, redbook retail sales on Tuesday.
[B]Dollar weakens as U.S. political deadlock continues[/B]
The greenback weakened broadly against other currencies on Monday as the U.S. government shutdown entered a second week with few signs of a resolution in sight, fuelling fears over the risk of a possible U.S. debt default.
The single currency ratcheted higher from New Zealand low at 1.3553 against the dollar in Asia and climbed to 1.3591 in European morning, however, cross-selling of euro pressured the pair from there and price retreated after the release of weaker-than-expected EU Sentix investor confidence (6.1 versus the forecast of 8.5), euro dropped to session low at 1.3543 in New York Morning but only to rebound to 1.3585 later in the day due to broad-based weakness in greenback in New York afternoon.
The British pound also rose in tandem with euro at New Zealand open and ratcheted higher from at 1.6014 to 1.6048 in Asia and then eased to 1.6026 but renewed buying interest there lifted price higher in European trading. Cable later climbed higher again in part due to cross-buying of sterling versus euro and rose to 1.6101 in New York morning before easing.
Versus Japanese yen, the greenback remained under pressure in Asian trading due to the drop in Nikkei 225 index and then edged lower in European trading, price fell to 96.81 in New York morning before recovering. Later, dollar staged a brief bounce to 97.22 on short covering but only to weaken to a fresh one-month low of 96.67 near New York close.
In other news, ECB’s Praet says ‘Europe has problem of collective action; euro-area GDP won’t return to 2007 level until post-2015; monetary policy alone can’t create sustainable growth ; Europe’s banking sector hasn’t regained full trust; ECB has taken very little term risk on balance sheet; ECB has taken on relatively little credit risk; OMT program is different as is off balance sheet.’ ECB’s Asmussen says ‘single bank supervision and resolution mechanisms should start at roughly the same time; Italy so far does not qualify for OMT programme; Italy’s main problems is low growth potential, needs to continue with consolidation; OMT programme still ready to be activated if needed.’ White house’s Sperling says ‘president has made clear he is willing to negotiate with congress, but not under threat of default.’
In the data front, Japan leading indicators (Aug) came in at 106.5, vs the forecast of 106.6. Canada building permits in Aug came in at -21.2%, worse than the forecast of -7.4%, previous reading is revised to 21.4%.