[B]Market Review[/B] - 08/10/2013 [I]22:19GMT[/I]
[B]Data to be released on Wednesday: [/B]
Australia Westpac consumer confidence, Japan Machine tools orders, UK Industrial production, Manufacturing production, trade balance, Germany Industrial production, U.S. Wholesale inventories, Wholesale sales, FOMC minutes.
[B]Dollar ends mixed as U.S. political gridlock continues[/B]
The greenback fluctuated widely on Tuesday as hopes began to sprout that lawmakers will end a budget impasse that closed the government and threatened to derail efforts to lift the country’s debt ceiling and avoid default.
The single currency initially retreated to 1.3558 in Asian trading before edging higher in European morning. The pair rose above Monday’s high at 1.3591 to session high of 1.3607 in New York morning on greenback’s broad-based weakness partly due to the comment from IMF’s chief economist Olivier Blanchard, however, euro later dropped back to 1.3571 as hopes began to build that parties from both sides may be willing to return to the negotiating table to find a way to fund the government as well as lift the debt ceiling and avoid default.
IMF’s chief economist Blanchard says ‘U.S. default could cause financial trauma, turn what is now a U.S. economic recovery into a recession.’
Versus the Japanese yen, despite initial selloff to 96.55 in Australian morning, the pair ratcheted higher in Asian trading, rose to 97.19 in Europe and then further to 97.25 in New York morning before retreating. Later, renewed cross-buying of yen pushed the pair lower and price retreated to 96.83 before stabilising.
Although the British pound edged lower from Asian high of 1.6099 and then tanked to 1.6019 in European morning, active cross-buying of sterling lifted price sharply higher and cable later penetrated Monday’s high of 1.6101 to 1.6124 in New York morning before retreating on dollar’s based rebound, dropped to 1.6070 in New York afternoon.
In other news, Fed’s Plosser says 'the time has come for an expeditious phase-out of the purchase programme; disagreed with decision to delay tapering at September timing; delay in Tapering of asset purchases without clear justification undermines Fed credibility, efficacy of forward guidance; sees U.S. economy expanding 2.5% this year, 3% in 2014’ Fed’s Pianalto says 'wanted to reduce asset purchases in September; very supportive monetary policy remains essential to support economy; it pays to be cautious with expanding QE3’ German government official says 'exiting expansive monetary policy will be a topic for central bank at G20/IMF meeting; exit from expansive monetary policy is necessary and should be communicated well.’
On the data front, German factory order in August came in at -0.3% m/m and 3.1% y/y, worse than the expectation of 1.0% and 4.0%, previous reading revised to -1.9% and 2.3%. China HSBC Markit Service PMI (Sep) came in at 52.4, versus previous month reading of 52.8. Canada housing starts in September came in at 193.6K, better than then expectation of 185.0K, previous reading revised to 184.0K.