[B]Market Review[/B] - 03/03/2014 [I]22:04GMT [/I]
[B]Euro falls on risk aversion due to geopolitical tensions in Ukraine[/B]
The single currency fell against the dollar and the other major currencies on Monday as fears over the growing threat of war between Russia and Ukraine after Russian President Vladimir Putin’s decision to send troops into the Crimea region over the weekend sparked a broad based selloff in assets perceived as risky.
Euro ‘gap-down’ opened in New Zealand on Monday after rising to a fresh 2-year peak at 1.3825 last Friday. Price fell to 1.3755 before rebounding to 1.3793 ahead of European opening on short-covering. Later, despite release of a mixed manufacturing PMIs from euro zone and its members countries, euro fell further versus dollar to 1.3726 in late New York on dollar’s broad-based strength except versus the Japanese yen.
In euro zone, data on Monday confirmed that the region’s manufacturing PMI declined to 53.2 in February from 54.0 in January. It was the first dip in five months, highlighting the fragile nature of the recovery in the euro area. Separate reports showed that the rate of decline in France’s manufacturing sector eased in February, while activity in Germany’s manufacturing sector rose for the eighth straight month.
Versus the Japanese yen, although dollar remained under pressure after opening lower from Friday’s close of 101.80 to 101.32 in Monday’s New Zealand due to broad-based buying of yen on risk aversion after Russian President Vladimir Putin’s threat to invade Ukraine. Price briefly staged a short-covering rebound to 101.67 in Australia before falling further to 101.20 in Europe. Later, dollar climbed back to 101.57 after release of a slew of encouraging U.S. economic data in New York morning and then traded sideways in New York afternoon.
On the data front, U.S. personal income rose 0.3%, beating expectations for a 0.2% increase, after a flat reading in December. U.S. personal spending rose 0.4% in January, above expectations for an increase of 0.1%, however, December data was revised down to a 0.1% gain from a previously reported increase of 0.4%.
Cable traded in a choppy fashion on Monday. Although price moved closely with euro in Asia and rebounded from New Zealand low at 1.6710 to 1.6751, price retreated to 1.6698 (Reuters) in European morning and then rebounded to 1.6751 after data showed that the strong upswing in the U.K. manufacturing sector continued in February and more-than-expected mortgage approvals in January. Later, broad-based rebound in greenback pushed price lower again n cable nose-dived to 1.6652 in late New York after penetrating 1.6698 level.
The Markit U.K. manufacturing purchasing managers’ index for February came in at 56.9, up from a revised 56.6 in January. Market had expected the index to tick down to 56.5. A separate report showed that the number of mortgages approved in the U.K. rose to 76,947 in February, the highest level since November 2007, from 72,798 in January.
In other news, ECB’s President Mario Draghi gave testimony before the European Parliament’s Committee on Economic and Monetary Affairs on Monday and said ‘government bonds will be stressed according to stress parameters like all other assets in stress test; very important to reach swift conclusion on single resolution mechanism; financial linkages of Ukraine with euro zone are “rather small”, economic impact likely to be limited; geopolitical dimensions of Ukraine could go beyond actual links of statistical numbers, must watch carefully; we have to find a way whereby the changes of our monetary policy will be passed to the real economy; start seeing some progress now in lending channels improving; funding for lending scheme is one of the instrument we could use; euro exchange is not our policy target, but it is important for price stability; premature to speculate about a debt relief for Greece, Greece should focus on programme implementation; looking at house price increases in some parts of euro zone with “great attention”, too early to speak of bubble.’
[B]Data to be released on Tuesday: [/B]
Australia building approvals, RBA rate decision, U.K. PMI construction, EU PPI and U.S. ISM New York.