[B]Market Review - 26/02/2013 [I]21:08GMT [/I][/B]
[B]Euro retreats amid Italian political uncertainty[/B]
The single currency went through a roller-coaster session on Tuesday and later fell broadly across the board in New York afternoon as the political deadlock in Italy reignited investors’ fear about the eurozone debt crisis.
Although the single currency recovered briefly from Monday’s low at 1.3047 to 1.3089 in Asian morning, active cross selling in euro versus other currencies due to political uncertainty surrounding the inconclusive Italian election pressured the pair below, price briefly weakened to a 7-week low at 1.3018, however, price staged a recovery to 1.3119 in European morning on short-covering. Later, despite euro’s brief but strong rebound from 1.3052 to 1.3123 in New York morning after the release of upbeat U.S. home sales (+15.6%, the highest since July 2008, versus the forecast of -7.3% and -3.8% in December) together with the dovish comments from Fed Chairman Ben Bernanke, intra-day steep fall in eur/jpy sent the pair lower to 1.3037 in U.S. afternoon, euro traded around 1.3061 near New York close.
Fed’s Bernanke said in testimony that ‘benefits of Fed asset purchases, policy accommodation are clearly outweigh potential costs at this point; U.S. should consider replacing sharp, front-loaded sequestration cuts with policies that reduce deficit more gradually; given moderate pace of growth, additional burden on recovery fm short term fiscal drag significant; monetary policy providing important support to recovery while keeping inflation close to Fed’s 2% goal; since monetary policy promotes growth, jobs, resulting fall in deficits wud dwarf any variation in Fed remittances to treasury; low long-term interest rates have helped spark housing market recovery; substantial portion of recent deficit progress concentrated in near-term, could create significant headwind for recovery.’
Versus the Japanese yen, although the greenback recovered strongly from Monday’s low at 90.85 to 92.75 in Asian morning on bargain hunting from Japanese importers, active cross buying of yen versus other currencies sent the pair lower to 91.40 in European morning before staging another recovery. Later, despite dollar’s brief rise to 92.41 in New York morning after the strong U.S. housing data together with comments from Fed’s Bernanke, selloff in eur/jpy pressured the pair below 91.40 to 91.12 at U.S. midday before staging another recovery to 92.03.
Despite cable’s breach of Monday’s 1.5200 high to 1.5219 in Asia, price dropped in tandem with euro to 1.5141 in European morning before staging a recovery to 1.5217, however, the pound fell again to 1.5129 in European midday due to dovish comments fm the Band of England policymaker Paul Tucker who said ‘we should not start to withdraw monetary stimulus until we have secured "escape velocity; remains open to doing more QE depending on outlook for demand and inflation; no one on MPC thinks that QE has reached the end of the road, stands prepared to do more if needed.’ The British eventually fell to 1.5112 at New York midday before stabilising.
In other news on the Italian election, Italy centre-left leader Pier Luigi Bersani said ‘we did not win, even though we came first; crisis n austerity policies were behind results, this campaign also resonates for Europe; much react with humility to outcome of election, want to be of use to our country; our first responsibility to country is to represent change, more so than in election campaign.’ Portugal PM said ‘we do not need more money nor time to conclude bailout programme.’ EU commission said ‘Italy needs growth n jobs agenda to reduce the unsustainable lvl of its debt.’ BOE policymaker Bean said 'markets largely expecting a downgrade, other ratings agencies may follow suit.
[B]Data to be released on Wednesday :[/B]
New Zealand Exports, Imports, Trade balance (nzd), Japan Retail sales, Germany Import price index, Gfk consumer confidence, France consumer confidence, Swiss KOF indicator, U.K. GDP, EU Business climate, Economic sentiment, Consumer sentiment, U.S. Durable goods, ex. Defense, ex. Transport, Pending home sales.