[B]Market Review - 14/02/2013 23:06 All times in GMT
Euro tanks to 3-week low on disappointing GDP data in Europe [/B]
The single currency tanked to 3-week low versus the U.S. dollar on Thursday as weaker-than-expected France, Germany, Italy ann eurozone GDP data showed the recession in Europe deepened, raising the chance of further monetary easing by the European Central Bank.
Earlier in Asia, the single currency traded narrowly after previous day’s steep fall to 1.3427, intra-day decline resumes at European open and euro tanked to 1.3383 in European morning on weaker-than-expected German GDP data which showed euro zone’s largest economy shrank the most since 2009. Despite a brief recovery to 1.3414 on short-covering, renewed selling emerged after the release of disappointing Italy preliminary GDP and the pair tumbled below Monday’s low at 1.3326 (New Zealand) to a 3-week low of 1.3315 after growth data in the eurozone also reported a weaker-than-expected GDP in fourth quarter of 2012. Euro later stabilised in New York session and staged a modest recovery.
German GDP came in at -0.6% q/q and 0.1% y/y versus the forecasts of -0.5% and 0.2%. Eurozone GDP in Q4 came in at -0.6% q/q and -0.9% y/y, worse than the forecasts of -0.4% and -0.7% respectively. France GDP in Q4 was reported at -0.3% q/q and -0.3% y/y, versus the expectations of both -0.2%. Italy preliminary Q4 GDP was released at -0.9% q/q n -2.7% y/y, versus the forecasts of -0.6% and -2.3% respectively
Versus the Japanese yen, although the greenback rose from 93.15 to 93.64 in Asia due to the yen-bearish comments from former Bank of Japan Deputy governor Kazumasa Iwata and then marginally higher to 93.72 at Asian midday, the selloff in eur/jpy pressured the pair below said 93.15 to 93.09 in Europe. Later, another round of active cross buying of yen versus other major currencies sent dollar further lower to 92.68 near New York closing before stabilising.
Former Bank of Japan Deputy governor Kazumasa Iwata, who is one of the two possible candidates to replace the outgoing BoJ governor Shirakawa, said that’ yen correction needed to fulfill BOJ 2% price target; yen-dollar rate of 90-100 is returned to equilibrium; lots of ways for monetary policy to boost economy; policies include buying longer-term JGBs,risk assets.’
The British pound remained under pressure on Thursday after Wednesday’s downbeat quarterly BOE Inflation report. Price edged lower from Asian high at 1.5544 and pierced through Wednesday’s low at 1.5524 to 1.5493 in Europe due to the intra-day selloff in eur/usd. The pound eventually dropped to 1.5482, then marginally lower to a fresh 6-month low at 1.5475 in New York afternoon before staging a recovery.
On the data front, U.S. jobless claim came in at 341K, versus the forecast of 360K and the revised 368K.
In other news, the Bank of Japan kept interest rate unchanged at 0-0.1% and announced no new monetary easing steps. BOJ said ‘raise economic assessment; Japan’s economy appears to be bottoming out; Japan’s economy expected to level off for time being, then resume moderate recovery; Japan CPI expected to fall for time being, in reaction to last year’s rise in energy costs, then move back to around flat growth.’ ECB policymaker Constanio said ‘countries with floating currencies should let markets determine fx rate, interventions only in coordination; ECB respects that system floating rates; there is too much exaggeration recently when talking about currency wars; when country experiences deflation, as in Japan, monetary policy has to do utmost to correct that; euro exchange rate has been volatile; ECB looks at exchange rate as has impact on inflation.’
[B]Data to be released on Friday: [/B]
New Zealand retail sales, Japan Industrial production, Capacity utilisation, U.K. Retail sales, EU Trade balance, U.S. Empire state mfg, Net LT TIC flows, Industrial prod’n, Capacity utilisation, manufacturing production, U. S.of Michigan consumer confidence on Friday. (China is closed due to market holiday.)