[B]Market Review - 06/03/2013[/B] [I][B]22:10GMT[/B][/I]
[B]Euro weakens on usd’s broad-based strength ahead of ECB meeting[/B]
The single currency dropped versus the dollar on Wednesday on concerns the central bank policy makers of ECB may judge that there is sufficient economic justification to take new measures, including cutting their main interest rate target from the current 0.75 percent, the inconclusive election last month in Italy and revised data confirmed a deepening recession in eurozone also weighed on euro.
In earlier trade, although the euro rose to a session high of 1.3070 shortly after European open, failure to penetrate Tuesday 1.3075 top prompted long liquidation and the pair later fell to 1.3024 after release of eurozone GDP data before recovering, however, broad-based firmness in greenback due to release of better-than-expected U.S. jobs data sparked off another round of selling in European currencies and euro tanked from 1.3045 to 1.2983 before falling further to session low at 1.2965 in late New York afternoon.
In a report, Eurostat said that the eurozone’s gross domestic product shrank 0.6% in the final quarter of 2012 from prior three months, in line with expectations and unchanged from a preliminary estimate. Year-on-year, euro zone GDP fell 0.9% compared to a year earlier, also in line with expectations.
The payrolls firm ADP said Wednesday that the U.S. private sector added about 198,000 new jobs in February, down from January’s 215,000 but a bit better than the average of the last six months and market forecast of a 170,000 increase, figure had been revised upward from the initial estimate by 23,000 jobs to 215,000.
The British pound weakened against the dollar on Wednesday as investor also remained cautious ahead of the Bank of England’s monthly policy-setting meeting on Thursday, amid speculation over whether the central bank will resume its asset purchase program. Cable edged lower from Asian morning high of 1.5156 and then accelerated intra-day fall in tandem with euro during early European session, dropped to 1.5064 before staging a recovery to 1.5105, cable later extended losses to 1.5016 in New York afternoon.
Versus the Japanese yen, dollar rebounded after finding support at 93.00 in Asian morning n ratcheted higher in European session due to firmness in greenback versus other European currencies, later, cross-selling of yen further pushed the pair in New York afternoon n usd/jpy penetrated Monday’s high at 93.73 to a fresh 1-week high of 94.11.
In other commodity currency, the Canadian dollar fell against the U.S. dollar after the Bank of Canada announced to keep overnight interest rate unchanged at 1.00% and said in the following statement that rates likely to stay on hold ‘for a period of time’. Usd/cad rose from 1.0255 to a session high of 1.0337, near last Friday’s 8-month peak at 1.0343.
Fed’s Beige Book said on Wednesday that ‘US economy activity expanded at either a modest or moderate pace in January and early February; consumer spending expanded in most of its 12 districts, car sales strong or solid, tourism up; residential real estate market strengthened in nearly all districts, home prices up amid falling inventories; for services was generally positive, notably for technology and logistics firms, but transportation mixed; manufacturing improved modestly in most districts, several saw strong demand for auto, food and construction industries; overall loan demand stable or sightly higher in nearly all districts, competition stiffer for qualified borrowers; price pressures remained modest in January to early February period, despite increases for certain raw materials; even with some rising input costs, most district Fed contacts did not plan to increase selling prices; majority of its 12 districts reported modest improvements in labor market conditions, wage pressures mute.’
[B]Data to be released on Thursday includes: [/B]
Australia Trade balance, Japan BOJ rate decision, Leading indicators, Swiss Unemployment rate, France unemployment rate, trade balance, Italy PPI, Germany factory orders, U.K. BOE rate decision, BoE asset purchase target, ECB rate decision, U.S. trade balance, Jobless claims and building permit.