[B]Market Review - 06/02/2013 [I]18:56GMT[/I][/B]
[B]Euro tanks ahead of ECB meeting[/B]
The single currency fell sharply on Wednesday as investors were cautious ahead of the European Central Bank meeting on Thursday as ECB President Mario Draghi may raise concerns about the high level of euro currency.
Although the single currency rose briefly to 1.3597 in Asian morning, selling interest below Tuesday’s high at 1.3598 capped euro’s upside and price fell sharply to 1.3513 in Europe and then 1.3493 in New York morning due to the selloff in eur/jpy but then staged a recovery to 1.3544 before retreating again.
Ahead of New York open, the single currency was supported due to the news that German government spokesman said ‘euro is not overvalued at moment if look at long trend; sensible for financial markets to determine exchange rates; cannot achieve long-term competitiveness via exchange rates.’
The British pound traded narrowly compared to other currencies. The pair moved sideways in Asia and dropped briefly to 1.5631 in European morning, however, failure to penetrate Tuesday’s low at 1.5630 triggered short-covering and price rebounded to 1.5678 in Europe due to cross buying of sterling versus euro before trading sideways in New York session.
Versus the Japanese yen, although the greenback rose to a fresh 33-month high at 94.06 in Asian morning due partly to the comments from Bank of Japan board member Takehiro Sato, cross buying of yen versus other currencies pressured the pair in Europe and price dropped to a low of 93.30 in New York morning but then recovered to 93.69 in U.S. afternoon before falling again to 93.28.
BoJ’s Sato said ‘want to keep focusing on channel in which monetary policy can indirectly affect forex rates; had some doubts against calls for BoJ to buy more risky assets; achieving 2% inflation just by weakening yen is unrealistic; 2% inflation cannot be achieved just by enhancing ongoing government, BoJ policy initiatives.’
On the data front, Germany factor orders in Dec came in at -0.8% m/m and -1.8% y/y, versus the forecasts of 0.7% m/m and-1.2% y/y and the previous readings at -1.8% m/m and -1.0% y/y.
In other news, OECD said ‘further expansion of QE by BoE warranted if U.K. economy stays weak; appropriate, flexibility needed if growth weaker than expected; U.K. inflationary risks are low, given slack in the economy n slow wage growth.’
[B]Data to be released on Thursday:[/B]
New Zealand Unemployment rate, Employment change, Japan Machinery orders, Australia NAB business confidence, Employment change, Unemployment rate, Japan Leading indicators, France trade balance, U.K. Industrial prod’n, Manufacturing prod’n, Trade balance, BOE rate decision, BOE QE total, Germany Industrial prod’n, ECB rate decision, U.S. Jobless claims, Canada New housing price index, Building permits.