Market Review - 19/05/2015 22:47GMT
Euro tumbles on ECB officials' dovish comments and strong U.S. housing starts
The single currency fell sharply on Tuesday on the dovish comments from ECB's Benoit Coeure who said that the central bank intends to increase its purchases of euro-area assets in May and June ahead of an expected low-liquidity period in the summer.
Euro nose-dived from 1.13 level to 1.1160 in European morning after the abovementioned 'dovish' commments from ECB's Benoit Coeure before staging a brief recovery to 1.1217. The single currency weakened further to 1.1118 in New York after the release of upbeat U.S. economic data. U.S. building permits and housing starts rose by 10.1% to 1.143 millions and 20.2% to 1.135 millions in April respectively.
Coeure said in a closed-door speech delivered on Monday and published on Tuesday that the ECB, which is buying 60 billion euros ($67.3 billion) of assets per month as part of its quantitative easing programme, will "slightly" increase purchases in May and June due to low market liquidity in July and August, but these adjustments are unrelated to the bond market volatility, Coeure said 'rapidity of recent bond market selloff is worrisome; to frontload asset purchases in May and Jun due to low market liquidity in July and August; may also backload asset purchases in September; frontloading QE unrelated to recent market volatility; not desirable to remove the 0 lower bound in euro area at the currency juncture.'
ECB's Noyer said 'recent indicators suggest that QE has had a positive effect on inflation expectations; U.S. experience shows re-anchoring inflation expectations takes time; ECB ready to go further if necessary to deliver on mandate of maintaining inflation close to but below 2%.' European Central Bank Governing Council member Ewald Nowotny said the danger of deflation in Europe had receded and made it clear that interest rates in the euro zone were set to stay low for some time, noting conditions were not ripe for a change in monetary policy.
Despite dollar's brief retreat to 119.83 in European morning on Tuesday, the greenback rallied above previous daily resistance at 120.27 and 120.51 to as high as 120.73 in New York due to dollar's broad-based strength after the release of stronger-than-expected U.S. building permits and housing starts data.
The British pound tumbled from 1.5669 to 1.5529 in European morning after the release of UK annual inflation reading which fell below zero percent for the 1st time since the 1960s. Cable dropped further to 1.5447 in New York on dollar's broad-based strength after the release of upbeat U.S. economic data.
Wednesday will see the release of Japan's GDP, Australia's Westpac consumer confidence, Germany's producer prices, ECB's meeting, U.K. MPC vote outcome, Swiss ZEW investor sentiment, Canada's wholesales trade and FOMC minutes.
Euro tumbles on ECB officials' dovish comments and strong U.S. housing starts
The single currency fell sharply on Tuesday on the dovish comments from ECB's Benoit Coeure who said that the central bank intends to increase its purchases of euro-area assets in May and June ahead of an expected low-liquidity period in the summer.
Euro nose-dived from 1.13 level to 1.1160 in European morning after the abovementioned 'dovish' commments from ECB's Benoit Coeure before staging a brief recovery to 1.1217. The single currency weakened further to 1.1118 in New York after the release of upbeat U.S. economic data. U.S. building permits and housing starts rose by 10.1% to 1.143 millions and 20.2% to 1.135 millions in April respectively.
Coeure said in a closed-door speech delivered on Monday and published on Tuesday that the ECB, which is buying 60 billion euros ($67.3 billion) of assets per month as part of its quantitative easing programme, will "slightly" increase purchases in May and June due to low market liquidity in July and August, but these adjustments are unrelated to the bond market volatility, Coeure said 'rapidity of recent bond market selloff is worrisome; to frontload asset purchases in May and Jun due to low market liquidity in July and August; may also backload asset purchases in September; frontloading QE unrelated to recent market volatility; not desirable to remove the 0 lower bound in euro area at the currency juncture.'
ECB's Noyer said 'recent indicators suggest that QE has had a positive effect on inflation expectations; U.S. experience shows re-anchoring inflation expectations takes time; ECB ready to go further if necessary to deliver on mandate of maintaining inflation close to but below 2%.' European Central Bank Governing Council member Ewald Nowotny said the danger of deflation in Europe had receded and made it clear that interest rates in the euro zone were set to stay low for some time, noting conditions were not ripe for a change in monetary policy.
Despite dollar's brief retreat to 119.83 in European morning on Tuesday, the greenback rallied above previous daily resistance at 120.27 and 120.51 to as high as 120.73 in New York due to dollar's broad-based strength after the release of stronger-than-expected U.S. building permits and housing starts data.
The British pound tumbled from 1.5669 to 1.5529 in European morning after the release of UK annual inflation reading which fell below zero percent for the 1st time since the 1960s. Cable dropped further to 1.5447 in New York on dollar's broad-based strength after the release of upbeat U.S. economic data.
Wednesday will see the release of Japan's GDP, Australia's Westpac consumer confidence, Germany's producer prices, ECB's meeting, U.K. MPC vote outcome, Swiss ZEW investor sentiment, Canada's wholesales trade and FOMC minutes.
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