Dollar recoups earlier losses after higher-than-expected U.S. inflation data: Mar 25, 2015

Market Review - 24/03/2015 22:59GMT 
 
Dollar recoups earlier losses after higher-than-expected U.S. inflation data

U.S. dollar rebounded broadly on Tuesday after Federal Reserve policymaker James Bullard said that zero percent interest rates were no longing appropriate in the United States. Bullard also said that a rate hike in the summer would still leave policy extremely accommodative.

Fed's Bullard said 'was an important move to remove word patient from policy guidance, will give FOMC more optionality; will decide on next move on a meeting by meeting basis, based on data; unemployment near long run average in view of Fed; expect growth to rebound in U.S. in second quarter; think U.S. will finish the year at plus 3% in GDP terms, that is a relative boom; unemployment to go below 5% by Q3 this year; impact of higher dollar badly over-emphasised as role in low inflation, oil much more significant; could be a potentially violent reconciliation in markets if Fed rate moves do not dovetail with market expectations; Fed and market expectations should be better aligned than they are; Europe's negative bond yields are somewhat surprising, we are all trying to understand; hope by time to hike rates, it should have been so well flagged that response the event is anti-climatic.'

The single currency found renewed buying at 1.0904 in Asia on Tuesday and then rose to an intra-day high at 1.1029 in New York morning, however, euro subsequently fell to 1.0890/91 on dollar's rebound elsewhere together with renewed concerns over Greek debt problem as German Chancellor Angela Merkel did not reveal details from her meetings with Greek Prime Minister Alexis Tsipras, but she did tell members of her conservative party at a closed-door meeting in parliament on Tuesday that Greece needs to work with the European Central Bank, the International Monetary Fund and the European Commission to unlock the cash injection it needs. Reuters also reported that European central bank has asked Greek banks not to raise exposure to Greek government debt.

Eurogroup spokesman said 'Eurogroup head Dijsselbloem asks eurozone bailout fund to analyse possibility of refunding 1.2 billion euros to Greece.' German Greens party co-leader says Greek PM made clear in meeting that he wants to avoid third bailout.

In other news, Greek government spokesman said on Tuesday that Greece will present its proposed package of reforms to its euro zone partners by next Monday in hopes they will release much needed cash.

The British pound swung wildly on Tuesday after the release of U.K. inflation data. The annual rate of U.K. consumer price inflation dropped to 0.0%, from 0.3% in January. The Office for National Statistics said keeping a rate rise by the Bank of England firmly off the table for now. Despite cable's brief drop to 1.4895 after the release of lower-than-expected U.K. CPI, the pair rebounded to 1.4984 in New York morning in tandem of intra-day strength in euro before tumbling to 1.4843 near New York close.

Wednesday will see the release of New Zealand's exports, imports and trade balance, Germany's Ifo business climate, U.S. durable goods and SNB quarterly bulletin.