Euro recovers from 11-year low versus U.S. dollar on short-covering: Jan 26, 2015

Market Review - 23/01/2015 19:00GMT 
 
Euro recovers from 11-year low versus U.S. dollar on short-covering

The single currency recovered from a fresh 11-year trough against the U.S. dollar on Friday as investors decided to take profit ahead of Greek election on Sunday. Market focus shifted to the upcoming election of Greece on January 25 as ECB's president Mario Draghi said on Thursday that Greece will be ineligible for the ECB's 1.1 trillion-euro ($1.3 trillion) program until at least July because of limits on how much debt the central bank buys from a single issuer.

During the day, although euro followed the selloff in previous day on Friday due to ECB's massive bond purchase program and tumbled from Australia's high of 1.1373 to a fresh 11-year trough at 1.1115 versus the greenback ahead of New York open, short-covering emerged above 1.1100 level and later lifted price to 1.1289 in New York morning. Euro then chopped inside 1.1233-1.1289 and was last seen around 1.1220 near New York closing.

Versus the Japanese yen, U.S. dollar ratcheted lower after a brief rise to 118.82 ahead of Asian open on Friday due to active cross-buying in yen versus other currencies. Price dropped to 118.10 in Europe and then tanked to an intra-day low of 117.56 in New York morning after release of disappointing U.S. economic reports before moving sideways.

On the data front, Financial data firm Markit said its preliminary U.S. Manufacturing PMI fell to 53.7 in January. Market had expected the reading to be 54.0 compared to 53.9 in December. In a separate report, the National Association of Realtors said that home sales in U.S. rose to 5.04 million units, from 4.92 million units in the preceding month whose figure was revised down from 4.93 million units. Economists had expected the U.S. existing home sales to rise to 5.06 million units.

Cable edged lower after meeting renewed selling interest at 1.5027 in Australia and price then fell in tandem with euro to a fresh 17-month low of 1.4952 ahead of New York open. In New York session, price rebounded on renewed broad-based weakness in greenback due to disappointing U.S. data and rose to fresh intra-day high of 1.5036 before retreating to 1.4999.

Reuters reported comments from an ECB official on Friday, who declined to be named, 'another extension to Greek bailout may need to be considered, need to have government in place; extension will need to be more than a few weeks, no discussions underway as yet; Eurozone remains ready to discuss Greece's financing needs, not concerned by situation; debt relief discussions for Greece cud be undertaken under certain conditions; there will be no glitch with Greece whatever outcome of Sunday's election; debt relief discussions for Greece cud be undertaken under certain conditions.'

In other news, Angela Merkel, the Chancellor of Germany, said on Friday 'ECB decision is independent n that's why we don't comment on that; the Italy reaction to the ECB decision pleases her, praises that reforms in Italy will be decisively continued; after ECB decision we need to move out of the way everything that hinders growth; the reform drive everywhere, n not only in Italy, can't be braked by the ECB decision; won't comment on Greek election, will talk about the future path after the vote.'

Data to be released this week:

Australia market holiday. Japan's Trade Balance, Exports, Imports, BoJ meeting minutes, Germany's Ifo Business Climate, Ifo Current Conditions, Ifo Expectations, Eurogroup meeting, U.K.'s BBA Mortgage Approvals, euro zone's Retail Sales on Monday. 

Australia's NAB Business Conditions, NAB Business Confidence, China's CB leading economic index, France's Business Climate, EU FinMin meeting, U.K.'s GDP, U.S.'s Durable goods orders, Redbook, Markit Service PMI, New Home Sales, Consumer Confidence on Tuesday.

Australia's CPI, RBA Trimmed Mean CPI, Switzerland UBS Consumption indicator, Germany's Gfk Consumer Sentiment, Import Price index, France's Consumer Confidence, FOMC rate decision and monetary policy statement, RBNZ rate decision on Wednesday.

New Zealand's Trade Balance, Exports, Imports, Japan's Retail Sales, Australia's Exports, Imports, France's Consumer Spending, Germany's Unemployment rate, unemployment change, CPI, HICP, Italy's Wage Inflation, euro zone's Business Climate, Consumer Inflation Expectation, Consumer Confidence, Economic Sentiment, Industrial Sentiment, Italy's Consumer Confidence, U.K.'s CBI Distributive Trades, U.S.'s Pending home sales on Thursday.

Japan's Unemployment Rate, All Household Spending, CPI, Industrial output, Construction orders, Housing Starts, Australia's PPI, France's Producer Prices, KOF indicator, Italy's Unemployment Rate, Producer Prices, U.K.'s Gfk Consumer Confidence, Mortgage Approvals, euro zone's Unemployment Rate, Inflation ex Food & Energy, Canada's GDP, U.S. PCE, Chicago PMI, University of Michigan Sentiment on Friday.