Market Review - 30/11/2015 22:29GMT
Euro briefly falls to fresh 7-month lows before recovering
The single currency fell to fresh seven-month lows versus the greenback on Monday as investors remained cautious ahead of the European Central Bank's policy meeting later this week.
During the day, euro retreat after meeting renewed selling at 1.0595 in Australia and then dropped to 1.0571 in Asia before investors pushing price marginally higher to 1.0596 in European morning, however, selling interest there knocked price down again to 1.0564, then to a fresh 7-month trough at 1.0558 in New York morning before stabilising.
The Germany's Federal Statistics Office said on Monday that retail sales inched down 0.4 on the month in real terms in October after stagnating the previous month. Meanwhile, retail sales climbed by 2.1 percent on a year, down from previous reading of a gain of 3.7 percent and also missed the consensus forecast for a 2.9 percent rise. Separately, Germany's Federal Statistical Office said that German CPI rose to a seasonally adjusted 0.1% in November, from 0.0% in the preceding month.
Versus the Japanese yen, the greenback strengthened on Monday as talk of a U.S. rate hike boosted the U.S. dollar. The pair found support at 122.69 in Asia and ratcheted higher to 123.15 in European morning, then higher to 123.34 in New York morning before retreating.
In other news, Bank of Japan governor Haruhiko Kuroda said on Monday, 'BoJ has ability, strong determination to achieve 2 percent inflation at earliest date possible; Japan economic fundamentals are strong; corporate and household sectors have improved a lot compared to a few years ago; going slow in trying to achieve 2 PCT inflation will only make wage adjustment gradual; China, other emerging markets clearly slowing, which is weighing on Japan export; BoJ must be first one to act to dispel deflationary mindset, which is why it has promoted QQE; Japan's price trend improving steadily; July-Sept GDP shows Japan's final demand is growing; companies have maintained bullish Capex plans; price trend improving not just because of weak yen but because more firms are raising prices of their goods amid improving job conditions; inflation to reach 2 PCT around latter half of fiscal 2016; Japan is close to complete employment; tight labour market is pushing up wages; there is uncertainly on outlook for China's economy and how much any pickup in its growth could help other East Asian economies; don't see big risk of weakness in exports, output hurting corporate revenues, Capex.' He later added, 'expect Japan to grow above its potential heading into next fiscal year; excluding energy, Japan's price trend is steadily improving; must be mindful of risk uncertainly surrounding emerging economies could hurt Japan business confidence; BoJ won't hesitate acting if needed to achieve 2 PCT inflation at earliest date possible; Japan's economy continues to recover gradually but must watch for risks, such as developments in emerging economies; weak yen is pushing up import prices, but price gain are spreading to broad range of goods; expect to meet 2PCT price target in 2ND half of FY 2016, but timing depends on oil prices; environment for wage hikes to occur is already well established; Japan's economy has increased resilience to external shocks; once 2 percent inflation prevails, firms that continue to base their investment, hiring, and price-setting decisions on deflationary mindset will be at a disadvantage.'
The British pound erased its early losses versus the U.S. dollar and turn higher from a fresh 5-month trough in New York session. During the day, although cable rebounded after falling to 1.5015 in Asia, renewed selling interest knocked price lower to a fresh 5-month trough at 1.4994 in European morning before active cross-buying in sterling versus other major currencies lifted price to 1.5067 in New York morning.
On the data front, Reuters news reported on Monday that contracts to buy previously owned U.S. homes rose far less than expected in October, the latest sign that the housing market recovery was losing momentum after strong gains early this year.
The National Association of Realtors said on Monday its pending home sales index edged up 0.2 percent to 107.7. While the increase ended two straight months of declines, it was far below economists' expectations for a 1.0 percent rebound. Pending home contracts become sales after a month or two, and last month's small gain suggested home resales will probably not bounce back after falling 3.4 percent in October.
Separately, industrial data earlier showed manufacturing activity in the Chicago-area contracted unexpectedly in November. Market research group Kingsbury International said its Chicago purchasing managers’ index tumbled by 7.5 points to a seasonally adjusted 48.7 this month from a reading of 56.2 in October. Market had expected the index to fall 2.2 points to 54.0 in November.
Another piece of news on Monday worth mentioning. IMF executive board Lagarde said 'agrees to include China's Renminbi in benchmark SDR currency basket; including yuan in basket is an important milestone in integrating China into global financial system; move recognizes China's progress on reforms; deepening of reform effort will make international monetary and financial system more robust; China's journey will continue, include more reforms; IMF will continue to monitor SDR criteria, compliance by all five currencies' authorities; will not go into details of weighting of yuan in basket; China's Reminbi to have weighting of 10.92 percent in IMF's benchmark SDR currency basket; new SDR weightings will be 41.73% for the U.S. dollar; 30.93% for euro; 8.33% for the Japanese yen; and 8.09% for the pound sterling.'
Data to be released on Tuesday:
New Zealand terms of trade, Australia manufacturing index, building approvals, private house approvals, current account, net export, Japan business Capex, mfg PMI, China manufacturing PMI, non-manufacturing PMI, Swiss GDP, retail sales, manufacturing PMI, Italy manufacturing PMI, unemployment rate, GDP, France manufacturing PMI, Germany manufacturing PMI, unemployment rate, EU unemployment rate, manufacturing PMI, U.K. manufacturing PMI, Canada GDP, manufacturing PMI, U.S. Redbook, ISM-manufacturing PMI, construction spending, services revenues and service sector outlook
Euro briefly falls to fresh 7-month lows before recovering
The single currency fell to fresh seven-month lows versus the greenback on Monday as investors remained cautious ahead of the European Central Bank's policy meeting later this week.
During the day, euro retreat after meeting renewed selling at 1.0595 in Australia and then dropped to 1.0571 in Asia before investors pushing price marginally higher to 1.0596 in European morning, however, selling interest there knocked price down again to 1.0564, then to a fresh 7-month trough at 1.0558 in New York morning before stabilising.
The Germany's Federal Statistics Office said on Monday that retail sales inched down 0.4 on the month in real terms in October after stagnating the previous month. Meanwhile, retail sales climbed by 2.1 percent on a year, down from previous reading of a gain of 3.7 percent and also missed the consensus forecast for a 2.9 percent rise. Separately, Germany's Federal Statistical Office said that German CPI rose to a seasonally adjusted 0.1% in November, from 0.0% in the preceding month.
Versus the Japanese yen, the greenback strengthened on Monday as talk of a U.S. rate hike boosted the U.S. dollar. The pair found support at 122.69 in Asia and ratcheted higher to 123.15 in European morning, then higher to 123.34 in New York morning before retreating.
In other news, Bank of Japan governor Haruhiko Kuroda said on Monday, 'BoJ has ability, strong determination to achieve 2 percent inflation at earliest date possible; Japan economic fundamentals are strong; corporate and household sectors have improved a lot compared to a few years ago; going slow in trying to achieve 2 PCT inflation will only make wage adjustment gradual; China, other emerging markets clearly slowing, which is weighing on Japan export; BoJ must be first one to act to dispel deflationary mindset, which is why it has promoted QQE; Japan's price trend improving steadily; July-Sept GDP shows Japan's final demand is growing; companies have maintained bullish Capex plans; price trend improving not just because of weak yen but because more firms are raising prices of their goods amid improving job conditions; inflation to reach 2 PCT around latter half of fiscal 2016; Japan is close to complete employment; tight labour market is pushing up wages; there is uncertainly on outlook for China's economy and how much any pickup in its growth could help other East Asian economies; don't see big risk of weakness in exports, output hurting corporate revenues, Capex.' He later added, 'expect Japan to grow above its potential heading into next fiscal year; excluding energy, Japan's price trend is steadily improving; must be mindful of risk uncertainly surrounding emerging economies could hurt Japan business confidence; BoJ won't hesitate acting if needed to achieve 2 PCT inflation at earliest date possible; Japan's economy continues to recover gradually but must watch for risks, such as developments in emerging economies; weak yen is pushing up import prices, but price gain are spreading to broad range of goods; expect to meet 2PCT price target in 2ND half of FY 2016, but timing depends on oil prices; environment for wage hikes to occur is already well established; Japan's economy has increased resilience to external shocks; once 2 percent inflation prevails, firms that continue to base their investment, hiring, and price-setting decisions on deflationary mindset will be at a disadvantage.'
The British pound erased its early losses versus the U.S. dollar and turn higher from a fresh 5-month trough in New York session. During the day, although cable rebounded after falling to 1.5015 in Asia, renewed selling interest knocked price lower to a fresh 5-month trough at 1.4994 in European morning before active cross-buying in sterling versus other major currencies lifted price to 1.5067 in New York morning.
On the data front, Reuters news reported on Monday that contracts to buy previously owned U.S. homes rose far less than expected in October, the latest sign that the housing market recovery was losing momentum after strong gains early this year.
The National Association of Realtors said on Monday its pending home sales index edged up 0.2 percent to 107.7. While the increase ended two straight months of declines, it was far below economists' expectations for a 1.0 percent rebound. Pending home contracts become sales after a month or two, and last month's small gain suggested home resales will probably not bounce back after falling 3.4 percent in October.
Separately, industrial data earlier showed manufacturing activity in the Chicago-area contracted unexpectedly in November. Market research group Kingsbury International said its Chicago purchasing managers’ index tumbled by 7.5 points to a seasonally adjusted 48.7 this month from a reading of 56.2 in October. Market had expected the index to fall 2.2 points to 54.0 in November.
Another piece of news on Monday worth mentioning. IMF executive board Lagarde said 'agrees to include China's Renminbi in benchmark SDR currency basket; including yuan in basket is an important milestone in integrating China into global financial system; move recognizes China's progress on reforms; deepening of reform effort will make international monetary and financial system more robust; China's journey will continue, include more reforms; IMF will continue to monitor SDR criteria, compliance by all five currencies' authorities; will not go into details of weighting of yuan in basket; China's Reminbi to have weighting of 10.92 percent in IMF's benchmark SDR currency basket; new SDR weightings will be 41.73% for the U.S. dollar; 30.93% for euro; 8.33% for the Japanese yen; and 8.09% for the pound sterling.'
Data to be released on Tuesday:
New Zealand terms of trade, Australia manufacturing index, building approvals, private house approvals, current account, net export, Japan business Capex, mfg PMI, China manufacturing PMI, non-manufacturing PMI, Swiss GDP, retail sales, manufacturing PMI, Italy manufacturing PMI, unemployment rate, GDP, France manufacturing PMI, Germany manufacturing PMI, unemployment rate, EU unemployment rate, manufacturing PMI, U.K. manufacturing PMI, Canada GDP, manufacturing PMI, U.S. Redbook, ISM-manufacturing PMI, construction spending, services revenues and service sector outlook
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