Market Review - 01/12/2015 22:29GMT
Dollar falls on long liquidation after downbeat U.S. ISM manufacturing PMI
The greenback weakened against the other major currencies on Tuesday, after data showed that U.S. manufacturing activity entered contraction territory last month, however, losses were limited as hopes for a December rate hike by the Federal Reserve continued to support the greenback.
Versus the Japanese yen, although U.S. dollar fell sharply from 123.28 to 122.64 in Asian morning on Tuesday as market were jittery after data showed that China's manufacturing PMI ticked down to 49.6 last month from 49.8 in October, renewed buying quickly emerged there n later lifted price to 123.19 in Europe, then marginally to 123.20 in New York morinng before retreating below 123.00 level to 122.80 following the release of downbeat U.S. ISM manufacturing PMI.
The Institute for Supply Management said its index of national factory activity fell to 48.6, the first time the index has been below 50 since November 2012, after reading 50.1 in October. Market had expected the reading to gain slightly to 50.5.
The single currency gained versus the greenback on Tuesday as the release of upbeat economic reports from the euro zone and Germany eased investors' concerns ahead of the European Central Bank's upcoming policy meeting on Thursday. During the day, the pair ratcheted higher after finding support at 1.0562 ahead of Asian open and then rose to 1.0637 in New York morning before retreating to 1.0602 in part due to cross-selling in euro versus the Japanese yen.
On the data front, Markit said its German manufacturing PMI rose to 52.9 in November from 52.6 the previous month, while its manufacturing PMI for euro zone last month was holding steady at 52.8. Separately, official data data showed that the number of unemployed people in Germany declined by 13.000 last month, compared to expectations for a 5.000 drop. Later, Eurostat reported that the euro zone’s unemployment rate fell to 10.7% in October from 10.8% a month earlier, which was the lowest rate recorded in the euro area since January 2012.
Elsewhere, the British pound erased most of its gains versus the U.S. dollar after market research group Markit showed that manufacturing activity in the U.K. expanded at a slower rate than expected in November. Cable ratcheted higher from 1.5052 shortly after Asian open and rose to 1.5136 in European morning before retreating to 1.5060, then a fresh session low of 1.5051 in New York morning.
Market research group Markit said that its U.K. manufacturing PMI fell to a seasonally adjusted 52.7 last month from a revised reading of 55.2 in October. Analysts had expected the index to decline to 53.6 in November.
In other news, The Reserve Bank of Australia (RBA), as expected, kept its benchmark cash rate at a record low 2% on Tuesday, but again said inflation levels offer scope for further easing if needed. RBA said in the post-rate decision statemen, 'room for further policy easing if needed; A$ adjusting to declines in commodity prices; inflation is low and should remain so; judged economic outlook had firmed a little; policy needs to be accommodative; inflation should remain low; low rates supporting borrowing and spending; information suggest moderate expansion economy continues.'
Federal Reserve Bank of Chicago's Charles Evans said, 'number of important downside risks to inflation outlook; FOMC must "strongly and effectively" communicate gradual pace of rate hikes after initial increase; repeats appropriate to raise target interest rate "very gradually"; could well be appropriate for funds rate to still be under 1 percent by end of 2016; expects core inflation just below 2 percent at end of 2018; his estimate of GDP growth through mid-2017 at upper end of FOMC's 2-1/4 to 2-1/2 percent range; still some additional resource slack in labor market, but sees it diminishing over time; sees longer-run normal unemployment rate at 4.9 percent.' He later added, 'global economy facing low-inflation challenges; Fed has to admit certainty about a lot of things in economy is not as good as it should be; IMF inclusion of yuan in SDR basket reflects China's economic strength; U.S. has long-term fiscal issues.'
Data to be released on Wednesday:
Australia GDP, U.K. construction PMI, EU inflation, producer prices, Canada rate decision, U.S. ADP national employment, labour cost, productivity, ISM-New York Index, Beige book.
Dollar falls on long liquidation after downbeat U.S. ISM manufacturing PMI
The greenback weakened against the other major currencies on Tuesday, after data showed that U.S. manufacturing activity entered contraction territory last month, however, losses were limited as hopes for a December rate hike by the Federal Reserve continued to support the greenback.
Versus the Japanese yen, although U.S. dollar fell sharply from 123.28 to 122.64 in Asian morning on Tuesday as market were jittery after data showed that China's manufacturing PMI ticked down to 49.6 last month from 49.8 in October, renewed buying quickly emerged there n later lifted price to 123.19 in Europe, then marginally to 123.20 in New York morinng before retreating below 123.00 level to 122.80 following the release of downbeat U.S. ISM manufacturing PMI.
The Institute for Supply Management said its index of national factory activity fell to 48.6, the first time the index has been below 50 since November 2012, after reading 50.1 in October. Market had expected the reading to gain slightly to 50.5.
The single currency gained versus the greenback on Tuesday as the release of upbeat economic reports from the euro zone and Germany eased investors' concerns ahead of the European Central Bank's upcoming policy meeting on Thursday. During the day, the pair ratcheted higher after finding support at 1.0562 ahead of Asian open and then rose to 1.0637 in New York morning before retreating to 1.0602 in part due to cross-selling in euro versus the Japanese yen.
On the data front, Markit said its German manufacturing PMI rose to 52.9 in November from 52.6 the previous month, while its manufacturing PMI for euro zone last month was holding steady at 52.8. Separately, official data data showed that the number of unemployed people in Germany declined by 13.000 last month, compared to expectations for a 5.000 drop. Later, Eurostat reported that the euro zone’s unemployment rate fell to 10.7% in October from 10.8% a month earlier, which was the lowest rate recorded in the euro area since January 2012.
Elsewhere, the British pound erased most of its gains versus the U.S. dollar after market research group Markit showed that manufacturing activity in the U.K. expanded at a slower rate than expected in November. Cable ratcheted higher from 1.5052 shortly after Asian open and rose to 1.5136 in European morning before retreating to 1.5060, then a fresh session low of 1.5051 in New York morning.
Market research group Markit said that its U.K. manufacturing PMI fell to a seasonally adjusted 52.7 last month from a revised reading of 55.2 in October. Analysts had expected the index to decline to 53.6 in November.
In other news, The Reserve Bank of Australia (RBA), as expected, kept its benchmark cash rate at a record low 2% on Tuesday, but again said inflation levels offer scope for further easing if needed. RBA said in the post-rate decision statemen, 'room for further policy easing if needed; A$ adjusting to declines in commodity prices; inflation is low and should remain so; judged economic outlook had firmed a little; policy needs to be accommodative; inflation should remain low; low rates supporting borrowing and spending; information suggest moderate expansion economy continues.'
Federal Reserve Bank of Chicago's Charles Evans said, 'number of important downside risks to inflation outlook; FOMC must "strongly and effectively" communicate gradual pace of rate hikes after initial increase; repeats appropriate to raise target interest rate "very gradually"; could well be appropriate for funds rate to still be under 1 percent by end of 2016; expects core inflation just below 2 percent at end of 2018; his estimate of GDP growth through mid-2017 at upper end of FOMC's 2-1/4 to 2-1/2 percent range; still some additional resource slack in labor market, but sees it diminishing over time; sees longer-run normal unemployment rate at 4.9 percent.' He later added, 'global economy facing low-inflation challenges; Fed has to admit certainty about a lot of things in economy is not as good as it should be; IMF inclusion of yuan in SDR basket reflects China's economic strength; U.S. has long-term fiscal issues.'
Data to be released on Wednesday:
Australia GDP, U.K. construction PMI, EU inflation, producer prices, Canada rate decision, U.S. ADP national employment, labour cost, productivity, ISM-New York Index, Beige book.
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