Market Review - 24/09/2014 22:38GMT
Euro falls to fresh 14-month low after weak German business confidence and Draghi's dovish comments
Despite euro's brief bounce to 1.2868 in European morning on Wednesday, the single currency ratcheted lower after weak Ifo German business confidence and ECB President Draghi's dovish remarks. Euro penetrated Mon's low at 1.2816 to a fresh 14-month trough at 1.2774 in New York morning due to dollar's broad-based strength on the rally in U.S. stocks before trading sideways.
Ifo economist Wohlrabe said 'expects to see a weak Q3 in Germany; expects economy to stagnate in Q3; still expects German GDP growth around 1.5% in 2014; reduced export expectations and weaker capital goods weighed on business sentiment.'
Reuters news reported European Central Bank chief Mario Draghi said on Wednesday that euro zone monetary policy would remain accommodative for a long period and that the goal was to push ultra-low inflation back up closer to the two percent level.
"Monetary policy will remain accommodating for a long time and I can tell you that the (ECB) Governing Council is unanimous in committing itself to using the tools at its disposal to bring inflation back to just under two percent," Draghi said in an interview on French Europe 1 radio.
Although the greenback briefly dropped to 108.46 ahead of Tokyo open on Wednesday due to Japanese Prime Minister Shinzo Abe reportedly voiced concern about the economic impact of the currency's recent weakness, the greenback rebounded to 108.78 in Asia on the recovery in Japanese Nikkei-225 index. U.S. dollar later ratcheted higher to 109.15 against the the Japanese yen near New York close.
Cleveland Federal Reserve President Loretta Mester said she thinks the Fed should overhaul how it communicates its policy guidance, perhaps tying its statements about monetary policy to forecasts about economic performance. Mester said as the Fed ends its crisis-era policies it should also move away from the type of qualitative forward guidance it has used in recent years to statements that are more directly tied to economic projections. Mester said "I would like to see the forward guidance evolve over time to give more information about the conditions we systematically assess in calibrating the stance of policy to the economy's actual progress and anticipated progress." Mester repeated an earlier critique that she felt it was time for the Fed to drop as a key standing phrase that it would be a "considerable time," once a Fed bond buying program ends this fall, before interest rates are increased.
Chicago Federal Reserve Bank President Charles Evans said at a Peterson Institute conference on labor market slack that 'the U.S. Federal Reserve should be "exceptionally patient" in removing monetary policy accommodation, even if doing so means allowing inflation to modestly overshoot the central bank's 2 percent goal.'
The British pound moved sideways in Asia on Wednesday and then briefly bounced to 1.6414 in Europe, however, selling interest below Tuesday's high at 1.6416 knocked price lower to 1.6327 in New York morning due to renewed dollar's strength elsewhere before trading narrowly later in the day.
Thursday will see the release of U.K. CBI distributive trades, U.S. building permits, durable goods and Markit services PMI.
Euro falls to fresh 14-month low after weak German business confidence and Draghi's dovish comments
Despite euro's brief bounce to 1.2868 in European morning on Wednesday, the single currency ratcheted lower after weak Ifo German business confidence and ECB President Draghi's dovish remarks. Euro penetrated Mon's low at 1.2816 to a fresh 14-month trough at 1.2774 in New York morning due to dollar's broad-based strength on the rally in U.S. stocks before trading sideways.
Ifo economist Wohlrabe said 'expects to see a weak Q3 in Germany; expects economy to stagnate in Q3; still expects German GDP growth around 1.5% in 2014; reduced export expectations and weaker capital goods weighed on business sentiment.'
Reuters news reported European Central Bank chief Mario Draghi said on Wednesday that euro zone monetary policy would remain accommodative for a long period and that the goal was to push ultra-low inflation back up closer to the two percent level.
"Monetary policy will remain accommodating for a long time and I can tell you that the (ECB) Governing Council is unanimous in committing itself to using the tools at its disposal to bring inflation back to just under two percent," Draghi said in an interview on French Europe 1 radio.
Although the greenback briefly dropped to 108.46 ahead of Tokyo open on Wednesday due to Japanese Prime Minister Shinzo Abe reportedly voiced concern about the economic impact of the currency's recent weakness, the greenback rebounded to 108.78 in Asia on the recovery in Japanese Nikkei-225 index. U.S. dollar later ratcheted higher to 109.15 against the the Japanese yen near New York close.
Cleveland Federal Reserve President Loretta Mester said she thinks the Fed should overhaul how it communicates its policy guidance, perhaps tying its statements about monetary policy to forecasts about economic performance. Mester said as the Fed ends its crisis-era policies it should also move away from the type of qualitative forward guidance it has used in recent years to statements that are more directly tied to economic projections. Mester said "I would like to see the forward guidance evolve over time to give more information about the conditions we systematically assess in calibrating the stance of policy to the economy's actual progress and anticipated progress." Mester repeated an earlier critique that she felt it was time for the Fed to drop as a key standing phrase that it would be a "considerable time," once a Fed bond buying program ends this fall, before interest rates are increased.
Chicago Federal Reserve Bank President Charles Evans said at a Peterson Institute conference on labor market slack that 'the U.S. Federal Reserve should be "exceptionally patient" in removing monetary policy accommodation, even if doing so means allowing inflation to modestly overshoot the central bank's 2 percent goal.'
The British pound moved sideways in Asia on Wednesday and then briefly bounced to 1.6414 in Europe, however, selling interest below Tuesday's high at 1.6416 knocked price lower to 1.6327 in New York morning due to renewed dollar's strength elsewhere before trading narrowly later in the day.
Thursday will see the release of U.K. CBI distributive trades, U.S. building permits, durable goods and Markit services PMI.
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