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Market Review - 27/02/2009 22:48 GMT
Dollar rises versus euro on weak U.S. GDP data and concerns over the financial sector
The greenback strengthened against a basket of currencies on Friday as traders bought the dollar as a safe-haven currency following the release of U.S. GDP data which showed that the economy contracted at an annualised pace of 6.2% in the fourth quarter of 2008 (compared to the consensus forecast of a 5.4% contraction). The ICE Dollar index, which measures the dollar versus six currencies, rose to its highest level in almost 3 years.
Worries over the U.S. financial sector increased after the U.S. Government announced that it would hold up to 36% of Citigroup's common shares (by converting $25 billion of preferred shares). Financial stocks led the decline in U.S. equities with the Dow ending the day down 119 points while the S&P 500 index slid to a 12-year low.
The euro weakened to 1.2603 against the dollar following the U.S. GDP report before rebounding to 1.2737 on short-covering, however, the late fall in the Dow put pressure on the single currency and euro ended the week at 1.2669. The Swiss franc also declined versus the greenback to an intra-day low of 1.1764 before recovering to close at 1.1703.
The Japanese yen was able to bounce on Friday after holding above a 3 & 1/2 month low of against the greenback and a 7-week low versus the euro due to month-end repatriation of the Japanese currency. Usd/jpy and eur/jpy ended the week at 97.60 and 123.65 respectively after trading as high as 98.72 and 126.09 on Thursday. Sterling rebounded from its post-GDP report low of 1.4110 to 1.4365 on short-covering and also cross buying in a relatively thin market, with eur/gbp falling to 0.8851 from its intra-day high of 0.8945. Gbp/jpy dipped to as low as 136.75 before bouncing to end the day around 139.70.
Data to be released on Monday include German, eurozone and U.K. manufacturing PMI, U.S. PCE index, personal income and spending, ISM (manufacturing) and construction spending. Australia and Canada's central banks will announce their interest rate decisions on Tuesday and are likely to cut rates by 25 and 50 basis points to 3.00% and 0.50% respectively. The ECB and BOE are expected to lower rates by 50 basis points to 1.50% and 0.50% respectively on Thursday. The closely-watched U.S. non-farm payrolls report is due out on Friday, with economists forecasting a decline of about 648,000 jobs in February and a rise in the unemployment rate from 7.6% to 7.9%.
Dollar rises versus euro on weak U.S. GDP data and concerns over the financial sector
The greenback strengthened against a basket of currencies on Friday as traders bought the dollar as a safe-haven currency following the release of U.S. GDP data which showed that the economy contracted at an annualised pace of 6.2% in the fourth quarter of 2008 (compared to the consensus forecast of a 5.4% contraction). The ICE Dollar index, which measures the dollar versus six currencies, rose to its highest level in almost 3 years.
Worries over the U.S. financial sector increased after the U.S. Government announced that it would hold up to 36% of Citigroup's common shares (by converting $25 billion of preferred shares). Financial stocks led the decline in U.S. equities with the Dow ending the day down 119 points while the S&P 500 index slid to a 12-year low.
The euro weakened to 1.2603 against the dollar following the U.S. GDP report before rebounding to 1.2737 on short-covering, however, the late fall in the Dow put pressure on the single currency and euro ended the week at 1.2669. The Swiss franc also declined versus the greenback to an intra-day low of 1.1764 before recovering to close at 1.1703.
The Japanese yen was able to bounce on Friday after holding above a 3 & 1/2 month low of against the greenback and a 7-week low versus the euro due to month-end repatriation of the Japanese currency. Usd/jpy and eur/jpy ended the week at 97.60 and 123.65 respectively after trading as high as 98.72 and 126.09 on Thursday. Sterling rebounded from its post-GDP report low of 1.4110 to 1.4365 on short-covering and also cross buying in a relatively thin market, with eur/gbp falling to 0.8851 from its intra-day high of 0.8945. Gbp/jpy dipped to as low as 136.75 before bouncing to end the day around 139.70.
Data to be released on Monday include German, eurozone and U.K. manufacturing PMI, U.S. PCE index, personal income and spending, ISM (manufacturing) and construction spending. Australia and Canada's central banks will announce their interest rate decisions on Tuesday and are likely to cut rates by 25 and 50 basis points to 3.00% and 0.50% respectively. The ECB and BOE are expected to lower rates by 50 basis points to 1.50% and 0.50% respectively on Thursday. The closely-watched U.S. non-farm payrolls report is due out on Friday, with economists forecasting a decline of about 648,000 jobs in February and a rise in the unemployment rate from 7.6% to 7.9%.
