Market Review - 01/07/2014 22:58 GMT
Dollar weakens versus yen and sterling after disappointing U.S. ISM manufacturing report
The greenback traded mixed against the other major currencies on Tuesday, little changed against euro but weakened versus yen and sterling after the release of disappointing U.S. manufacturing data and as expectations that the Federal Reserve will leave interest rates on hold for longer continued to weigh on the greenback.
Versus the Japanese yen, despite dollar's initial muted reaction to release of the BoJ's Tankan survey ahead of Asian open on Tuesday, short term speculation sold yen broadly shortly after Tokyo open as intra-day rebound in the Nikkei following last week's selloff boosted risk sentiment. The subsequent release of fairly upbeat official manufacturing PMI in Japan prompted further broad-based selling in yen and dollar ratcheted higher to 101.53. Later, price dipped to 101.39 and then rose to a fresh session high of 101.59 in European midday before easing to 101.45 in New York morning due to release of disappointing U.S. ISM manufacturing report.
The Institute for Supply Management said its index of purchasing managers fell to 55.3 last month from a reading of 55.4 in May. Market had expected the manufacturing PMI to increase to 55.8 in June.
Although the single currency found support at 1.3679 in European morning and then moved sideways as investors showed muted reaction after the release of a slew of mixed economic reports from euro zone and its member countries, price staged a brief bounce above Monday's 5-week high of 1.3697 to 1.3700 in New York morning after release of worse-than-expected U.S. ISM manufacturing report. Later, lack of follow through buying prompted profit-taking and price retreated to 1.3676 before moving sideways for rest of the session.
Official data showed that the unemployment rate in the euro remained unchanged at 11.6% in May, confounding expectations for an uptick to 11.7%. In Germany, the number of unemployed people rose by 9,000 in May, disappointing expectations for a 10,000 decline. The number of unemployed people for April was revised to an increase of 25,000 from a previously estimated rise of 24,000. Earlier, Markit's euro zone manufacturing purchasing managers' index dipped to a 7-month low of 51.8, down from 52.2 in May. Growth in the German factory sector slowed to an 8-month low of 52.0, while the French manufacturing PMI fell to a six-month low of 48.2 but higher than the expectation of 47.9.
Cable traded sideways in Asia and in early Europe as focus was on other major currencies, however, price rebounded after finding support at 1.7096 and then jumped above Monday's fresh 5-1/2 year peak at 1.7115 as data showed that growth in the U.K.'s manufacturing sector accelerated more quickly than expected in June. Later, cable ratcheted higher to 1.7162 in New York morning on disappointing U.S. ISM manufacturing PMI and then further to a high of 1.7167 in New York afternoon before easing.
Markit said on Tuesday that the U.K. manufacturing purchasing managers' index rose to 57.5 last month, up from 57.0 in May. Market had expected the index to tick down to 56.8.
In other news, the Reserve Bank of Australia (RBA) kept its key rates unchanged at 2.50% on Tuesday as widely expected. In the following statement, RBA said 'prudent to have period of stability for interest rates; A$ high by historical standards; A$ offering less assistance than it might in balancing growth; sees smaller increases in resource exports in coming quarters; sees moderate growth in consumer demand; strong expansion in housing construction underway; inflation to remain within target over next two years; some sign of moderation in house prices; sees subdued government spending.'
Data to be release of Wednesday:
Australia exports, imports, trade balance, U,K. Nationwide house price, Markit/CIPS construction PMI, euro zone GDP, producer prices, U.S. ADP employment, durable goods revised, factory orders, Canada manufacturing PMI on Wednesday.
Dollar weakens versus yen and sterling after disappointing U.S. ISM manufacturing report
The greenback traded mixed against the other major currencies on Tuesday, little changed against euro but weakened versus yen and sterling after the release of disappointing U.S. manufacturing data and as expectations that the Federal Reserve will leave interest rates on hold for longer continued to weigh on the greenback.
Versus the Japanese yen, despite dollar's initial muted reaction to release of the BoJ's Tankan survey ahead of Asian open on Tuesday, short term speculation sold yen broadly shortly after Tokyo open as intra-day rebound in the Nikkei following last week's selloff boosted risk sentiment. The subsequent release of fairly upbeat official manufacturing PMI in Japan prompted further broad-based selling in yen and dollar ratcheted higher to 101.53. Later, price dipped to 101.39 and then rose to a fresh session high of 101.59 in European midday before easing to 101.45 in New York morning due to release of disappointing U.S. ISM manufacturing report.
The Institute for Supply Management said its index of purchasing managers fell to 55.3 last month from a reading of 55.4 in May. Market had expected the manufacturing PMI to increase to 55.8 in June.
Although the single currency found support at 1.3679 in European morning and then moved sideways as investors showed muted reaction after the release of a slew of mixed economic reports from euro zone and its member countries, price staged a brief bounce above Monday's 5-week high of 1.3697 to 1.3700 in New York morning after release of worse-than-expected U.S. ISM manufacturing report. Later, lack of follow through buying prompted profit-taking and price retreated to 1.3676 before moving sideways for rest of the session.
Official data showed that the unemployment rate in the euro remained unchanged at 11.6% in May, confounding expectations for an uptick to 11.7%. In Germany, the number of unemployed people rose by 9,000 in May, disappointing expectations for a 10,000 decline. The number of unemployed people for April was revised to an increase of 25,000 from a previously estimated rise of 24,000. Earlier, Markit's euro zone manufacturing purchasing managers' index dipped to a 7-month low of 51.8, down from 52.2 in May. Growth in the German factory sector slowed to an 8-month low of 52.0, while the French manufacturing PMI fell to a six-month low of 48.2 but higher than the expectation of 47.9.
Cable traded sideways in Asia and in early Europe as focus was on other major currencies, however, price rebounded after finding support at 1.7096 and then jumped above Monday's fresh 5-1/2 year peak at 1.7115 as data showed that growth in the U.K.'s manufacturing sector accelerated more quickly than expected in June. Later, cable ratcheted higher to 1.7162 in New York morning on disappointing U.S. ISM manufacturing PMI and then further to a high of 1.7167 in New York afternoon before easing.
Markit said on Tuesday that the U.K. manufacturing purchasing managers' index rose to 57.5 last month, up from 57.0 in May. Market had expected the index to tick down to 56.8.
In other news, the Reserve Bank of Australia (RBA) kept its key rates unchanged at 2.50% on Tuesday as widely expected. In the following statement, RBA said 'prudent to have period of stability for interest rates; A$ high by historical standards; A$ offering less assistance than it might in balancing growth; sees smaller increases in resource exports in coming quarters; sees moderate growth in consumer demand; strong expansion in housing construction underway; inflation to remain within target over next two years; some sign of moderation in house prices; sees subdued government spending.'
Data to be release of Wednesday:
Australia exports, imports, trade balance, U,K. Nationwide house price, Markit/CIPS construction PMI, euro zone GDP, producer prices, U.S. ADP employment, durable goods revised, factory orders, Canada manufacturing PMI on Wednesday.
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