Euro falls to fresh 6-1/2 month lows after weekend's Paris terror attacks: Nov 17, 2015

Market Review - 16/11/2015 22:55GMT 
 
Euro falls to fresh 6-1/2 month lows after weekend's Paris terror attacks

Euro remained lower against other major currencies on Monday as terrorist attacks in Paris late in last Friday hit risk sentiment.

During the day, the single currency tanked below 1.0700 ahead of Asian open on Monday and then fell to a low of 1.0687, however, renewed cross-selling in yen led by intra-day rally in usd/jpy pair lifted price to 1.0758 in Europe before retreating. Euro later retreated to 1.0701 and then a fresh session low of 1.0674 in New York trading.

On the data front, Eurostat said on Monday that euro zone CPI rose to a seasonally adjusted annual rate of 0.1%, from 0.0% in the preceding month. Market had expected Euro zone CPI to remain unchanged at 0.0% last month. Meanwhile, data from Eurostat showed euro zone CPI dropped 0.1% month-over-month in October, from 0.2% in the preceding month.

In other news, ECB Vice President Vitor Constancio said on Monday, 'low inflation rates reflect sluggish recovery; to bring inflation rates closer to objective, main policy rates will stay low for long period of time; no signs of general overvaluations in Euro area; concerns about emerging markets signal downside risks to inflation; further monetary policy options are available if needed; monetary policy will continue to be accomodative; aim that by 2017 will be closer to inflation target; events in Paris terrible; compounds all the problems we were already facing; forthcoming events after Paris attack may impact confidence, risk aversion.'

Later in the day, ECB Executive Board member Benoit Coeure said 'we are closing following the consequences of our exceptional monetary policy on financial stability; we do not see major signs that financial assets are overvalued, however we see bubbles here and there.'

ECB Governing Council member Ewald Nowotny said, 'everything I have heard about Greek bailout talks is that it is going in the right direction; we are finding a solution between EU and IMF on long-term debt sustainability in Greece; we are finding ways to relieve Greek debt burden; we have the problem that we could get into a Japan-style situation of low growth, inflation and interest rate; we need effective demand.'

Versus the Japanese yen, although dollar opened lower in New Zealand due to broad-based buying of yen for risk aversion and briefly fell to 122.21, buying interest in the greenback versus other major currencies checked intra-day losses there and the pair later rose to 122.61, then higher to 123.28 in New York trading.

The British pound tracked euro's intra-day swing closely on Monday. Cable fell from New Zealand high of 1.5237 (Reuters) to 1.5207 in Asia before edging back to 1.5228 in European morning. Later, the pair ratcheted lower on renewed cross-selling in sterling versus euro and tanked to a fresh session low of 1.5182 before moving sideways for rest of the day.

The Federal Reserve Bank of New York showed on Monday that its general business conditions index improved to -10.7 in November, from a reading of -11.4 in October. It had been contracted for a fourth straight month in November and below market's expectations of a recovery to -6.0.

Data to be released on Tuesday:

Australia RBA meeting minutes, New Zealand inflation expectation, Italy trade balance, U.K. CPI, PPI, RPI, DCLG house price, Germany ZEW reports, euro zone ZEW economic sentiment, U.S. CPI, Redbook, weekly real earnings, capacity utilization, industrial output and NAHB housing market index, net L-T Flows, net capital flows.