The yen jumped in NZ/Australia trading session in reaction to comments made by U.K.'s FSA chairman Adair Turner who said at the World Economic Forum in Davos the so-called carry trades were 'economically valueless'. The dollar weakened sharply but briefly to 89.76 low against the yen before profit-taking set in and lifted the pair. Later, although PBOC's adviser Ba Shusong commented that 'China may raise interest rates ahead of U.S. Fed' to dampen inflationary expectations in China, no impact was found on the Japanese yen. Instead, the greenback rebounded to as high as 90.94 after the release of much better-than-expected U.S. ISM manufacturing PMI which came in at 58.4 in January, compared to economists' forecast of 55.5. However, U.S. construction spending in December decreased by 1.2% against the consensus expectation of 0.5% drop.
Cable extended last week's decline in European morning due to the robust U.S. Q4 GDP and cross selling in sterling. Although the British pound rebounded after the release of much higher-than-expected U.K. CIPS manufacturing PMI data which was 56.7 in January versus economists' anticipation of 54.0 and well above 54.6 in December, the pair dropped to intra-day low at 1.5850 on active cross selling in sterling (eur/gbp rallied from 0.8683 to 0.8769). Nevertheless, the British pound rebounded on short-covering.
Euro remained under pressure in Asian morning on strong U.S. Q4 GDP and after-market report by CFTC on Friday which showed futures traders had built up shorts to the highest level in more than a year. As Greek/German 10-year gov. bond yield spread narrowed 20 basis points to 350 basis points together with German and eurozone manufacturing PMI both rose to 53.7 and 52.4 in January from 52.7 as well as 51.6 in December respectively, the single currency rebounded from intra-day 7-month low of 1.3852 (Asia) on short-covering in European morning. The pair picked up more upward momentum on the stronger-than-anticipated U.S. ISM manufacturing data.
Data to be released on Tuesday include Australia NAB business confidence, RBA rate decision, Germany retail sales, U.K. PMI construction, EU PPI and U.S. pending home sales.