After trading sideways in Asia as markets was evaluating the pledge by EU to offer a rescue plan for Greece, euro fell against the greenback and Japanese yen in European opening after the release of Germany's worse-than-expected GDP, the data was unchanged on a quarter basis from the previous reading of 0.7% q/q rise versus the consensus forecast of 0.2% q/q increase. The single currency suddenly dropped sharply near European mid-day on news of PBOC's surprise increase of banks' reserve requirement by 50 basis points (2nd time this year) together with the release of much weaker-than-expected eurozone industrial production and GDP, euro tumbled to a fresh 2010 low of 1.3532. EU industrial production dropped by 1.7 m/m and 5.0% y/y respectively versus the expectation of 0.2% m/m and -1.5% y/y. EU GDP came in at 0.1% q/q and -2.1% y/y, compared to economists' forecast of 0.3% m/m and -1.9% y/y. However, the pair later ratcehetd higher on short-covering and weaker-than-anticipated University of Michigan confidence survey (73.7 versus forecast of 75.0) as well as business inventories (-0.2% compared to anticipation of 0.2%).
Versus the Japanese yen, although the greenback briefly fell fm early intra-day high of 90.35 to 89.60 on news of reserve tightening by China, the pair later climbed to a one-week high of 90.43 high in NY morning as ST speculators unwound their short cross yen positions together with release of U.S. retail sales which rose by 0.5% in January, higher than economists' forecast of 0.3%. The core retail sales also increased by more than expected at 0.6% (consensus forecast was 0.5% rise). However, the greenback retreated to 89.85 on the lower-than-expected U. Michigan confidence and business inventories. The yen also weakend against the the 3 commodity-linked currencies as investors moved back to carry trades after intra-day decline to 0.8786, 0.6900 and 1.0580 in aussie, kiwi and the loonie respectively. Spot gold also staged a strong bounce after intra-day weakness to $1078.20 and closed around $1093.
The British pound briefly rose to intra-day high of 1.5742 in European opening on active cross-inspired buying interest (gbp/jpy strengthened to 141.89 high) due to the news that PM Gordon Brown expected economic growth in Q4 2009 to be revised higher from the 0.1% estimate published last month. Cable retreated from there and fell in tandem with euro to as low as 1.5580 after PBOC raised banks' reserve requirement by 0.5%. The pair later rebounded in NY on weaker-than-expected U. Michigan Confidence and business inventories and ended the day at 1.5695.
The dollar rallied against the Swiss franc to a fresh 2020 high in Europe on active cross-selling of Swiss franc versus euro due to rumors of SNB's intervention. Although the pair retreated from intra-day high of 1.0829, the U.S. currency recovered from 1.0736 to 1.0800 (eur/chf rose from 1.4641 to 1.4705 high) on suspected selling of the Swiss franc again by the SNB in NY mid-day.
Most major Asian centres will be closed on Monday due to Chinese lunar new year holiday and U.S. markets are closed for President Day holiday and Canada is also closed for holiday.
Economic data to be released next week include : Japan GDP, capacity utilisation, industrial production, U.K. rightmove house price, Swiss combined PPI on Monday, Australia RBA's minute, NAB business confidence, U.K. CPI, RPI, DCLG house price, Germany ZEW index, EU ZEW survey, U.S. empire state manufacturing, net LT TIC flows, NAHB housing market index, fed budget on Tuesday, Australia westpac leading economic index, Japan machines tool orders, U.K. Claimant count, unemployment rate, BOE meeting minutes, EU trade balance, U.S. building permits, export price index, import price index, housing starts, capacity utilisation, industrial production, FOMC meeting minutes on Wednesday, Japan BOJ rate decision, NAB business confidence, Japan leading indicators, Swiss trade balance zew index, U.K. PSNCR, CBI industrial trend, Canada CPI, CPI core, U.S. jobless claims, PPI, PPI core, leading indicators, Philadelphia Fed survey on Thursday, Japan BOJ report, Germany PPI, PMI manufacturing, PMI service, EU PMI manufacturing, PMI service, current account, U.K. retail sales, U.S. CPI, CPI core, real earnings, Canada leading indicators and retail sales on Friday.