On Wednesday, the single currency has under pressure after rallied to 1.4049 earlier this week as European Central Bank Governing Council member Erkki Liikanen suggested that further interest rate cut cannot be ruled out along with the tumble in U.S. 10-year Treasury note, driving its yield up to 3.66% from 3.55%. Investors concern about the rising yields on Treasury debt will slow down the recent recovery.
In the New York morning, euro traded as low as 1.3890 before rebounding to 1.3997 as U.S. existing home sales came in 4.68M with forecast 4.66M and exiting home sales M/M posting 2.9% versus consensus 2.0%. However, the market’s focus was on the house price index M/M in March was –1.1% compared with the expectation of 0.2% and the house price index Y/Y was –7.3%. The single currency retreated from there to 1.3870 against the dollar as the data suggesting the burst U.S. housing bubble has yet to bottom gave support to the greenback as safe-heaven currency.
On the other hand, the dollar fell against the sterling on the back of investors are speculating the worst of U.K economy and financial sector have possibly ended, increasing the demand of the British pound. Earlier in Asian session, cable has retreated briefly to intra-day low of 1.5927 from 1.5982 as traders booked profits. However, cross buying in sterling has lifted the price to as high as 1.6087 in New York afternoon, for the first time above 1.6000 level against the US currency in about seven months before retreat due to the selloff in U.S Treasury and stock markets. Eur/gbp hit multi month low at 0.8654 while gbp/jpy rose to fresh high for 2009 at 153.08. DJI off 173 points or –2.05%, NASDAQ dropped 19.35 point or –1.11% and S&P 500 down 17.27 points or 1.90%.
Economic data releases on Thursday include Japan retail sales, Switzerland trade balance, German unemployment rate, Eurozone business climate, economic sentiment, U.K. CBI distribution trade, U.S. Durable goods orders, jobless claims, new home sales and Midwest manufacturing data.