Market Review - 07/05/2009 21:27 GMT
Euro rises to one-month high versus the dollar after ECB's less aggressive liquidity-boosting measures
The European Central bank cut interest rates by 25 basis points to a record low at 1 percent on Thursday and said it would buy up to 60 billion euros worth of covered bank bonds in a bid to stem the eurozone’s economic decline. The single currency rose after the announcement as market participants said the European Central Bank’s decision was not as aggressive as those taken by other countries, touching a one-month high of 1.3471 against the dollar in New York morning before retreating ahead of the U.S. banks stress tests results.
On the other hand, the Bank of England kept rates at record low of 0.5 percent on Thursday and said it would extend its quantitative easing program by committing more money (50 billion pounds) to its U.K. asset buying scheme. This surprised traders and sterling fell from a 4-month high of 1.5198 to as low as 1.4992 against the dollar and from 150.89 to 148.10 versus the Japanese yen before stabilising.
In other currencies, New Zealand dollar rose to as high as 0.5992 against the greenback after an economic report showed jobless rate in the first quarter increased to a six-year-high of 5 percent, however, this was lower than economists’ forecast of 5.2 percent. The Australian dollar also strengthened versus the U.S. currency and rallied to 0.7616 after a surprise drop in the unemployment rate to 5.4 percent in April from 5.7 percent in the previous month.
On the data front, economic reports from German showed manufacturing orders unexpectedly increased for the first time in seven months by 3.3 percent in March from a 1 percent decline in February, while separate reports from the U.S. showed the number of initial jobless claims decreased by 34,000 to the lowest level in three months at 601,000 and worker productivity rose at a 0.8 percent annual rate in the first quarter, more than the consensus forecast of 0.6 percent and compared to a 0.6 percent decline in the fourth quarter.
Later in the day, the U.S. banks stress test results were in line with the market’s expectation and showed none of the 19 U.S. banks being examined was facing insolvency but some of the larger institutions (Citigroup and Bank of America) needed to raise more capital.
On Friday, economic data releases include Japan BOJ minutes, Switzerland’s jobless rate, German trade balance and industrial production, U.K. PPI, Canada jobs-change, unemployment rate and housing starts. U.S. will release closely-watched non-farm payrolls, unemployment rate, average hourly earnings and wholesale inventories.
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