News Column

Yen continue rally; euro and pound swing ahead of rate decisions

February 5, 2014

The euro weakened against the U.S. dollar in Europe on Wednesday, steadying near a 10-week low against the yen as data showed retail sales in the region slumped in December, and ahead of the European Central Bank`s governing council policy meeting tomorrow. Data released earlier in the session showed demand for retail goods fell sharply, adding to the risk of deflation for the currency bloc. The seasonally adjusted volume of retail trade dropped 1.6% in the euro area and fell 1.0 percent on annual basis. Euro-area's services and manufacturing sectors showed signs of recovery, where data firm Markit said its composite Purchasing Managers Index for the Eurozone rose to 52.9 in January from 52.1 in December--signaling the most rapid expansion since June 2011 . The European Central Bank's Governing Council is expected to face a tough call at its interest rate meeting tomorrow, pressured from financial markets and governments to take fresh actions to steer the Eurozone away from excessively low inflation and prolonged stagnation, following last week showed inflation was well below the ECB`s target of a little bit less than 2%. The EURUSD pair was last seen trading up at $1.35304 after starting the session at $1.35160 . The EURJPY pair was little changed, trading at 136.784 after falling to a session low of 136.538. Pound declined against the dollar during the session, pushing the GBPUSD pair to trade at $1.62640 down from an opening of $1.62702 . The pair so far recorded an intraday high of $1.62812 and low at $1.62620 . The Bank of England (BoE) will also take central stage tomorrow as it releases it interest rate decision, amid questions about its forward guidance following the surprisingly rapid improvement in the UK's labor market. The yen advanced on Wednesday, reaching multi-month highs over the euro and the dollar as stock markets struggled and confidence remained brittle in emerging markets, leaving investors seeking for traditional safe-haven assets such bonds and the Japanese yen. Dollar dropped sharply versus the Japanese yen, where the USDJPY pair was last trading down at 101.069 based on the four-hour chart, after opening at 101.173. The pair so far hit a session low of 101.057. Stabilizing below key support level of 100.744 is a negative sign for the pair as it will probably see strong move to the downside. Across the atlantics, investors will be awaiting the U.S. jobs data on private hiring (ADP) and ISM services sector survey. A report from the ADP Research Institute today may show U.S. companies added 185 thousand jobs in January after creating 238 thousand the previous month ahead of the most anticipated Non-farm payrolls report due on Friday.

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Source: Financial Markets

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