Wednesday, October 20, 2010
Previous session overview
The euro rose against the dollar and yen Wednesday in Asia as China's unexpected interest rate hike failed to suppress Shanghai share prices, somewhat easing concerns over its impact on China's growth and the outlook for the global economy.
The People's Bank of China said that it will raise benchmark deposit and lending rates by 0.25 percentage point. The move prompted investors to speculate that this could blow down global economic growth, which in turn would forestall a tightening of rates by the European Central Bank.
However, the news failed to dent optimism in China's stock markets. The benchmark SSE Composite Index ended the morning session 0.65% higher at 3,021.42. With gains in the shares, investors bought back the euros they had sold earlier in Asia, pushing the common currency higher.
As of 0450 GMT, the euro was at USD1.3775 and JPY112.12, from USD1.3700 and JPY111.70 in Sydney Wednesday.
The greenback, meanwhile, was at JPY81.39 from JPY81.42 in Sydney.
The British pound extended losses following the unexpected rise in US housing starts in September that hit a five month high. Domestically, the results from the latest survey released by the Confederation of British Industry CBI, for UK's manufacturing had the lowest total order balance since April of -17 and the lowest export balance since February at -5.
The Australian dollar was lower late in Asia on Wednesday after China's move to tighten policy hurt commodity currencies on worries of slower growth in Asia, which would hit demand for Australian exports such as coal or iron ore.
Market expectation
Investors are now looking at whether China will hike its rates again in the near term, and analysts offered divided opinions on the prospects for such a move.
Some think China's move was largely a political gesture ahead of this weekend's meeting of finance ministers from the Group of 20 nations, in which case this increase is likely to be the last.
Others, though, believe the PBOC's surprise move was a signal that the nation's prices are raising sharply, which would force the central bank to take further steps to stem inflation.
EURCHF remains trapped in a range between support at 1.3268 and resistance at 1.3453, according to technical analysts. The pair is sidelined between the 55-day moving average.
European stock markets are expected to stabilize Wednesday as sentiment recovers after the negative reaction to China's surprise rate hike Tuesday, although resource stocks are expected to remain under pressure on demand concerns following the policy-tightening measure.
Most important events of the day
| Oct 20 | Count. | Event | For | Unit | Imp. | Act. | Cons. | Prev. |
|---|---|---|---|---|---|---|---|---|
| 00:00 |  AU | DEWR Skilled Vacancies | Oct | % m/m |  | 0.1 | ||
| 00:00 |  US | Federal Reserve Governor Duke speaks at New York University Money Marketeers Club | | |||||
| 00:00 |  EU | ECB Executive Board member Stark concludes ECB conference on "Central Bank Statistics- What did the financial crisis change?" | | |||||
| 00:00 |  JP | BoJ Deputy Governor Nishimura speaks to business leaders in Hiroshima, followed by a press conference | | |||||
| 05:00 | JP | Leading indicator (Final) | Aug | index | | 99.1 | ||
| 06:00 |  DE | PPI | Sep | % m/m |  | 0.2 | ||
| 06:00 | DE | PPI | Sep | % y/y | | 3.8 | 3.2 | |
| 06:30 | EU | ECB Vice President Constancio gives speech at the ECB Statistics Conference in Frankfurt | | |||||
| 07:30 |  NL | Consumer Confidence | Oct | index | | -16 | -14 | |
| 08:00 |  IT | Industrial Orders (nsa) | Aug | % y/y | | 10.4 | 0.7 | |
| 08:00 | IT | Industrial Orders (sa) | Aug | % m/m | | 3.5 | -3 | |
| 08:00 | IT | Non EU Trade balance | Sep | EUR bn | | -2.162 | ||
| 08:00 | EU | IMF Regional Economic Outlook for Europe | | |||||
| 08:30 |  GB | BoE release minutes of prior (6th& 7th October) MPC meeting | | |||||
| 08:30 | GB | Public Borrowing (PSNB ex interventions) | Sep | GBP bn | | 14.3 | 15.3 | |
| 08:30 | GB | M4 Money Supply (Prelim) | Sep | % m/m | | 0.3 | -0.1 | |
| 08:30 | GB | M4 Money Supply (Prelim) | Sep | % y/y | | 1.5 | 1.9 | |
| 12:30 |  CA | Wholesale Sales | Aug | % m/m | | 0.5 | -0.1 | |
| 14:30 | CA | BoC release Monetary Policy Report, followed by a press conference by Governor Carney | | |||||
| 16:45 | US | Federal Reserve Bank of Philadelphia President Plosser gives speech on "Incentives and Regulation" | | |||||
| 18:00 | US | Fed release Beige Book | | |||||
| 20:00 | US | Federal Reserve Bank of Richmond President Lacker gives speech on the US Economic Outlook at an "Economics Made Easy" seminar | | |||||
| 21:45 |  NZ | External Migration | Sep | net people (sa) | | 840 | ||
| 23:30 | AU | RBA Bulletin | |
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