RESEARCH VIA FOREX REPORT FOR 25 JUNE 2014

MARKET HEADLINES

Euro, pound tread water before German Ifo, Carney testimony
The euro and the pound traded steady on Tuesday before testimony from Bank of England chief Mark Carney and a German sentiment survey that could highlight the monetary policy divergence between the euro zone and Britain. Investors also looked ahead to an economic policy update from Japan later in the day. In Europe, the German Ifo survey at 0800 GMT is likely to provide signs of how companies in
the euro zone's largest economy are responding to recent easing measures by the European Central Bank. Its business climate index is forecast to show a reading of 110.2 in June, down from 110.4 in May while the expectations index is forecast to dip to 105.9 from 106.2. On Monday, German PMI data fell short of expectations, suggesting the economy could be losing momentum. Further evidence of that would be likely to keep pressure on the ECB to ease policy even further in the coming months. "There is a downside risk to the Ifo expectations survey but we will need a reading of 104 and below to see the euro drop sharply," said Jeremy Stretch, head of currency strategy at CIBC World Markets. The euro was flat on the day at $1.3605, having traded on either side of $1.3600 in the past few sessions.
Against the yen, the common currency stood at 138.75, while the dollar fetched 102 yen.

Rupee recovers 12 paise against US dollar
Moving in line with equity market, the rupee today recovered by 12 paise to 60.08 against the American currency in early trade on fresh selling of dollars by banks and exporters due to weaker greenback overseas. The rupee resumed higher at 60.13 per dollar as against the last closing level of 60.20 at the Interbank Foreign Exchange market, and hovered in a range of 60.07 and 60.18 per dollar before quoting at 60.08 at 1000 hours. Renewed selling of dollars by banks and exporters in view of sharp recovery in the equity market mainly boosted the rupee, a forex dealer said. Meanwhile, the benchmark Sensex recovered sharply by 265.05 points, or 1.06 per cent, to 25,296.37 at 1000 hours. In New York, the US dollar fell against the Australian dollar yesterday after a better-than-expected reading on Chinese manufacturing showed a return to expansion. The Chinese manufacturing sector swung into growth territory in June, with the "flash" version of HSBC's China manufacturing purchasing managers index jumping to 50.8 from 49.4 in May. That's the first time since December that the HSBI PMI reading was above 50, which divides contraction and expansion.

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