Market Review - 28/05/2013 22:27GMT

Dollar rallies as U.S. consumer confidence hits 5 year high

The greenback rallied against major currencies on Tuesday after data showed U.S. consumer confidence reached its highest level since 2008, increasing speculation that the Federal Reserve will slow its bond buying program.

U.S. consumer confidence index came in at 76.2, vastly higher than the economists' forecast of 71.0, previous reading was revised to 69.0.

Although the single currency met selling pressure at Asian open and fell sharply to 1.2884/85 in Asian morning, price rebounded to 1.2930 ahead of European open. Euro briefly retreated to 1.2893 in early European morning before rising to session high at 1.2950 ahead of New York open on cross-buying of euro vs yen.

However, price tumbled to 1.2853 in New York morning on dollar's broad-based strength after the release of better-than-expected U.S. consumer confidence before staging a recovery to 1.2880 in New york afternoon and then fell to a marginal low at 1.2850 near New York close.

Versus the Japanese yen, the greenback found a wave of buying in Tokyo morning and rose to 102.06 in Asian morning as Japanese stocks pared recent losses and closed the day higher. Price edged higher to 102.30 in European morning before gaining to an intra-day high at 102.51 in New York morning on dollar's strength before retreating to 101.86 in New York afternoon.

The British pound tracked euro's intra-day movement and dropped to 1.5064 in Asian morning before rebounding to 1.5115 ahead of European open and then gaining to session high at 1.5135 ahead of New York open. Cable pared intra-day gains and tanked to 1.5033 on dollar's strength before staging a brief recovery to 1.5072, however, renewed selling there pushed the pair back down to a marginal low at 1.5027 near New York close.

In other news, German Chancellor Angela Merkel said 'single labor market is major EU task; EU labor market will take long time.' Japan PM Shinzo Abe said 'ending deflation is top priority.'

On the data front, U.S. CaseShiller 20 home price index in Mar came in at 1.1% m/m n 10.9% y/y, higher than expectation of 1.0% n 10.2% respectively. French consumer confidence in May came in at 79, lower than the expectation of 85.

Data to be released on Wednesday :

Japan retail sales, Australia Westpac leading economic index, Swiss UBS consumption indicator, Germany unemployment rate, CPI, HICP, U.K. CBI distributive trades, U.S. redbook retail sales and Canada BoC rate decision.