Thread: Daily FX Market Outlook by AceTrader-1-2-2011

Market Review - 31/01/2011 20:04 GMT

Euro rises on higher-than-expected eurozone inflation data

Euro rose on Monday as higher-than-expected eurozone data fueled speculation that European Central Bank (ECB) may raise its interest rate quicker than the U.S. or other developed economies. In addition, the single currency was also underpinned by the tightened yield spreads between the 10-year eurozone peripheral countries' bonds n German bund on talk of growing support in the eurozone for giving Greece more time to pay back its European Union bailout to avoid default.

Despite extending Friday's decline to 1.3570 in Asian morning on Monday, the euro brushed aside the continued turmoil in Egypt n ratcheted higher, intra-day rise later accelerated after the release of higher-than-expected eurozone CPI, which came in at 2.4% vs previous reading of 2.2% Jan Y/Y, January figure was the highest in 2 years. Later, the single currency rallied to as high as 1.3740 in NY morning b4 retreating on profit-taking.

The British pound also extended Friday's selloff in Asian morning to 1.5821, however, cable then rallied strongly to 1.6050 (10 pips shy of Jan 18 high of 1.6060) on active short-covering as Guardian newspaper quoted Bank of England policymaker Martin Weale saying that he saw a compelling case for an increase in the bank rate. Weale joined hawk Andrew Sentance in calling for a rate hike at January's meeting of the Monetary Policy Committee. The British pound was also supported by cross-buying in sterling vs euro n yen as eur/gbp fell sharply fm 0.8619 to 0.8530 n gbp/jpy rallied fm 129.88 to 131.60.

Versus the Japanese yen, the dollar dropped below Friday's 81.98 low to of 81.77 in NZ trading on renewed cross-buying in yen, lack of follow-through selling swiftly prompted short-covering n the pair then recovered to 82.26 b4 retreating to 81.91 in NY again on dlr's broad-based weakness.

Data to be released on Tuesday:

Australia RBA rate decision, NAB business confidence and house price index, Switzerland retail sales and PMI, German Manufacturing PMI, unemployment rate and unemployment change, eurozone Manufacturing PMI and unemployment, UK Manufacturing PMI and Mortgage approval, and U.S. construction spending and ISM manufacturing.

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Market Review - 01/02/2011 20:20 GMT

The dollar falls as upbeat global manufacturing ISM data boosts risk appetite
The greenback declined against most of its counterparts on Tuesday as the solid global manufacturing ISM data together with rallies in global stock markets bolstered risk appetite, dampening the demand for dollar as a safe-haven asset. Easing fears on Egypt's geopolitical concerns also helped support the higher-yielding currencies. The dollar index, which tracks the greenback against a basket of currencies, fell as low as 77.092, its weakest since early November.

The U.S. manufacturing ISM index unexpectedly increased to 60.8 in January, the fastest pace in nearly seven years in January fm 58.5 in the previous month.

Despite Monday's retreat fm 1.3740 to 1.3664, the euro ratcheted higher to 1.3776 in European morning on Tuesday n price later rallied after the release of U.S. ISM manufacturing data n price later climbed to as high as 1.3843 ahead of NY closing. The euro was also supported by strong economic data fm Germany n eurozone. German unemployment fell to an 18-year low at 7.4% in January, unemployment change showed the number of people out of work dropped to a seasonally adjusted 13k to 3.135 mln, the lowest lvl since November 1992. Both German n eurozone manufacturing PMI in Jan were better-than-expected at 60.5 n 57.3 respectively.

Despite the retreat from Asian high of 1.6080, the British pound then jumped from 1.6035/37 to 1.6143 after the release of much stronger-than-expected U.K. Jan manufacturing PMI, the index came in at 62.0, the highest since survey began in 1992 compared to the previous reading of 58.3 n street forecast of 57.9. Cable later rose further in NY mid-day to an intra-day high of 1.6164 near NY closing.

Versus the Japanese yen, the dollar remained under pressure in Asian n European sessions n despite a brief but sharp bounce to 81.91 after the release of U.S. manufacturing PMI, the pair then tumbled to as low as 81.31 on dlr's broad-based weakness in NY afternoon b4 trading sideways.

Swiss National Bank vice-chairman Thomas Jordan said that Switzerland is well positioned to deal with challenges such as the strong Swiss franc, which is a big burden for the country's exporters. Although the dlr/chf pair bounced briefly but strongly to 0.9457 on reaction to the stronger-than-expected U.S. ISM manufacturing PMI data, dollar later pierced through Monday's 0.9369 low easily n dropped to an intra-day low 0.9337 b4 recovering in NY afternoon.

The Australian dollar, New Zealand dollar n Canadian dollar also strengthened against the dollar on Tuesday, aud/usd rallied fm 0.9963 to 1.0149, nzd/usd rose strongly fm 0.7712 to 0.7824, n usd/cad tumbled fm 1.0010 to 0.9900.

Data to be released on Wednesday:

U.K. BRC shop price index and PMI construction, eurozone PPI data, and U.S. ADP employment on Wednesday.

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Market Review - 04/02/2011 19:49 GMT

Dollar rallies broadly on surprised sharp fall in U.S. unemployment rate

The greenback rallied versus the Japanese yen on Friday as U.S. Treasury yields jumped after the key U.S. jobs report showed U.S. unemployment rate fell sharply in January to 9.0% versus previous month's rate of 9.4%, this was the lowest level since April 2009, painting a brighter picture for the U.S. economy.

Although the pair dropped briefly below Tuesday's 81.31 low to 81.10 immediately after the mixed U.S. jobs report, dollar swiftly rebounded n price later rallied to as high as 82.47 b4 stabilizing in late NY session. The benchmark U.S. 10-year treasury yields rose 11 basis points at 3.655% n 30-year treasury yields went up to a high of 4.74%. Eur/jpy, aud/jpy, gbp/jpy also rallied fm 110.77 to 112.06, 82.61 to 83.51 n 130.83 to 132.75 respectively.

Euro traded steadily after Thursday's selloff fm 1.3826 before key U.S. employment report in Asia on Friday. Although euro jumped to 1.3680 immediately after the much-awaited U.S. Jan jobs report showed nonfarm payrolls added only 36,000 jobs versus forecast of 108,000 due to the cold bad weather, traders quickly sold the single currency when they saw unemployment rate fell sharply from previous 9.4% to 9.0%, euro tanked to 1.3577 and eventually ratcheted lower to an intra-day low of 1.3543 b4 stabilizing.

The British pound moved sideways in Asia n briefly rose to an intra-day high of 1.6173 after stronger-than-expected U.K. house prices data. U.K. house prices unexpectedly rose by 0.8% (forecast was no change) in Jan. but fell by 2.4% (forecast was -3.0%) in the three months to Jan. compared with a year ago. Halifax economist Martin Ellis expected limited movement in house prices overall this year but said there are likely to be some monthly fluctuations with the risk on the downside. Later, despite cable's initial rebound to 1.6152 after the release of mixed U.S. jobs data, the pound also tumbled to 1.6036 in tandem with the single currency b4 recovering in NY mid-day.

Data to be released next week:

Australia retail sales, Japan leading indicator, Germany factory order, Canada building permit on Monday

Japan current account, economic watch DI, Swiss unemployment rate, Canada housing starts on Tuesday

Japan consumer confidence, Germany export/import data n trade balance, U.K. trade balance on Wednesday

Japan domestic CGPI, machine order, Swiss CPI, U.K. industrial production, manufacturing production, BoE rate decision, Canada new housing price, U.S. jobless claims, wholesales inventories, Fed budget on Thursday

Friday will be a holiday in Japan. Germany CPI, U.K PPI, U.S. trade balance n University of Michigan consumer confidence survey, Canada trade balance n export/import data on Friday.

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Market Review - 07/02/2011 20:38 GMT

Euro rebounds from a two-week low on short-covering in New York

The single currency was little changed on Monday as the continued rise in U.S. stocks together with short-covering lifted the euro fm a two-week low in New York afternoon trading.

Although the single currency recovered to 1.3627 at European opening on Monday after Friday's sharp fall to 1.3543, euro then ratcheted lower to 1.3508 in NY morning, however, short-covering lifted the single currency in NY mid-day and extended intra-day rebound to 1.3600 in late NY session after the hawkish remarks fm Yves Mersh. Governing council member Yves Mersh was quoted as saying that the European Central Bank could raise interest rates to contain inflation even before it exited measures to support liquidity in the bloc. Earlier, the euro was pressured by the release of weaker-than-expected German December industrial orders, which came in at a decrease of 3.4% versus street forecast of -1.5% n the previous reading of 5.2%.

In the other news, ECB chief Jean-Claude Trichet said that the European System Risk Board, ESRB, will single out problems bubbling in individual countries if they pose a risk to the wider system.

Despite the British pound's rebound to 1.6186 in European morning after Friday's selloff to 1.6336, cable retreated in tandem with the single currency to 1.6090, however, cross buying in sterling especially versus the euro cushioned the pound's downside n price traded sideways in NY mid-day. Eur/gbp extended recent descent to as low as 0.8389 as the above-target Britain inflation pressures the BoE to raise interest rate this year.

Versus the Japanese yen, the dollar was relatively quiet compared to Friday's rally fm 81.10 to 82.47 as the pair was confined inside intra-day narrow range of 82.16-82.48. Yields on U.S. 10-year notes increased as much as six basis points to 3.69 percent, the highest level since May 4. 30-year T-bond yields rose as much as four basis points to 4.76 percent, the highest since April 12.

Data to be released on Tuesday:
Japan current account, economic watch DI, Swiss unemployment rate, Canada housing starts.

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Market Review - 08/02/2011 20:07 GMT

Euro rises on active cross buying

Euro rose in volatile trading on Tuesday. Although euro ratcheted higher from Asian low of 1.3573 to 1.3667 in European morning, the single currency retreated after the release of much lower-than-expected German industrial production, which came in at -1.5% m/m n 10.00 y/y in December versus the previous readings of -0.7% n 11.1% respectively, however, active cross buying in euro vs Swiss franc (Eur/chf rallied fm 1.2974 to 1.3147) lifted price from around 1.3614 and eur/usd later rose to a high of 1.3689 before retreating again in New York mid-day.

The British pound was under pressure on Tuesday. Cable fell from a high of 1.6163 to as low as 1.6027 on active cross-selling in sterling versus euro (the eur/gbp cross pair rose strongly from 0.8420 to 0.8509), cable then rebounded to 1.6100/05 in tandem with euro in New York mid-day on short-covering. Earlier, the British pound was sold after U.K. raised bank levy. The U.K. government said that it will increase a tax (an extra 800 million pounds) on banks aiming to reduce its fiscal deficit from an estimated 10% of GDP in the year through March to 1.9% five years from now.

Versus the Japanese yen, dollar went through a roller-coaster session on Tuesday, the pair fell to 81.99 ahead of European opening n despite later staging a moderate recovery, the greenback extended intra-day decline to 81.77 in NY morning, however, the sharp rise in U.S. treasury yields together with dollar-positive remarks fm the Fed governors pushed price sharply higher in late NY trading n the pair eventually rose strongly to 82.43 b4 stabilising.

Dennis Lockhart, the president of the Federal Reserve Bank of Atlanta told reporters that 'if the economy stays on the track that his forecast suggests, further QE will not be needed'; 'there wud be a high bar to raise the $600 billion bond buying program'.

In other news, China raised interest rates by 25 basis points. Benchmark one-year deposit rates n one-year lending rates will be lifted by 25 basis points to 3% n 6.06% respectively effective fm Feb. 9.

Data to be released on Wednesday:

Australia W'pac consumer confidence, Japan consumer confidence, Germany export/import data n trade balance, U.K. BRC shop price index, trade balance.

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Market Review - 09/02/2011 20:10 GMT

Euro rises as Fed's Bernanke expects U.S. unemployment rate remains high

Euro rose on Wednesday after Federal Reserve Chairman Ben Bernanke reiterated U.S. unemployment would remain high together with the fall in U.S. Treasury yields.

Although euro retreated after recovering fm Asian low of 1.3613 to 1.3663 n price fell to an intra-day low of 1.3610 in reaction to the news that Bundesbank chief Axel Weber is not a candidate to succeed European Central Bank President Jean-Claude Trichet, the single currency later rebounded strongly in NY morning after Federal Reserve Chairman Ben Bernanke started speaking n euro eventually climbed to as high as 1.3745 in late NY session on dlr's broad-based weakness.

Federal Reserve Chairman Ben Bernanke testified at the House Budget Committee and said U.S. unemployment rate remains too high for policymakers' comfort despite signs of strength in the economic recovery. Bernanke repeated overall inflation 'quite low' n added longer-term inflation expectations have remained stable.

The British pound ratcheted high fm Asian low of 1.6050 to 1.6101 in European morning n although cable retreated to 1.6032 after the release of the biggest deficit on record, price then rebounded strongly to 1.6125 in tandem with the euro in NY morning b4 trading sideways. U.K. global goods trade balance came in at -9.247 bln pounds in December, the biggest deficit on record, against the economists' forecast of -8.60 bln pounds n revised reading of -8.46 bln pound in November. U.K. global non-EU goods trade balance was at -5.82 bln pounds in December, also the biggest deficit on record.

Versus the Japanese yen, the dollar went through another day of choppy trading on Wednesday, price initially ratcheted higher fm Asian low of 82.25 to 82.68 in European morning but selling interest there knocked the usd/jpy pair down n although the greenback rebounded in NY mid-day, the pair then fell to a low of 82.20 in late NY session on dlr's broad-based weakness as U.S. bond yields fell after a solid $24 billion auction of 10-year Treasury notes. Ten-year Treasury note yields were down fm around 3.7% to 3.64%.

Data to be released on Thursday:

Japan domestic CGPI, machine order, Australia unemployment n employment change, Swiss CPI, U.K. industrial production, manufacturing production, BoE rate decision, Canada new housing price, U.S. jobless claims, wholesales inventories, Fed budget.

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Market Review - 10/02/2011 20:14 GMT

Euro tumbles on much lower-than-expected U.S. weekly jobless claims data
The dollar rallied broadly (except vs the British pound) on Thursday after U.S. weekly jobless claims fell to a 2-1/2 year low last week.

U.S. weekly jobless claims last week dropped to 383,000 versus the expectation of 410,000.

In sharp contrast to the previous session, euro was under heavy selling pressure throughout the day in Asia, Europe and U.S. session on Thursday. Euro continued its intra-day decline in NY morning after the release of much lower-than-expected U.S. weekly jobless claims, the single currency eventually tumbled to a low of 1.3577 b4 recovering on short-covering. The pair was also weighed down by the lingering eurozone debt woes as Portugal is considered at risk of becoming the next eurozone periphery country to need a bailout. European leaders will meet next month to discuss bolstering a 440-billion euro fund.

In the other news, sources quoted as saying that Bundesbank chief Axel Weber will meet German Chancellor Angela Merkel on Friday.

The British pound ratcheted lower fm Asian high of 1.6111 n price was under pressure in European session on Thursday. Later, despite extending intra-day decline to 1.6011 in NY morning, cable then staged a strong rebound in NY mid-day to 1.6139 on active short-covering together with aggressive cross-buying in sterling, eur/gbp tumbled fm 0.8529 to 0.8444 n gbp/jpy rallied fm 132.54 to 134.26.

BoE's Monetary Policy Committee kept interest rate unchanged at 0.5% as widely expected and maintained its asset purchase program at 200 bln pounds.

Versus the Japanese yen, the dollar maintained a biddish tone in Asian n European sessions on Thursday and intra-day upmove accelerated in NY morning. The greenback eventually climbed to a high of 83.37 b4 stabilising in late NY trading.

Friday will be a holiday in Japan

Data to be released on Friday:
Germany CPI n WPI, U.K PPI, U.S. trade balance n University of Michigan consumer confidence survey, Canada trade balance n export/import data.

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FX currency trading may seem like an odd concept to some, so why would you want to buy and sell currencies? We are used to using currency to purchase material items so maybe buying currency seems a little strange.

Well, consider this - put simply, you stand a good chance of turning a profit when trading currencies. For example, if you see that the Euro price dropped considerably, that would be a good time to purchase some Euros. The next day, if it rises again, you can sell it and turn a profit on the difference.

Market Review - 11/02/2011 20:07 GMT

The dollar rises broadly despite Egyptian Hosni Mubarak's resignation as president

The U.S. dollar strengthened versus most of its counterparts on Friday even though Egyptian Hosni Mubarak finally resigned his post as president. The dollar index, which tracked the greenback against a basket of currencies, was up 0.3% at 78.508. Usd/jpy rose to a one-month high of 83.68 (just 2 pips shy of Jan 07 high) while usd/chf also climbed strongly fm 0.9679 to 0.9776 on Friday.

Egypt's Vice President Omar Suleiman said in a television statement that 'President Hosni Mubarak had bowed to pressure fm the street and has resigned, handing power to the army.' In addition, a military source was quoted as saying that Egypt's defence minister Mohamed Hussein Tantawi is the head of the Higher Military Council that took control of Egypt after Hosni Mubarak resigned as president.

Euro remained under heavy selling pressure on Friday after meeting renewed selling at 1.3621 in Asian morning, price continued to fall in Europe. The single currency later dropped below Monday's 1.3508 low to 1.3505 in NY morning. Although the pair managed to recover to around 1.3570/72 on short-covering together with the knee-jerk reaction after the news on Egypt's President Mubarak's resignation, another round of selling interest there pushed price to a fresh intra-day marginal low of 1.3497 b4 recovering in late NY trading on short-covering.

In other news, a spokesman for German Chancellor Angela Merkel said Axel Weber will step down as head of Bundesbank with effect fm April 30 after they met together with Finance Minister Wolfgang Schaeuble. The spokesman also said a decision on Weber's successor will be announced next week.

The British pound also tumbled on Friday after meeting renewed selling at Asian high of 1.6115, price then fell sharply to 1.5963 in European mid-day after triggering large stops below 1.6110/00. However, cable then recovered in tandem with the single currency later in the NY session.

On the data front, Germany's consumer price index came in at -0.4% m/m n 2.0% y/y versus the economists' forecast of -0.5% m/m n 1.9% y/y respectively. U.K. producer price index rose by 1.0% m/m n 4.8% y/y in Jan., the highest annual rate since May 2010, versus the economists' expectation of 0.5% m/m n 4.4% y/y respectively. The core PPI came in at 0.7% m/m n 3.2% y/y against the expectation of 0.3% n 3.0%. U.S. trade deficit was 40.58 bln in December versus the economists' forecast of 40.40 bln and previous reading of 38.32 bln in November. U.S. University of Michigan consumer sentiment rose to 75.1 (forecast was 75.0) in February versus previous reading of 74.2 in January.

Data will be released next week:

New Zealand retail sales, Japan GDP, eurozone, industrial production, U.S. NAHB on Monday

Japan capacity utilisation, U.K. DCLG house price, CPI, RPI, eurozone trade balance, GDP, Germany GDP, Zew index, U.S. Empire state manufacturing index, import/export price index, retail sales, net LT TIC flows, foreign treasury buys, business inventories on Tuesday.

U.K. nationwide consumer confidence, claimant count, ILO unemployment rate, avg. earning, Canada leading indicator, U.S. housing starts, PPI, capacity utilisation, industrial production on Wednesday.

Swiss ZEW index, U.K. CBI orders, CPI, U.S. CPI, jobless claims, eurozone consumer sentiment, U.S. real earnings, leading indicators, Philadelphia Fed survey on Thursday.

Germany PPI, U.K. retail sales, Canada CPI on Friday.

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Market Review - 14/02/2011 19:13 GMT

Euro hits a three week low versus dollar on WestLB rescue hitch

The single currency pared its initial intra-day gain against the greenback in European session on Monday and fell from 1.3559 to a three-week low of 1.3428 in early New York trading as concerns over the eurozone debt concern heightened ahead of peripheral bond auctions in Spain and Italy this week after a source told Reuters that German bank WestLB was struggling to come up with a rescue deal ahead of presenting a restructuring plan to the European commission. Source quoted that saving banks are so far blocking the WestLB rescue.

However, short-covering in euro lifted price from 1.3428 and eur/usd later rebounded to 1.3506 before retreating near New York closing. Euro cross-pairs also tumbled on increasing risk aversion and eur/jpy, eur/chf and eur/gbp fell fm session highs of 112.95, 1.3203 and 0.8448 to as low as 112.09, 1.3053 and 0.8399 respectively before staging a recovery in New York.

In other news, Reuters reported German Finance Minister Wolfgang Schaeuble said there was no need to boost the firepower of the eurozone rescue fund and that discussion of the matter was fuelling market speculation over the finances of eurozone countries.

The British pound also weakened versus the US dollar and cable tumbled from session high of 1.6080 to 1.5982 in U.S. morning, near Friday's European low of 1.5963 and then traded in a volatile manner later in the day after Moody's downgraded various Irish covered bonds.

The euro-led decline also pressured the other higher-yielding currencies and the Australian dollar and New Zealand dollar fell from intra-day high of 1.0075 to 1.0003 and from 0.7620 to 0.7545 versus the US dollar respectively before stabilising.

On the data front, economy in Japan shrank slightly in the final quarter of 2010 as GDP in Q4 showed an annualised contraction of 1.1% versus expansion of 4.5 percent in previous reading, the data also confirmed that Japan lost its place to China last year as the world's second-largest economy and highlighted Tokyo's increasing reliance on its giant neighbour. Other data reported that eurozone industrial production in December dropped 0.1 percent M/M and increased 8.0% Y/Y compared to consensus forecast of a decrease of 0.5 percent and a rise of 8.8 percent respectively.

Economic indicators to be released on Tuesday includes:

Australia RBA's Board February Minutes, Japan Capacity utilization, industrial production, machine tools orders and Bank of Japan rate decision, German GDP data and ZEW index, UK DCLG house prices, CPI and RPI data, eurozone GDP data and trade balance, and US Empire state manufacturing, retail sales, import price index, export price index, Net LT TIC flows, Foreign treasury buys, NAHB housing market index and Business inventories.

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