Thread: Daily FX Market Outlook by AceTrader-1-4-2011

Market Review - 31/03/2011 20:14 GMT

Euro pares gains after Fed's U.S. rate hike remarks

The single currency pared some of the intra-day gains after Minneapolis Fed President Narayana Kocherlakota, a voting member of the Federal Open Market Committee, commented in Wall Street Journal that 'Fed could raise rates by end of 2011'.

Earlier, the single currency rose above previous resistance at 1.4148/49 and price then rallied to 1.4233 in European morning after the higher-than-expected eurozone March inflation data, however, the euro tanked to 1.4164 in New York morning on Reuters news that the European Central Bank would not announce plans for a new liquidity facility to help Irish banks. Later, although the single currency managed to recover in New York midday after the Irish bank stress test results were released as most of the details had leaked out earlier, the euro retreated again after U.S. interest rate hike comments from Fed's Narayana Kocherlakota.

Ireland said its four remaining banks require another 24 billion euros ($34.1 billion) to enable them to withstand potential losses from worsening economic situation. Ireland's central bank said under 'stress test' scenario, the banks would be required to maintain a minimum capital ratio of 6%. Allied Irish Banks, Bank of Ireland, Educational Building Society (EBS) and Irish Life and Permanent need 13.3, 5.2, 1.5 and 4 billion euros respectively.

Eurozone March inflation estimated at 2.6% y/y versus the expectation of 2.3% and much higher than the reading of 2.4% in February.

The European Commission, IMF and European Central Bank said in a joint statement that bank stress tests published are a major step toward restoring Ireland's banking system to health and can be comfortably funded under the country's IMF-EU bailout program.

The British pound fell against the dollar due to active cross-selling in sterling especially versus the single currency. Although cable extended erratic upmove from this Monday's low of 1.5937 to 1.6152 in European morning, selling interest there capped intra-day rise and price later tumbled to 1.6117 on aggressive cross-selling in sterling following remarks from Bank of England policy maker David Miles. The eur/gbp cross pair extended recent ascent to a five-month high of 0.8853.

In a speech to the Home Builders Federation, David Miles said requirements for larger mortgage deposits from first-time buyers were likely to lead to low transaction levels for several years. Monthly Mortgage approvals in Britain have hovered just below 50,000 since the financial crisis, compared to levels of 80,000-90,000 during the previous decade. Miles added BOE needs to recalibrate link between bank rate and mortgage rate.

Earlier, the British pound was supported by the slightly better-than-expected U.K. Gfk consumer confidence and the unexpectedly increase in U.K. house prices. The latest GfK NOP Consumer Confidence Index showed UK consumer confidence remained unchanged at -28 in March, however, the reading is still 13 points lower compared to the same month in 2010. U.K. Nationwide house prices rose 0.5% M/M in March and 0.1% Y/Y versus economists' forecast of -0.1% M/M and -0.7% Y/Y respectively.

Data to be released on Friday include:

Japan's Tankan big manufacturing and capex; Swiss retail sales and PMI; German manufacturing PMI; EU manufacturing PMI and unemployment rate; U.S. non-farm payrolls, private payrolls, unemployment rate, construction spending and ISM manufacturing.

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Market Review - 01/04/2011 20:16 GMT

Dollar falls broadly after dovish comments from the New York Fed President
The greenback fell across the board in New York midday after Federal Reserve Bank of New York President William Dudley said in a speech in Pueto Rico that firming of economic activity is welcome and not a reason to reverse course. He also added that the Fed is still very far away from achieving its dual mandate of maximum sustainable employment and price stability.

Earlier, the dollar rallied against the Japanese yen following the much better-than-expected U.S. jobs report and price eventually extended recent ascent from record low of 76.25 to as high as 84.74 in New York morning before retreating on Dudley's remarks.

U.S. non-farm payrolls increased by 216,000 in March versus street forecast of 190,000, private payrolls posted 230,000 gain versus forecast of 200,000 and unemployment rate fell slightly to 8.8% from last month's reading of 8.9%. The unemployment rate has come down to its lowest level in 2 years.

The euro rallied in New York trading and went through another roller-coaster session. The single currency tanked from European high of 1.4180 to an intra-day low of 1.4061 after the stronger-than-expected U.S. jobs data and later rallied back above 1.4200 level to a day's high of 1.4246 on active short-covering as Dudley's dovish comments clouded the Fed's rate hike prospect, which was in sharp contrast to ECB's certain rate hike next week. Cross-buying in euro also supported the single currency as eur/jpy and eur/chf rallied sharply from 117.74 to 119.80 and from 1.3012 to 1.3171 respectively.

Similar to the euro, the British pound also went through an extremely volatile session. Although cable ratcheted lower from European high of 1.6083 and tumbled to 1.5972 in New York morning, cable later rallied to as high as 1.6134 in tandem with euro before trading sideways. Earlier, a lower-than-expected U.K manufacturing PMI data also pressured sterling. U.K. March manufacturing PMI fell sharply to a five-month low of 57.1, much weaker than economists' forecast of 60.6 and the downwardly revised reading of 60.9 in February. However, firms still ramped up prices at a record rate to cover rising costs. Markit said the slowdown in demand was most pronounced in the consumer goods sector, which was virtually stagnant and indicated a fall in domestic orders for such goods.

The Australian dollar posted another fresh 29-year high of 1.0398, New Zealand dollar rose strongly from 0.7581 to 0.7683 while usd/cad pair tumbled to a 3-year low of 0.9626.

Data to be released next week include:

EU Sentix investor confidence; U.K. construction PMI; EU PPI on Monday.

Australia trade balance and RBA rate decision; Germany services PMI; EU services PMI and retail sales ; U.K. service PMI; U.S. ISM non-manufacturing and FOMC meeting minutes on Tuesday.

U.K. BRC shop price index, industrial production and manufacturing production; Japan leading indicators; Swiss CPI; EU GDP; Germany factory orders; U.S. Midwest manufacturing; Canada Ivey PMI on Wednesday.

Australia Employment change; Japan BOJ rate decision; German industrial production; U.K. BOE rate decision and BOE asset purchase target; Canada building permits; U.S. jobless claims on Thursday.

Japan current account and economic watch DI; German export and import; U.K. core, input and output PPI; Canada employment change, unemployment rate and housing starts; U.S. wholesale inventories on Friday.

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Market Review - 05/04/2011 19:47 GMT

Euro strengths in U.S. session on weaker-than-expected U.S. ISM non-manufacturing index

Euro rose strongly in U.S. session on active shorting covering on Tuesday as the lower-than-expected U.S. ISM non-manufacturing index raised concerns about the strength of the U.S. economy.

U.S. non-manufacturing ISM index in March came in much lower than expected at 57.3 versus street forecast of 59.5.

Earlier, although the single currency ratcheted lower from Asian high of 1.4233 following a rise to a 5-month high of 1.4269 in previous session and price fell to an intra-day low of 1.4151 after the surprised interest rates hike by the China's central bank in European midday, the euro then rebounded strongly in NY and the single currency hit a day's high of 1.4246 after Fed's minutes at March 15 meeting showed officials divided over tighter policy in 2011. Cross-buying in euro versus the Japanese yen and Swiss franc also supported the single currency, eur/jpy strengthened to a 11-month high of 120.73 while eur/chf rebounded strongly from 1.3055 to 1.3167.

The China's central bank raised interest rates for the second time this year to curb inflation, which surged to a 28-month high of 5.1% in November. According to the People's Bank of China, benchmark one-year deposit rate will be lifted by 25 basis points to 3.25 percent, while one-year lending rate will be raised by 25 basis points to 6.31%.

Minutes of the Fed's March 15 meeting showed that some Federal Reserve officials last month believed they would have to hold to an easy monetary policy course beyond this year while a few said the central bank should move to tighter conditions before year-end. 'Almost all' Fed officials saw no need to taper QE2 buying.

Moody's downgraded Portugal's bond ratings to BAA1 from A3, still under review for possible downgrade, sending Portuguese bonds yields over 10-year German bunds to a post-euro era high and close to 10%.

The British pound surged against the dollar and euro as the much stronger-than-expected U.K. Services PMI fueled speculation that the Bank of England would raise interest rates in coming months. Despite falling to a day's low of 1.6091 ahead of European opening, cable immediately jumped after the release of much stronger-than-expected UK March Services PMI, which came in at 57.1 versus forecast of 52.5. The data showed UK services grew at its fastest pace in over a year, a 13-month high, pointing towards a 0.8% expansion for the economy as a whole in the first quarter in 2011. The pound eventually climbed to an intra-day high of 1.6298 in NY midday before trading sideways. Eur/gbp tanked from 0.8819 to 0.8715.

The dollar jumped against the Japanese yen to 84.49 in Tokyo morning after the inflation comments from Fed's Chairman Ben Bernanke who indicated recent spike in inflation to be 'transitory', adding speculation that the Federal will hike interest rate once or twice by the year end but not a sign of the start of the tightening cycle. The pair eventually rose above Friday's 84.73 high to as high as 84.88 after the release of Fed's minutes.

Data to be released on Wednesday include:

U.K. BRC shop price index, industrial production and manufacturing production; Japan leading indicators; Swiss CPI; EU GDP; Germany factory orders; U.S. Midwest manufacturing; Canada Ivey PMI.

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Market Review - 07/04/2011 19:48 GMT

Euro falls as ECB Trichet turns cautious on more rate hike

Euro declined on Thursday after European Central Bank President Jean-Claude Trichet said in a press conference following interest rate announcement that 'we did not decide that it was the first of a series of interest-rate increases'. The ECB raised its lending rate to 1.25% from record low of 1.00% to tame inflation pressure, making ECB the first major central bank to hike rates since July 2008.

Earlier, euro was under selling pressure in Asia trading after rising to a 14-month high of 1.4350 on Wednesday and despite the brief bounce from 1.4266 to 1.4327 after the rate decision, price then fell swiftly to an intra-day low of 1.4243 as Trichet's tone was less hawkish than some investors had anticipated, however, buying interest there limited the euro's downside and the single currency managed to rebound later in New York midday.

In the other news, Fitch Ratings said Portugal's decision to seek financial assistance from the European Union will help financial stability in the economically struggling European nation and the firm will remove Portugal from downgrade watch if an agreement on help is reached.

The British pound was little changed after Bank of England kept rate unchanged as widely expected. Although cable ratcheted lower in Asian session to a day's low of 1.6260 (5 pips above Wednesday's low), buying interest there in European morning lifted the pound up to as high as 1.6349, however, failing to re-test previous session's 1.6364 high prompted price to fall to 1.6279/80 after the Bank of England held its benchmark rate at 0.5% and maintained its asset-purchase program at 200 billion pounds.

The Japanese yen strengthened across the board after a magnitude 7.1 aftershock and tsunami alert shook northeastern Japan. Usd/jpy pair ratcheted lower in Asian and European sessions after failing to penetrate previous session's 85.53 high, price then dropped briefly to a day's low of 84.60 after the news. Eur/jpy, aud/jpy and gbp/jpy also retreated from multi-month highs of 122.55 to 120.76, 89.59 to 88.11, 139.53 to 137.91 respectively.

Data to be released on Friday include:

Japan current account and economic watch DI; German export and import; U.K. core, input and output PPI; Canada employment change, unemployment rate and housing starts; U.S. wholesale inventories.

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Market Review - 08/04/2011 19:41 GMT

Dollar falls across the broad on worries of U.S. government shutdown

The greenback declined against most of its counterparts on Friday as Democratic and Republican party leaders in Congress remain divided over a federal budget, resulting in potentially the first U.S. government shutdown in 15 years ahead of the Friday's midnight deadline. The US Dollar Index, which tracks the greenback against a basket of currencies, sank to as low as 75.02, the lowest since December 2009.

Euro extended recent ascent to a fresh 15-month high due to prospect of widening interest rate differentials against other major currencies together with dollar's broad-based weakness. The single currency jumped above Wednesday's high of 1.4350 in Asian morning on concern of a U.S. government shutdown following the European Central Bank raised its lending rate to 1.25% on Thursday. Euro continued to ratchet higher in European and New York sessions and eventually climbed to a 15-month high of 1.4489 in thin late New York trading.

German February exports came in at 2.7% m/m, strongest since September 2010 and versus forecast of 1.5%. German February imports came in at 3.7% m/m versus forecast of 0.8%. German February trade balance came in at 11.4 billion euro versus forecast of 12.5 billion euro.

The British pound retreated from a fresh 15-month high on active cross-selling in sterling versus the euro. Although cable rose in tandem with the single currency in Asian session and price blipped up to as high as 1.6430 after the release of higher-than-expected U.K. PPI data, the pound then retreated to 1.6326 in New York midday on aggressive cross-selling in sterling especially against the euro and eur/gbp rose strongly from 0.8760 to 0.8845.

U.K. March PPI input came in at 3.7% m/m and 14.6% y/y, higher than the forecast of 2.1% m/m and 12.5 y/y respectively. U.K. PPI output in March came in at 0.9% m/m and 5.4% y/y, the highest since October 2008, versus the expectations of 0.6% m/m and 5.1% y/y.

The dollar gyrated inside near term range of 84.60-85.53 against the Japanese yen. Despite a brief bounce from 85.00 to 85.40 in New York morning, price then ratcheted lower to a day's low of 84.68 later in New York midday before staging another recovery.

The continued rise in commodity prices (U.S. crude oil futures climbed to a near 2-1/2 year high, spot gold price hit another fresh record high of $1473.40/oz and spot silver price rose to a new 31-year high of 40.65/oz) sent Australian dollar, New Zealand dollar and Canadian dollar (known as commodity currencies) higher. Aud/usd posted another fresh 29-year high of 1.0585, nzd/usd rallied from 0.7763 to 0.7835 while usd/cad slumped to a 3-1/2 year low of 0.9526.

Data to be released next week include:

Japan machinery orders; Germany wholesale price index; U.K. Nationwide Consumer Confidence on Monday.

U.K. RICS house prices, BRC retail sales, CPI, RPI, trade balance and DCLG house prices; Japan machine tools orders; Germany CPI final, HICP final, ZEW index and current situation; Canada new housing price index, trade balance, exports and imports and BOC rate decision; U.S. export and import price index and Fed budget on Tuesday.

Japan domestic CGPI; Swiss combined PPI; U.K. claimant count, ILO unemployment and average earnings; EU Industrial production; U.S. retail sales and business inventories on Wednesday.

Swiss ZEW index; U.S. jobless claims and PCE index on Thursday.

Japan industrial production; EU trade balance and HICP final; U.S. CPI, real earnings, foreign treasury buys, net LT TIC flows, capacity utilisation and industrial production on Friday.

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Market Review - 11/04/2011 20:14 GMT

Euro retreats from 15-month high on long liquidation

Euro retreated on Monday on long liquidation after recent ascent following a strong rise to a 15-month high of 1.4489 last Friday due to worries over possible U.S. federal government shutdown. However, the single currency failed to penetrate 1.4489 and retreated after meeting selling interest at 1.4485 in Asian morning as President Barack Obama signed a short-term spending bill on Saturday and averted such shutdown. Price later dipped to 1.4421 in New York morning before trading sideways on quiet U.S. afternoon session.

The British pound was little changed on volatile Monday trading. Despite ratcheting lower from Asian high of 1.6392 to 1.6314, cross-buying in sterling versus euro lifted the pound in New York morning to an intra-day high of 1.6427. However, failing to penetrate Friday's 15-month high of 1.6430 prompted cable to retreat in New York midday. Eur/gbp fell sharply from 0.8860 to as low as 0.8793 before rebounding on short-covering.

Bank of England's Monetary Policy Committee member Andrew Sentance was quoted on Reuters Sunday as saying that Bank of England should raise interest rate gradually to help stave off the threat of future inflation.

Reuters also reported on Sunday that voters in Iceland rejected a second plan to repay debts to Britain and the Netherlands from a bank crash, Prime Minister Johanna Sigurdardottir told state television that economic and political chaos could follow.

The Japanese yen strengthened across the broad. Despite the dollar's cross-inspired rise to 85.16 in Australia against the Japanese yen (eur/yen climbed to an 11-month peak of 123.33), sellers quickly emerged at Tokyo opening with price continued to edge lower in Europe and dropped to a day's low of 84.51 in late New York before trading sideways. Eur/jpy, aud/jpy and gbp/jpy retreated sharply from multi-month highs of 123.33 to 122.03, from 90.04 to 88.74 and from 139.63 to 138.04 respectively.

In the other news, International Monetary Fund lifted European area's 2011 GDP growth forecast to 1.6% from 1.5% in January and raised 2012's forecast to 1.8% from 1.7%. IMF saw gradual and uneven expansion with 1.7% in 2011's growth in advanced Europe and 3.7% growth in emerging Europe. IMF cut UK's 2011 GDP growth forecast to 1.7% from 2.0% in January and kept 2012's growth forecast at 2.3%. IMF also lowered U.S.'s growth forecast to 2.8% in 2011 from 3% in January and raised 2012's growth forecast to 2.9% from 2.7%. IMF trimmed Japan's 2011 GDP growth forecast to 1.4% from January estimate of 1.6% and raised Japan's 2012 GDP growth forecast to 2.1% from January's 1.8%.

Data to be released on Tuesday include:

U.K. RICS house prices, BRC retail sales, CPI, RPI, trade balance and DCLG house prices; Japan machine tools orders; Germany CPI final, HICP final, ZEW index and current situation; Canada new housing price index, trade balance, exports and imports and BOC rate decision; U.S. export and import price index and Fed budget.

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Market Review - 13/04/2011 20:40 GMT

Euro retreats from 15-month high as President Barack Obama plans to cut U.S. budget deficit

The single currency retreated from a fresh 15-month high on Wednesday due to lingering concerns over Greek debt together with Obama's deficit cut.

Obama set a time-frame of 12 years or less to reach the goal of cutting the U.S. budget deficit by $4 trillion and called for talks with Democratic and Republican lawmakers to lay out a detailed blueprint. He also warned that steadily rising debt could cost jobs and harm the economy and force the country to borrow more and more from other countries such as China.

Although the euro extended recent ascent to a fresh 15-month high of 1.4521 in European midday after ECB Governing Council member Luc Coene's hawkish remarks, price then retreated following German newspaper report that Greece must wipe away 40-50% of its debt burden in order to return to a sustainable economic path. The single currency then dropped briefly to a day's low of 1.4414 in late New York trading after Obama's dollar-positive budget deficit cut plan. Cross-selling in the single currency also weighed on the euro as eur/jpy, eur/gbp and eur/chf fell sharply from 122.16 to 120.78, from 0.8924 to 0.8871 and from 1.3044 to 1.2917 respectively.

In the other news, German Finance Minister Wolfgang Schaeuble said in an interview with Die Welt newspaper that any Greek debt restructuring would have to happen on a voluntary basis if done before 2013. His remarks also pressured the euro in late New York trading.

ECB Governing Council member Luc Coene was quoted as saying that the European Central Bank's increase of interest rates last week should not be considered as an isolated decision and the ECB president has signalled that it was not a one-off.

The British pound was little changed as price was confined inside previous session's 1.6227-1.6330 range. Despite ratcheting higher to 1.6302 in European morning, cable later retreated sharply to a day's low of 1.6236 but buying interest there lifted price to 1.6310 in New York morning before retreating in tandem with the euro in late New York trading.

Fed's beige book stated that U.S. economy continued to improve since last report in early March. Many districts described improvements as only moderate, but gains were widespread across sectors. It also stated that wage pressures are mostly seen as weak or subdued, but higher commodity costs put increasing pressures on prices. Consumer spending also picked up modestly, but some districts reported weaker retail sales.

U.K. February unemployment rate came in at 7.8%, better than the forecast of 8.0%. U.K. March claimant count rose by 700, versus the expectations of a fall of 4,200 and the revised 8,500 fall in February.

Data to be released on Thursday include:

Swiss ZEW index; U.K. Nationwide Consumer Confidence; U.S. jobless claims and PPI.

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Market Review - 15/04/2011 19:57 GMT

Euro falls on renewed fears over European periphery debt defaults

Euro fell against the dollar and the Japanese yen on Friday as fears over European periphery debt defaults increased after Moody's cut Ireland's rating to just above 'junk' status.

Moody's downgraded Ireland to BAA3 from BAA1 and outlook remained negative.

Euro ratcheted lower from Asian morning high of 1.4504 following an extremely volatile trading session on the previous day and despite staging a brief but strong rebound following a dip to 1.4451 after Moody's downgraded Ireland's debt rating, selling interest quickly emerged below said intra-day resistance and price then retreated swiftly. Later, the single currency fell sharply to the day's low of 1.4390 in New York morning after German Deputy Foreign Minister Werner Hoyer said in an interview that 'a Greek debt restructuring would not be a disaster', however, euro managed to recover following remarks from European Central Bank Governing Council member Athanasios Orphanides. Orphanides said in an event held in New York that a Greek debt restructuring would be undesirable as well as unnecessary, adding that 'the whole of Europe' is supporting the country.

The British pound fell from Asian high of 1.6373 after failure to penetrate previous session's 1.6385 high and despite staging a recovery from 1.6317, selling interest below said resistance capped intra-day rebound. Later, cable declined to a day's low of 1.6294 in tandem with the euro in New York morning.

The continued surge in commodity prices underpinned the Australian dollar, the New Zealand dollar and the Canadian dollar. Aud/usd rebounded strongly from 1.0511 to 1.0579 (shy of Monday's 29-year high of 1.0585), nzd/usd rose above previous top of 0.7976 to a 3-year high of 0.8000 while usd/cad fell from 0.9650 to 0.9591. Spot gold price posted another record high of 1486.90/oz and spot silver price strengthened to a fresh 31-year high of 42.82/oz.

On the data front, eurozone February trade balance came in at -1.5 billion euros versus economists' forecast of 2.2 billion. Eurozone March inflation rose by 1.4% m/m and 2.7% y/y, slightly higher than the expectations of 1.3% m/m and 2.6% y/y. Eurozone March inflation excluding energy and unprocessed food increased by 1.3% m/m and 1.5% y/y against consensus forecast of 1.0% m/m and 1.1% y/y respectively. U.S. March CPI rose by 0.5% m/m and 2.7% y/y versus the economists' forecast of 0.5% m/m and 2.6% y/y respectively.

Data to be released next week:

New Zealand CPI; U.K. Rightmove house prices; EU consumer sentiment; U.S. NAHB housing market index on Monday.

Reserve Bank of Australia's board April minutes; Japan Consumer confidence and machine tools orders; Germany manufacturing and service PMI; EU manufacturing and service PMI and current account; Canada CPI, leading indicators and wholesale sales; U.S. housing starts and building permits on Tuesday.

Japan import / export, trade balance and tertiary industry index; Australia Westpac consumer confidence and import / export price index; Germany PPI; Bank of England minutes of the MPC's meeting; U.S. existing home sales on Wednesday.

Australia PPI; Japan Leading indicators; Germany Ifo business climate and current assessment; U.K. retail sales, public sector net cash requirement (PSNCR) and public sector net borrowing; U.S. jobless claims, leading indicators and Philadelphia Fed survey; Canada retail sales on Thursday.

New Zealand, Australia, U.K., EU, Germany, Swiss, Canada and U.S. markets will be closed on Friday (Good Friday holiday).

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Market Review - 18/04/2011 19:50 GMT

Euro tumbles as European sovereign debt fears mount

Euro tanked on Monday with increasing fear of a possible Greek debt restructuring and the yield on Greece's 2-year bonds surged to a record high of 19.4%. In addition, Standard & Poor's U.S. debt outlook downgrade from stable to negative dampened risk appetite, increasing safe-haven demand for the dollar, the Japanese yen and the Swiss franc.

Standard & Poor's revised its outlook on the United States' long-term rating from stable to negative but affirmed its AAA sovereign credit rating.

Investors ignored Greece's claims that it will not need to restructure its debt. The government denied a Greek newspaper report that it wanted to extend maturities on its outstanding debt.

The single currency came under heavy selling pressure at Asian opening after bearish news on Sunday that the anti-euro True Finns party in Finland had made huge gains in the parliamentary election and price continued to ratchet lower in Asian and European sessions. Despite staging a brief but strong rebound from 1.4262 to 1.4350 after Standard & Poor's lowered its U.S. credit-rating outlook in New York morning, aggressive cross-selling in euro pushed the single currency sharply lower to a day's low of 1.4156 before rebounding on short-covering. Eur/jpy, eur/gbp and eur/chf tanked from 120.04 to 116.49, from 0.8843 to 0.8746 and from 1.2887 to 1.2730 respectively.

The British pound tracked intra-day movement of euro closely and ratcheted lower from Asian high of 1.6325 to 1.6244 in European morning. Later, although cable staged a strong rebound to as high as 1.6329 in New York morning, price then tumbled to a day's low of 1.6166 before staging another strong correction in New York midday.

The Japanese Yen rose across the board on safe-haven demands. Usd/jpy fell sharply from Asian high of 83.27 to as low as 82.19 in New York morning due partly to 50 basis points increase in the required reserve ratio by China's central bank on Sunday before staging a rebound. Aud/jpy and gbp/jpy also tumbled from 87.90 to 86.01 and from 135.86 to 133.01 respectively.

Data to be released on Tuesday include:

Reserve Bank of Australia's board April minutes; Japan Consumer confidence and machine tools orders; Germany manufacturing and service PMI; EU manufacturing and service PMI and current account; Canada CPI, leading indicators and wholesale sales; U.S. housing starts and building permits.

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