Market Review - 03/11/2011 22:02 All times in GMT

Euro rebounds after Papandreou called off Greek referendum

The single currency staged a strong recovery Thursday on optimism that Greece will cancel its plans to hold a referendum after Greek Prime Minister George Papandreou and Finance Minister Evangelos Venizelos called for a ruling out of the referendum. Earlier in NY morning, euro hit a session low after the European Central Bank unexpectedly cut its interest rate.

Although euro edged marginally lower to a session low at 1.3656 at European open, price rose sharply to 1.3835 on dollar's broad-based weakness due to talks of ECB buying Italian 10 year BTP bond via the Securities Market Program. However, the pair tumbled to 1.3660 after ECB unexpectedly cut its interest rate by 25 basis points to 1.25% and as newly appointed ECB President Mario Draghi, in his first conference,
said inflation in eurozone is likely to fall below 2% while the economy is seen growing less than expected.

Later, price rallied sharply to an intra-day high at 1.3855 after Greek Finance Minister Venizelos called for the Greek government to scrap the referendum and as Prime Minister Papandreou earlier said he was open to ruling out the referendum if the opposition backed the bailout package.

Greece's Venizelos said 'Greece must reassure its international partners that it will immediately do all it must to implement EU bailout deal; Greece must say it is not holding referendum'. Greek Prime Minister Papandreou said 'opposition support for bailout package is "great"; party members to discuss with opposition its proposal; Greek membership in eurozone is not in question.'

Despite cable's brief fall to a session low at 1.5876 in Asian morning, the British pound surged to 1.6041 in tandem with euro. Although cable retreated sharply to 1.5949 in NY morning after ECB cut its benchmark rate, renewed buying lifted price above 1.6041 to a session high at 1.6062 on hopes of Greek calling off its referendum.

Versus the yen, the greenback traded narrowly for the whole day. Dollar edged lower from intra-day high at 78.17 to a session low at 77.89 before recovering to 78.10 ahead of NY close.

In other news, Germany Chancellor Angela Merkel said 'important that Greece backs euro summit decisions quickly.' ECB President Mario Draghi said 'underlying pace of monetary expansion continues to be moderate; downside risks to the economy have intensified; significant downward revision to 2012 growth projections likely.' France President Nicolas Sarkozy said 'Europe willing to make quick progress with implementing changes to EFSF; message to Greece sent by Germany and France has helped make progress.'

DJI closed the day at 12044.47, up by 208.43 points or 1.76%. FTSE-100, CAC-40 and DAX rose strongly by 1.72%, 2.73% and 2.81% respectively.

On the data front, US Jobless claims were reported at 397K vs forecasts of 400K. UK services PMI in October fell to 51.3 from 52.9 in Sept, lower than forecast of 52.0.

Data to be released on Friday:

Germany services PMI, factory orders, EU services PMI, PPI, Canada unemployment rate, building permits, Ivey PMI, U.S. non-farm payrolls, private payrolls, unemployment rate, average hourly earnings.