Daily FX Market Outlook-4-10-2010 by AceTrader

Market Review – 01/10/2010 22:23 GMTEuro rallies to a six-month high against dollar on Fed Dudley’s dovish commentsEuro rose strongly to a 6-month high of 1.3793 against the greenback on Friday after dovish comments from NY Fed President William Dudley which reinforced market’s speculation on further quantitative easing by the U.S. Fed in the future.
The single currency edged higher in Asia initialy due to renewed risk appetites after release of the official China purchasing managers’ index which rose to 53.8 from 51.7 in August, providing further evidence the economy was pulling smoothly out of a second-quarter swoon. Despite a brief retreat at Euroepan opening on profit-taking, renewed buying at 1.3629 contained intra-day pullback and euro surged to 1.3764 after penetrating Thursday’s 5-month high of 1.3684 in Europe, price later ratcheted higher to a 6-month peak of 1.3678 in New York after dovish comments from NY Fed President William Dudley, he said ‘more action by the Fed to boost growth will likely be warranted unless the economic outlook improves’, fueling speculation that more money would be pumped to the U.S. economy. Despite euro’s brief retreat to 1.3717 after the release of slightly weaker-than-expected U.S. ISM manufacturing index for September (which came in at 54.4, versus the forecast of 54.5 and 56.3 in August), euro rose again and climbed to a 6-month high of 1.3793 ahead of NY closing.  
In other news, International Monetary Fund chief Dominique Strauss-Kahn said that he did not expect the euro rescue fund to be activated due to Ireland.   
On data front, German retail sales in August came in at -0.2% m/m and 2.2% y/y respectively, weaker than the economists’ forecast of 0.4% m/m and 3.5% y/y.   
Versus the Japanese yen, the greenback edged lower from 83.58 in Australia and then fell sharply to 83.15, 1 tick below Thursday’s low of 83.15, in Europe on dollar’s broad-based weakness. However, buying interest at there lifted dollar to 83.44 in NY afternoon before retreating.  
Earlier in Asia, Japanese Prime Minister Naoto Kan said the government would keep taking decisive action to curb the Japanese yen’s rise as needed and urged BOJ to take further necessary steps to beat deflation.   
Japanese unemployment rate was 5.1% in August versus the economists’ forecast of 5.2%. Tokyo CPI and National CPI fell by 0.6% and 1.0% respectively.  
The British pound ratcheted higher in Asia on short-covering after Thursday’s selloff from an 8-week high of 1.5924 to 1.5670. Later, cable rallied from 1.5705 in tandem with euro in European morning despite the weaker-than-expected U.K. Manufacturing PMI index (which fell to 53.4 in September, the lowest reading in 10 months, versus the downwardly revised of 53.7 in August and the forecast of 53.8), cable climbed to 1.5874 in Europe before retreating in NY session.  
Economic data to be released next week include:  
U.K. PMI construction, EU PPI, U.S. Durable goods (rev.), ex. Defense (rev.), ex. Transport (rev.) , Factory orders, Pending home sales, Pending home sales (Australia is closed on holiday) on Monday, Australia Retail sale, Trade balance (aud), RBA rate decision, Japan BOJ rate decision, Swiss CPI, Germany Services PMI, EU Services PMI, Retail sales, U.K. Services PMI, U.S. ISM non-manufacturing on Tuesday, U.K. BRC Shop Price Index , EU GDP, Germany Industrial prod’n, U.S. ADP employment, Canada Ivey PMI on Wednesday, Australia Unemployment change, Unemployment rat, Japan Leading indicators , U.K. Industrial prod’n, Manufacturing prod’n, BOE rate decision, Germany Industrial prod’n, EU ECB rate decision. U.S. Jobless claims, Canada Building permits on Thursday, Japan Current account, Economic watch DI, Swiss Jobless rate, Germany Export, Import, Trade balance (euro), U.K. PPI core, PPI input, PPI output, Canada Unemployment rate, Jobs-change, Housing starts, U.S. Avg. hourly earnings, Non-farm payrolls, Unemployment rate, Wholesale inventories on Friday.