Daily FX Market Outlook by AceTrader 9-2-2011

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.