Daily FX Market Outlook by AceTrader 14-2-2011

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.