Daily FX Market Outlook by AceTrader-19-8-2011

Market Review – 18/08/2011 22:32 GMT

Dollar and yen rally broadly on debt crisis and global economic growth

The single currency tanked on Thursday on renewed risk aversion as investors were worried about Europe’s debt crisis could spread to the U.S. banking system. The much weaker-than-expected U.S. Philadelphia Fed business conditions index also fuelled concerns over the growth of global economy.

  
  
Earlier in the day, the Wall Street Journal reported that U.S. Federal and state regulators, signalling their growing concern that Europe’s debt crisis could spill into the U.S. banking system, were intensifying their scrutiny of the U.S. arms of Europe’s biggest banks who do not have enough capital.  
  
The single currency penetrated Wednesday’s NY low of 1.4422 at Asian open, price then weakened to 1.4381 staging a brief bounce to 1.4452 in European morning. However, euro plunged on renewed risk aversion due to selloff of European and US stock markets and extended its intra-day weakness to session low at 1.4271 on much weaker-than-expected U.S. Philadelphia Fed business conditions index (-30.7, forecast of 3.7) before recovering.  
  
The global stock markets took a big hit Thursday with DJI tumbling by 419.63 or -3.68% to 10990.58 whilst FTSE-100, CAC-40 and DAX indices closed down 4.49%, 5.48%, and 5.82% respectively.   
  
Versus the Japanese yen, the greenback continued to trade narrowly n the pair rose to an intra-day high at 76.71 in Asian morning before ratcheting lower to 76.46 in NY morning after the release of the weak U.S. Philadelphia Fed survey before stabilising.  
  
Although the British pound traded sideways in Asia and then climbed to an intra-day high of 1.6555 in European morning, sterling tumbled in tandem with euro to 1.6421 in NY morning as the disapointing U.S. Philadelphia Fed data was released, increasing investors’ fears of a global slowdown in growth. However, price recovered to 1.6529 ahead of NY closing on short-covering.  
  
The commodity currencies tanked on Thursday due to risk aversion, aud/usd and nzd/usd tumbled from 1.0558 to 1.0352 and from 0.8378 to 0.8196 respectively. Usd/cad rallied from 0.9801 to 0.9939  
  
Spot gold rallied from $1784.80 per troy ounce and then climbed above $1813.70 to a fresh all-time high of $1828.50.  
  
On the data front, July U.S. existing home sales dropped by 3.5% to 4.67 million vs forecast of 4.9 million, down from 4.84 million sales in June. U.S. jobless claims were 408K vs consensus estimate of 400K, up from revised previous month figure of 399K.  
  
Data to be released on Friday include:  
  
Japan all industry index, Germany PPI, U.K PSNCR, PS net borrowing, Canada CPI, core CPI.

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