Daily Market Outlook by AceTrader

Market Review – 10/04/2010 01:26GMT

Euro rallies on speculation of a favourable Greek aid package

The single currency gained against most of its counterparts for a second day on Friday despite Fitch Rating downgraded Greece’s debt by 2 notches on speculation that the European Union has fostered a bailout package for Greece at below-market interest rate if such aid is needed , this move had the calming effect on market’s concern that the debt-ridden Greece will default following ECB’s chief Trichet comment on Thursday that Greece was not in danger of defaulting on its debt.

Although euro retreated fm Asian morning high of 1.3384 to 1.3341 in Asian mid-day, euro climbed to 1.3419 on renewed buying following previous day’s strong rebound from 1.3282. The single currency rose steadily in European morning due to firmness in European shares and despite a brief retreat to 1.3366, renewed buying interest lifted the pair again after Reuters reported that Euro zone finance ministers and senior central bankers have reached an agreement on the terms of possible emergency loans for Greece. The single currency eventually rallied to 1.3500 in NY afternoon and closed at 1.3499. In other news, Fitch downgraded Greece rating by two notches to BBB- from BBB+ and outlook to negative. However, euro drew support as ECB President Jean-Claude Trichet said Italy absolutely not in same situation as Greece and Italy has been able to contain public deficit and has shown resistance in difficult time. In addition, Greek Finance Minister George Papaconstantinou also said the country will not seek the activation of an EU-IMF aid mechanism decided by European leaders last month.  
The British pound edged higher to 1.5305 in Australia in tandem with euro following previous day’s rebound fm 1.5141. Cable’s intra-day rise accelerated at European opening due to broad-based buying after triggering stops above Monday’s top of 1.5320 and hit an intra-day high of 1.5393 after U.K. core PPI came in higher-than-expected at 0.7% m/m and 3.6% y/y respectively versus the economists’ forecast of 0.3% m/m n 3.1% y/y.   
Versus the Japanese yen, dollar extended the rebound from Thursday’s low of 92.83 in Asian morning as yen was pressured by overnight news after Nikkei and other newspapers reported Japan’s PM will meet BOJ’s chief today at periodic meetings between the govt. n the central bank to discuss the economy and financial situation, traders speculated the government will make additional request to the BOJ for more monetary easing steps. However, the pair retreated from 93.79 in European mid-day and price retreated in NY morning due to broad based weakness in dollar, the pair hit an intra-day low of 93.10 in NY mid-day before stabilising.  
The Swiss franc fell versus euro on speculation that SNB sold its currency to prevent it from appreciating and eur/chf surged to 1.4395 in NY morning, however, usd/chf resumed its decline fm Thursday high of 1.0786 to 1.0655 and closed near the day’s low.  
Commodity currencies rallied due to return of risk appetite as rally in the Dow encouraged investors to move back to yen carry trades. DJI briefly hit a 52-week high of 11,000 and closed 70 points up at 10,997.  
Economic data to be released on next week include:Canada Housing starts and U.S. Fed budget on Monday, U.K. house prices, BRC retail sales, Trade balance , Japan Domestic CGPI, Germany CPI and HICP, U.S. Trade balance, Export price , Import price, Consumer confidence, Canada Exports, Imports, New housing price index on Tuesday, New Zealand Retail sales, Australia W’pac consumer confidence, EU Industrial production, U.S. CPI data, Retail sales on Wednesday, Swiss GDP, CPI, Retail sales, Industrial production, Japan Capacity utilisation and Industrial production, EU Trade balance, U.S. Jobless claims, Industrial production, Philadelphia Fed survey, NAHB housing market index on Thursday, Swiss Combined PPI, EU HICP final, U.S. Housing starts and Building permits on Friday.