Daily FX Market Outlook-19-11-2010 by AceTrader

Market Review – 18/11/2010 23:01 GMT

Euro rises on optimism about an aid package for Ireland from IMF/EU

The single currency rose on Thursday due to optimism over a possible IMF/EU rescue plan for Ireland and the solid demand on Spanish government’s 10-year and 30-year bond eased the ongoing worries over contagion spreading through the euro area. Irish central bank Governor Patrick Honohan said he expects the country to ask for ‘tens of billions’ of euros in loans, not bailout to rescue its battered banks.

The dollar strengthened against the Japanese yen and the Swiss Franc on upbeat Philly (Philadelphia) Fed report which highlighted its index of business conditions in the U.S. Mid-Atlantic region, the Philly Fed 6-month activity index rose to 22.5 in November from 1.0 in October and was the highest since March 2010. Although the dollar traded sideways against the Japanese yen in Asian and European sessions, the usd/jpy pair jumped from around 83.20/25 to an intra-day high of 83.79 after the release of Philly Fed report before easing. Usd/chf also rallied from 0.9855 to 1.0000 in NY mid-day.  
The euro ratcheted higher in Asian session and price then jumped to as high as 1.3657 after news of good demand at the Spanish govt. 10-year n 30-year bond auctions. Although the single currency extended intra-day rise to a session high of 1.3668 later, the euro then fell sharply to 1.3584 in NY mid-day after the release of Philly Fed report before staging a recovery. Cross-selling in the single currency versus the British pound also weighed on the euro as eur/gbp dropped from 0.8553 to 0.8488.  
The British pound traded sideways in Asian session and despite the initial fall from 1.5947 to 1.5890 in London morning trading, cable then jumped to 1.6031 on heavy short-covering together with active cross buying in euro and yen, gbp/jpy rallied from 132.26 to 134.21. Although sterling retreated to 1.5983 in NY mid-day, renewed buying there then pushed the pound above said 1.6031 res to an intra-day high of 1.6056 before easing. Earlier, the British pound showed pretty muted reaction to UK retail sales figure and a higher-than-expected PSNB data(actual data for Oct came in at 9.8 bln pounds vs forecast of 8.9 bln).   
Economic data to be released on Friday include: Japan All industry index and Germany PPI.