Daily FX Market Outlook by AceTrader -23-11-2010

Market Review – 22/11/2010 22:56 GMT

Euro falls due to Irish uncertainty and contagion fears

Euro fell on Monday as Moody’s said it might downgrade the credit rating of Ireland by more than one level. The single currency was also pressured by investors’ worries over how a bailout on Ireland would be implemented together with fears of contagion to other euro-zone countries. The Irish Green Party’s call for new general election added uncertainty to the situation.

The single currency rose initially in Asian morning as Sunday’s official announcement by Irish FINMIN Brian Lenihan that Ireland would seek a bailout from international lenders prompted short-term investors to push euro higher. Euro rose from 1.3695 (NZ) to 1.3786 at European opening but the single currency retreated and tumbled to as low as 1.3577 in NY session due to worries over the Irish debt problem before staging a minor recovery.   
The British pound edged higher in Asia and then rose sharply to 1.6085 in European session before retreating sharply. Cable then extended intra-day decline to 1.5900 in tandem with euro as Irish debt problems sparked risk aversion before staging a rebound.  
In other news, UK’s Chancellor of the Exchequer George Osborne said U.K. considered bilateral loan to Ireland but Britain does not want to be part of permanent bail-out mechanism for the euro.  
The greenback traded narrowly against the Japanese yen throughout the day as focus was on the euro and other major currencies. The pair spent the day in a tight 83.20-83.60 range.  
Economic data to be released on Tuesday include:  
Germany GDP, Gfk index, Services PMI, Manufacturing PMI, EU Services PMI, Manufacturing PMI, U.S. GDP, GDP deflator, Personal consumption, PCE, PCE core, Home Sales, Home Sales change, Canada CPI core, CPI, and Retail sales.