Daily FX Market Outlook-24-11-2010 by AceTrader

Market Review – 23/11/2010 23:07 GMT

Euro tumbles on N.Korea and debt worries

The single currency fell sharply across the board on Tuesday as the news of exchange of shelling between North and South Korea prompted risk aversion activities of dollar buying. German Chancellor Angela Merkel said euro was in an ‘exceptionally serious’ situation and German finance minister said the single currency was at stake due to the Irish debt crisis. These comments added further pressure on euro.

Euro initially bounced to 1.3633 but swiftly retreated and remained under pressure throughout the day. Cross-selling in euro also weighted on euro as eur/jpy, eur/gbp and eur/chf tumbled from 113.68 to 110.75, 0.8541 to 0.8446, and 1.3485 to 1.3296 respectively. Euro eventually tanked to 1.3361 in NY session before stabilizing.  
Versus the Japanese yen, the greenback edged higher to 83.85 initially, however, the pair retreated sharply and nose-dived to 82.78 in NY session before rebounding.  
In other news, Fed’s minutes from FOMC meeting indicated that most participants saw benefits of additional easing. Fed’s officials felt it would be unlikely for the economy to slide back into recession but their November forecasts showed downward revision to GDP and upward revision to unemployment in 2011. In addition, U.S. Q3 GDP and deflator came in at 2.5% n 2.2% versus the economists’ forecast of 2.4% and 2.3% respectively.  
Tension in Korea spooked the market and investors dumped riskier assets such as stocks for safe-haven currencies like yen and dollar. Both commodity currencies and stocks fell sharply and DJI ended the day down by 142.21 points or 1.27 percent at 11036.37. Aud/usd slumped from 0.9889 to 0.9708 while nzd/usd tumbled from 0.7732 to 0.7578.  
The British pound also fell sharply in tandem with euro from 1.5965 to 1.5759 in NY session before stabilizing.   
Economic data to be released on Wednesday include:  
Germany Ifo index, U.K. GDP, EU Industrial orders, U.S. Durable goods, ex. Defense, ex. Transport, Jobless claims, Consumption, PCE core, PCE index, Personal income, U. Michigan survey Final, New homes change, Home Price, Building permits, Change of building permits.