Daily FX Market Outlook by AceTrader 28-12-2010

Market Review – 27/12/2010 21:42 GMT

Euro rebounds against dollar after China’s rate hike

The single currency initially fell against dollar on Monday after weekend’s quarter-point rate hike by PBOC in its key one-year lending and deposit rates on X’mas Day (its 2nd rise since mid-Oct) prompted traders to buy dollar and yen on risk aversion.

Euro dropped to 1.3072 after the surprise rate hike but the single currency swiftly rebounded from said low as traders brushed aside the concerns about the rate hike and pushed the euro higher. The single currency later climbed to 1.3171 before stabilizing.  
  
The dollar fell to a three-week low against the yen as China raised interest rate to contain inflation. The dollar was also pressured after an auction of $35 billion auction in 2-year US Treasury notes was met with strong demand. The greenback briefly rose to 82.98 against the Japanese yen in Asian morning, however, the pair fell to 82.65 and then spent the rest of the day inside the aforesaid range.   
  
The British pound fell in tandem with euro initially and reached 1.5400 due to a drop in U.K. Hometrack Housing Survey which showed U.K. house asking prices fell 0.4% on the month in Dec and were down 1.6% on the year. Sterling then rebounded on short-covering and price climbed back to 1.5456 but cable dropped sharply to 1.5370 in part due to active cross-selling in sterling as eur/gbp jumped to 0.8558 from 0.8485.   
  
Tuesday will be holidays in New Zealand, Australia, U.K. and Canada.    
  
Economic indicators to be released on Tuesday include:  
  
Japan Household spending, National CPI Y/Y, National CPI (core) Y/Y, Tokyo CPI Y/Y, Unemployment rate, U.S. Consumer confidence and Richmond Fed Manuf.

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