Daily FX Market Outlook by AceTrader 7-1-2011

Market Review – 06/01/2011 21:36 GMT

Euro falls below $1.30 level to a 5-week low against dollar

The single currency tumbled to a five-week low against the dollar on Thursday as the recent release of upbeat U.S. economic data painted a rosier picture of the US economy while worries over the European sovereign debt crisis continued to pressure euro. Traders would pay attention to the release of U.S. non-farm payroll data due out on Friday following the strong ADP jobs data released earlier this week.

The single currency remained under pressure after meeting renewed selling at 1.3170 in Asian morning on lingering concerns over European sovereign debt crises. Price eventually edged lower and once fell below 1.3000 level and reached 1.2997 in NY before recovery.  
In other news, the Daily Telegraph reported that the European Commission would discuss a plan to spread the cost of bank failures to senior bond holders. Bloomberg also reported that the EU might give regulators power to block new products and limit trading risks at banks deemed too big to fail.  
The spreads between peripheral eurozone government bond yields and German debt widened on Thursday as driven by gains in Portuguese yields following Portugal’s debt agency said it would issue a total of between 750 million euros and 1.25 billion euros in two bond maturities at an auction on Jan 12.   
The greenback traded narrowly against the Japanese yen after marginal rise above Wednesday’s high of 83.38 to 83.40 at Tokyo opening. The greenback retreated from there and then edged lower to 82.88 but the pair managed to rebound and spent the rest of the day inside the range of 82.88-83.40 as traders waited for the release of US non-farm payroll data on Friday.  
The British pound initially edged higher in Asia but cable fell immediately after the release of a surprise sharp fall in December U.K. PMI Services index, which actually came in at 49.7 vs forecast of 52.8. The index dropped below the 50.0 mark to a 20-month low, analysts attributed this sharp drop to the severe wintry conditions which hit the U.K. last month. Sterling declined from London morning high of 1.5564 after the data and eventually fell to 1.5450 in NY.  
Economic indicators to be released on Friday include:    
Swiss Unemployment rate, Germany trade data and Industrial production, EU GDP, US non-farm payrolls and jobs data.