Daily FX Market Outlook by AceTrader 13-1-2011

Market Review – 12/01/2011 21:41 GMT

Euro surges versus dollar as Portugal auction demand rises

The euro strengthened against the dollar on Wednesday after Portugal sold bonds due in 2020 at a yield of 6.716%, lower than 6.806% at the previous auction Nov. 10. The auction was met with increased demand as investors asked for 3.2 times the amount of 10- year bonds sold, up from 2.1 times at the November sale.

   
  
The single currency edged higher in Asia and reached 1.3047 in European morning. Although euro staged a pullback to 1.2961 on profit-taking, the single currency subsequently surged from said intra-day low and eventually climbed to 1.3145 in NY session.  
  
Traders would wait for the results of the Spanish and Italian bond auctions together with ECB rate decision on Thursday. In other news, an academic adviser to the People’s Bank of China said no one wishes to see the euro disappear and Europe’s debt crisis did not alter the long-term strategic position of the euro in the global monetary system.   
  
The greenback initially fell to 82.98 against the Japanese yen from 83.42, however, the pair rose sharply to 83.47 before tumbling to 82.80 on dollar’s broad-based decline in NY.  
  
Fed’s beige book indicated that all Fed districts showed employment levels were rising in at least some sectors, generally by modest amounts. U.S. economic activity continued to expand moderately through early January and manufacturing sector continued to improve across all Fed districts. Retail spending improved across all districts but banking and financial services were mixed. Most Fed districts indicated business contacts were positive about outlook but still cautious, upward pressure on wages was not seen yet.   
  
Although cable climbed to 1.5681 in European morning, price quickly retreated after release of larger-than-expected U.K. November trade deficit, which widened to 8.736 billion pounds vs forecast of 8.33 billion pounds, the Nov figure was the highest (worse) since records began in Jan 1980. Cable staged a pullback to 1.5583 but swiftly surged from there in tandem with euro and later rallied to 1.5780 in NY before stabilizing.  
  
Economic indicators to be released on Thursday include:  
  
Australia jobs data, UK industrial production, manufacturing and Band of England rate decision, ECB rate decision and press conference, Canada trade data, and US trade balance, jobless claims and PPI.

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