Daily FX Market Outlook by AceTrader 8-4-2011

Market Review – 07/04/2011 19:48 GMT

Euro falls as ECB Trichet turns cautious on more rate hike

Euro declined on Thursday after European Central Bank President Jean-Claude Trichet said in a press conference following interest rate announcement that ‘we did not decide that it was the first of a series of interest-rate increases’. The ECB raised its lending rate to 1.25% from record low of 1.00% to tame inflation pressure, making ECB the first major central bank to hike rates since July 2008.

Earlier, euro was under selling pressure in Asia trading after rising to a 14-month high of 1.4350 on Wednesday and despite the brief bounce from 1.4266 to 1.4327 after the rate decision, price then fell swiftly to an intra-day low of 1.4243 as Trichet’s tone was less hawkish than some investors had anticipated, however, buying interest there limited the euro’s downside and the single currency managed to rebound later in New York midday.  
In the other news, Fitch Ratings said Portugal’s decision to seek financial assistance from the European Union will help financial stability in the economically struggling European nation and the firm will remove Portugal from downgrade watch if an agreement on help is reached.  
The British pound was little changed after Bank of England kept rate unchanged as widely expected. Although cable ratcheted lower in Asian session to a day’s low of 1.6260 (5 pips above Wednesday’s low), buying interest there in European morning lifted the pound up to as high as 1.6349, however, failing to re-test previous session’s 1.6364 high prompted price to fall to 1.6279/80 after the Bank of England held its benchmark rate at 0.5% and maintained its asset-purchase program at 200 billion pounds.  
The Japanese yen strengthened across the board after a magnitude 7.1 aftershock and tsunami alert shook northeastern Japan. Usd/jpy pair ratcheted lower in Asian and European sessions after failing to penetrate previous session’s 85.53 high, price then dropped briefly to a day’s low of 84.60 after the news. Eur/jpy, aud/jpy and gbp/jpy also retreated from multi-month highs of 122.55 to 120.76, 89.59 to 88.11, 139.53 to 137.91 respectively.  
Data to be released on Friday include:  
Japan current account and economic watch DI; German export and import; U.K. core, input and output PPI; Canada employment change, unemployment rate and housing starts; U.S. wholesale inventories.