Daily FX Market Outlook by AceTrader 19-4-2011

Market Review – 18/04/2011 19:50 GMT

Euro tumbles as European sovereign debt fears mount

Euro tanked on Monday with increasing fear of a possible Greek debt restructuring and the yield on Greece’s 2-year bonds surged to a record high of 19.4%. In addition, Standard & Poor’s U.S. debt outlook downgrade from stable to negative dampened risk appetite, increasing safe-haven demand for the dollar, the Japanese yen and the Swiss franc.

Standard & Poor’s revised its outlook on the United States’ long-term rating from stable to negative but affirmed its AAA sovereign credit rating.  
Investors ignored Greece’s claims that it will not need to restructure its debt. The government denied a Greek newspaper report that it wanted to extend maturities on its outstanding debt.   
The single currency came under heavy selling pressure at Asian opening after bearish news on Sunday that the anti-euro True Finns party in Finland had made huge gains in the parliamentary election and price continued to ratchet lower in Asian and European sessions. Despite staging a brief but strong rebound from 1.4262 to 1.4350 after Standard & Poor’s lowered its U.S. credit-rating outlook in New York morning, aggressive cross-selling in euro pushed the single currency sharply lower to a day’s low of 1.4156 before rebounding on short-covering. Eur/jpy, eur/gbp and eur/chf tanked from 120.04 to 116.49, from 0.8843 to 0.8746 and from 1.2887 to 1.2730 respectively.  
The British pound tracked intra-day movement of euro closely and ratcheted lower from Asian high of 1.6325 to 1.6244 in European morning. Later, although cable staged a strong rebound to as high as 1.6329 in New York morning, price then tumbled to a day’s low of 1.6166 before staging another strong correction in New York midday.  
The Japanese Yen rose across the board on safe-haven demands. Usd/jpy fell sharply from Asian high of 83.27 to as low as 82.19 in New York morning due partly to 50 basis points increase in the required reserve ratio by China’s central bank on Sunday before staging a rebound. Aud/jpy and gbp/jpy also tumbled from 87.90 to 86.01 and from 135.86 to 133.01 respectively.   
Data to be released on Tuesday include:  
Reserve Bank of Australia’s board April minutes; Japan Consumer confidence and machine tools orders; Germany manufacturing and service PMI; EU manufacturing and service PMI and current account; Canada CPI, leading indicators and wholesale sales; U.S. housing starts and building permits.