Daily FX Market Outlook by AceTrader 20-4-2011

Market Review – 19/04/2011 20:02 GMT

Euro rebounds on short-covering even sovereign debt fears remain

Euro staged a short-covering rebound on Tuesday even fears over a possible Greek debt restructuring still lingered on. The single currency moved relatively narrowly in subdued Asian trading after the sharp fall in previous European and U.S. sessions on broad-based unwinding of long euro positions versus the usd, yen, gbp and chf. Despite a brief dip to an intra-day low of 1.4206 in European morning after Greek newspapers reported that an European Commission source was quoted that Greece had accepted mild restructuring as unavoidable, buying interest there lifted price and euro ratcheted higher across the board in Europe and New York session and eventually climbed to a day’s high of 1.4353 before easing. Eur/jpy, eur/gbp, and eur/chf rebounded strongly from 117.09 to 118.45, from 0.8743 to 0.8794 and from 1.2730 to 1.2915 respectively.

The higher-than-expected German and eurozone manufacturing Purchasing Managers Index (PMI) also supported the euro. German April PMI manufacturing came in at 61.7 versus the previous reading of 60.9 while eurozone April PMI manufacturing came in at 57.7 versus economist’s forecast of 57.0.  
No U.K. economic data were due out on Tuesday and the British pound tracked euro’s intra-day movement closely. Despite initial sideways trading after a brief retreat from Asian high of 1.6274, buying interest at 1.6232 lifted cable in European morning and the pound eventually climbed to as high as 1.6339 in New York morning before easing.   
Spot gold and silver prices extended recent ascent to a fresh record high of $1498.60/oz and a new 31-year high of $44.09/oz respectively amid sovereign debt problems in the U.S. and Europe.  
Canadian dollar rallied against the greenback after Statistics Canada reported that the consumer price index advanced to a two-year high of 3.3% in March from a year earlier, compared with 2.2% increase in previous month. Usd/cad tumbled from 0.9666 to 0.9548.  
U.S. housing starts rose by 7.2% to 549,000 versus economists’ forecast of 520,000 whilst building permits increased by 11.2% to 594,000 versus the expectation of 540,000.   
Data to be released on Wednesday include:  
Japan import / export, trade balance and tertiary industry index; Australia Westpac consumer confidence and import / export price index; Germany PPI; Bank of England minutes of the MPC’s meeting; U.S. existing home sales.