Daily FX Market Outlook by AceTrader 27-4-2011

Market Review – 26/04/2011 18:50 GMT

Euro rises to fresh16-month high on speculation that Fed will maintain its loose monetary policy

Euro hit a fresh 16-month high on Tuesday on speculation that the U.S. Federal Reserve would keep its loose monetary policy to support the U.S. economy. In addition, the euro was also supported by improved risk appetite as the three major U.S. stock markets rose to 2011 highs after upbeat earnings results from Ford Motor Co. together with United Parcel Service Inc. and 3M Co., all 3 companies raised their 2011 earnings forecasts.

Despite the initial brief but sharp fall below Monday’s low of 1.4526 to an intra-day low of 1.4494 at Asian opening after European Central Bank President Jean-Claude Trichet’s euro-bearish remarks, buying interest emerged and lifted the single currency, price then rebounded strongly to 1.4653 in European midday. Later, euro climbed to a marginal high of 1.4658 in New York midday on dollar’s broad-based weakness.  
Earlier, Trichet was quoted as saying that he shared the view that a strong dollar was in the interests of U.S. and he did not see any significant effects of second-round inflation.  
The British pound was little changed against the dollar but fell versus the euro. Despite staging a strong rebound from 1.6437 to 1.6533, cross-selling in sterling versus euro pressured cable to as low as 1.6432 in New York morning, however, intra-day firmness in the single currency lifted the pound to around 1.6495/97 in New York midday. Eur/gbp rallied from 0.8808 to 0.8904 on prospect of widening interest rate differentials.  
The Federal Open Market Committee (FOMC) started its two-day policy meeting on Tuesday and the Fed was widely expected to keep its interest rate at record low of 0-0.25% range on Wednesday. The market’s focus will be on the first regularly scheduled policy decision press conference by the Fed’s Chairman Ben Bernanke in Federal Reserve’s 97-year history.   
The Swiss franc strengthened to its all-time high against the greenback on dollar’s broad-based weakness. Usd/chf tumbled from 0.8852 to 0.8745 before staging a recovery.  
In other news, German government spokesman Steffen Seibert said that decision on Trichet successor would be taken at next EU Summit in June.  
U.S. April consumer confidence came in at 65.4 versus the economists’ forecast of 64.5 and well above previous reading of 63.4 in March.  
Data to be released on Wednesday include:  
U.K. Nationwide house prices, GDP and BBA mortgage Approvals; Japan retail sales; Australia CPI; Germany Gfk consumer confidence survey, CPI, HICP and retail sales; EU industrial orders; U.S. durable goods, Midwest manufacturing, Fed April rate decision and policy statement.