Daily FX Market Outlook by AceTrader 3-5-2011

Market Review – 2/05/2011 19:57 GMT

Euro falls from a 17-month high in late New York as metal prices tumble

Euro retreated sharply from a 17-month high in late New York trading on Monday due to profit-taking together with another wave of heavy selling in commodities especially in spot gold and silver.   
Earlier in Asian midday, the single currency fell sharply from 1.4864 to an intra-day low of 1.4762 after U.S. President Barack Obama said al-Qaeda leader Osama bin Laden had been killed by the U.S. military in Pakistan. However, the single currency rebounded in thin Europe session (London was closed for May Day holiday) due to the better-than-expected German and eurozone Manufacturing PMI data, fueling speculation that overall growth in the region would prompt the ECB to keep raising interest rates. Later, the euro climbed above last week’s top of 1.4882 to a 17-month high of 1.4903 in New York moring due to hawkish remarks from Eurogroup chief Jean-Claude Juncker before retreating in late New York trading.  
Eurogroup head Jean-Claude Juncker was quoted as saying that strength of euro is not giving rise to concern and is mainly due to dollar’s weakness. He added inflation developments in euro area are of some concern. Juncker also said euro area would give a full fledged answer to Portugal situation by mid-May and restructuring Greek debt was not an option.   
German manufacturing PMI rose to 62.0 in April versus economists’ forecast of 61.7 and the previous reading of 61.7 in March. Eurozone Markit final manufacturing PMI also rose to 58.0, against the expectation of 57.7, suggesting factories continued to ramp up their prices.  
The British pound tracked euro’s intra-day movement closely. Despite falling swiftly from an intra-day high of 1.6739 to 1.6644, cable then edged higher in European session, however, the pound’s upside was limited to 1.6720/22 and price later declined to a day’s low of 1.6642 in late New York session in tandem with the single currency. Cross-selling in sterling versus the euro also weighed on the pound as eur/gbp strengthened from 0.8857 to as high as 0.8920.  
The dollar resumed its recent decline against the Japanese yen to 81.00 in Asian morning, however, the pair then rebounded strongly to 81.68 after news of Bin Laden’s death. Later, renewed selling interest capped intra-day rebound and price later ratcheted lower again in New York morning before staging another recovery.  
Spot gold price tumbled sharply from around 1575.00/oz to 1542.30/oz in late New York session after early resumption of LT uptrend to a fresh record high of 1575.70 in Australian session while spot silver price also tanked from 47.31 to 43.73 in late New York trading.  
Data to be released on Tuesday include:   
Tuesday will be a holiday in Japan.    

China Non-manufacturing PMI; U.K. Halifax hse prices, manufacturing PMI and CBI distribution trade; EU PPI; U.S. durable goods (revised) and factory orders.