Daily FX Market Outlook by AceTrader-9-5-2011

Market Review – 06/05/2011 20:13 GMT

Euro tumbles after German magazine reports that Greece may exit eurozone

Euro tanked broadly again on Friday in New York midday after German Der Spiegel magazine reported that Greece Government raised the possibility of leaving eurozone and was considering to reintroduce its own currency. Later, eurozone officials including Eurogroup Chairman Jean-Claude Juncker, Austrian Finance Minister spokesman, French Finance Ministry official and Slovak Finance Minister Miklos came out and tried to comfort market by saying that the report was not valid. A Greek official also denied that Greece was considering the idea of leaving the eurozone.

Reuters news report citing source from German coalition source confirmed ‘there is crisis meeting in Luxembourg with German Finance Minister Wolfgang Schaeuble and Deputy Finance Minister Joerg Asmussen taking part.’  
Latest news from Reuters at 21:40 GMT quoted comments from Eurogroup chairman Jean-Claude Juncker who said that ‘Luxembourg didn’t discuss Greece leaving Eurozone or Greek debt restructuring; Luxembourg meeting was attended by Germany, France, Italy and Spain.’  
Earlier in the session, although the euro managed to stage a recovery in Asian morning following the sharp selloff in the previous session due to mildly dovish comments from European Central Bank President Jean-Claude Trichet, renewed selling at 1.4588 capped the euro’s upside and price ratcheted lower in European trading session. Despite the single currency’s knee-jerk reaction after the release of mixed U.S. jobs data, price fell to a low of 1.4457 before staging a rebound in New York morning. However, the euro tumbled to as low as 1.4310 in late New York session on speculation that Greece may stop using the shared currency. Eur/jpy, eur/gbp, eur/chf also tanked from 117.60 to 115.23, from 0.8899 to 0.8745 and from 1.2748 to 1.2575 respectively.  
The British pound was little changed against the dollar but rallied against the euro. Despite cable’s brief breach of previous session’s low of 1.6357 after meeting renewed selling at 1.6434 in Asian morning, price then rebounded strongly from 1.6355 after the release of higher-than-expected U.K. core PPI data which came in at 0.6% m/m and 3.4% y/y versus economists’ forecast of 0.3% m/m and 3.0% y/y respectively and despite rising to an intra-day high of 1.6464 in New York morning, the pound then retreated in tandem with the single currency in late New York session but cable’s downside was limited due to active cross-buying in sterling versus the euro.  
U.S. jobs report showed 244,000 jobs were created in the U.S. economy in April, the figure was higher than market’s forecast of 186,000, however, unemployment rate rose to 9.0% versus forecast of 8.8%. Private payrolls number, however, climbed to 268,000 versus forecast of 200,000, this was the largest increase since February 2006.  
Data to be released next week include:   
Germany export and import and trade balance; EU Sentix investor confidence; Canadian housing starts on Monday.   
U.K. BRC retail sales and RICS house prices; Australian trade balance and NAB business confidence; China trade balance and imports and exports; Swiss CPI; U.S. export and import price indicies and wholesale inventories on Tuesday.   
China consumer price index, industrial production, retail sales and fixed assets investment urban YTD; Japan leading indicators; Germany CPI and HICP final; U.K. trade balance; Canadian exports and imports and trade balance; U.S. Fed budget on Wednesday.   
Japan current account and economic watch DI; German wholesale price index; U.K. industrial and manufacturing production; EU industrial production; Canadian new housing price index; U.S. jobless claims, PPI, retail sales and business inventories on Thursday.   
German GDP; Swiss combined PPI; EU GDP; U.S. CPI, real earnings and University of Michigan survey final on Friday.