Daily FX Market Outlook by AceTrader-27-5-2011

Market Review – 26/05/2011 21:16 GMT

Euro ends higher against the greenback after intra-day volatile movements

The single currency traded in a volatile manner on Thursday, having staged initial rally from Asian morning low of 1.4068 to a session high of 1.4206 in New York morning on speculation that China would increase its purchases of European bonds together with greenback’s broad-based weakness after the release of weaker-than-expected U.S. GDP data before nose-dived to as low as 1.4067 due to comments from Eurogroup head Jean-Claude Juncker, who said ‘International Monetary Fund may not release next tranche to Greece next month’ before recovery was seen later. Euro also weakened against the British pound and Swiss franc as eur/gbp and eur/chf dropped sharply to a two-month low of 0.8611 and a fresh record low of 1.2205 respectively.

Although cable was under pressure and dropped from Asian morning high of 1.6336 to 1.6273 after the release of index of sales volumes at U.K. consumer-services companies (including hotels and restaurants) which fell to the lowest since November 2009, renewed active cross-buying in sterling supported the British pound and cable extended the upmove from Tuesday’s low of 1.6055 to a session high of 1.6405.  
Greenback’s broad-based weakness due to weaker-than-expected U.S. economic growth in the first quarter pressured the U.S. dollar against the Japanese yen and Swiss franc. Usd/jpy dropped sharply from 81.87 to a session low of 81.15 while usd/chf ratcheted lower to as low as 0.8650 before stabilising.  
On the data front, U.S. Q1 annualised GDP came in at 1.8% versus economists’ forecast of 2.1% and 1.8% in the prior quarter. U.S. Q1 GDP deflator came in at 1.9% versus economists’ forecast of 1.9% and 1.9% in the prior quarter. U.S. Q1 core personal consumption expenditures (PCE) q/q came in at 1.4% versus economists’ expectation of 1.5% and previous reading of 1.5%. U.S. Jobless claims came in at 424,000 versus economists’ expectation of 400,000 and revised previous reading of 414,000.  
Data to be released on Friday include:   
U.K. Gfk survey and nationwide house prices; Japan national and Tokyo CPI and retail sales; German CPI and HICP preliminary; Eurozone business climate, economic sentiment, industrial sentiment and consumer Sentiment; Swiss KOF indicator; U.S. personal spending, personal income, PCE index and PCE core, University of Michigan survey final and pending home sales.