Daily Market Outlook by AceTrader

Market Review – 28/01/2010 21:23      All times in GMT   

Dollar hits a 6-1/2-month high vs euro; yen gains

The euro declined to the lowest level against the dollar and yen in more than six months as Greece’s and Portugal’s budget crises spurred a retreat from riskier assets. 

The euro fell on Thursday to its lowest level in more than six months to 1.3930 in Asia due to persistent concerns over the fiscal health in some smaller eurozone countries such as Greece and Portugal. The single currency rebounded strongly from the low on short-covering and reached an intra-day high of 1.4053 in European morning as ECB ‘s Gertrude Tumpel-Gugerell said it is time for fiscal and monetary policy to return gradually to normal after the emergency steps taken to combat the financial crisis. However, the single currency fell sharply again after European equities pared all of their early gains and dropped to as low as 1.3946 in NY morning before stabilizing. Euro ended the day down over 0.24%.  
Although the British pound rose above Tuesday’s high of 1.6269 to 1.6277 versus the greenback, cable tumbled after rating agency Standard & Poor’s said that ‘U.K. banks are no longer among the world’s most stable and low-risk as the economy stagnates.’ The pair hit an intra-day low of 1.6113 in NY afternoon before stabilising.   
In other news, German unemployment rose by 6,000, compared to the consensus forecast of an increase of 18,000. German unemployment rate was 8.2% in January, in line with economists’ forecast.  
Versus the yen, the greenback initially extended Wednesday’s rally as regional stocks opened higher in Asia (N225 was over 1.5%) following Fed’s rate decision. Risk appetite and active cross-selling in yen pushed the pair to 90.56 in European morning. However, the pair retreated on renewed risk aversion and the fall picked up more momentum after the weaker-than expected U.S. data. U.S. durable goods increased by 0.3%, much lower than the common anticipation of 2.0%. U.S. jobless claims came in at 470,000 (more than the expectation of 450,000) from the previous reading of 478,000. The pair reached an intra-day low of 89.62 in NY mid-day and closed the day down over 0.05%.  
Data to be released on Friday include New Zealand trade balance, Japan manufacturing PMI, National CPI, unemployment rate, household spending, industrial production, housing starts, construction orders, U.K. Gfk survey, EU HICP flash, Unemployment rate, Swiss KOF indicator, U.S. building permits, PCE core, GDP, Chicago PMI, U. Michigan survey, Canada GDP and PPI.