Daily Market Outlook by AceTrader

Market Review – 02/02/2010 23:13      All times in GMT   

Dollar falls on improved risk appetite on upbeat U.S. home data

Euro fell initially in Asian morning after RBA held rates unchanged to as low as 1.3886 against the dollar.

Despite euro’s brief rise to 1.3952 in European morning, the single currency retreated due to renewed risk aversion on concerns about a possible debt default by one or more member states, which in turn might threaten the euro and even the existence of the eurozone. However, the single currency edged higher in European session after the release of stronger-than-expected eurozone PPI data. Eurozone PPI came in at 0.1% m/m and -2.9% y/y in December versus the expectation of 0.0% m/m as well as -3.0% respectively. Euro continued to trade under a firm undertone in N.Y session. Today, EU will issue a review of Greece’s budget-cutting plans.  
Although the greenback maintained a firm undertone after Monday’s rally to 90.94 versus the Japanese yen in Australia, after the RBA’s rate decision, the pair retreated and moved sideways as investors waited for the release of U.S. pending home sales and the testimony by U.S. Treasury Geithner. U.S. pending home sales index rose by 1.0% to 96.6 from downwardly revised reading of 95.60. In addition, U.S. Treasury Secretary Timothy Geithner appealed to Republicans to join a bipartisan bid to wrestle down soaring deficits that he blamed largely on the former Bush administration. The dollar then fell to as low as 90.26 against the yen in NY morning before moving sideways.  
As Reserve Bank of Australia unexpectedly kept interest rates unchanged at 3.75% versus economists’ forecast of a rate hike to 4.00% on Tuesday on the consideration that ‘credit conditions remained difficult in major countries and concerns regarding some sovereign have increased.’, the Australian dollar fell to its lowest level in six weeks versus the greenback to 0.8780, dragging eur/yen, euro and cable lower earlier in Asian session. Aud/usd then rebounded on short-covering in European morning.   
Data to be released on Wednesday include U.K. Nationwide consumer confidence, Australia trade balance, Germany retail sales, Germany services PMI, U.K. services PMI, EU retail sales, U.S. ADP employment and U.S. ISM non-manufacturing.