Daily FX Market Outlook by AceTrader-5-7-2011

Market Review – 04/07/2011 16:19 GMT

Euro pares gain after S&P says debt rollover may put Greece in ‘selective default’

The single currency extended last week’s rally to a fresh one-month high of 1.4580 in Australia on Monday after EU finance ministers promised to release the 5th tranche of 12-bln euro EU/IMF aid package to Greece at EU FinMins’ teleconference on Saturday, however, euro pared most of the gains and retreated after Standard & Poor’s said a debt-rollover plan for Greece may prompt a ‘selective default’ rating for the country. The pair weakened to 1.4496 in relatively thin European session as U.S. Markets were closed for the Independence Day holiday.

Bank of Japan Governor Masaaki Shirakawa said Japanese economy continues to face downward pressure, mainly on output, but showing signs of picking up; Japanese economy likely resume moderate recovery as output improves.’ He also said ‘global economy continues to recover, albeit at a slower pace; global financial markets remain unstable due to worries about Greek sovereign risk.’ The greenback fell briefly from 80.94 to 80.54 versus Japanese yen before recovering on short-covering together with dollar’s rebound against other major currencies.  
In other news, Bloomberg reported that Reed, which runs British’s largest recruitment website, released a report showing that U.K. employment creation accelerated as demand for skilled, highly qualified staff has added fuel to this month’s increase. Despite extending erratic rise from last week’s near 3-month low of 1.5912 to 1.6140 in European morning, the British pound retreated after the release of slightly weaker-than-expected U.K. construction PMI which came in at 53.6 versus the economists’ forecast of 53.7 and cable weakened to 1.6055 before rebounding to 1.6100 on short-covering.  
The Australian dollar dropped from last Friday’s high of 1.0790 to 1.0712 due to a surprise fall in Australian retail sales which decreased by 0.6% versus economists’ forecast of 0.3% increase. The Reserve Bank of Australia is expected to keep rates on hold for the eight straight month on Tuesday at 4.75%.   
Tuesday will see the release of Australia trade balance, German services PMI, eurozone service PMI and retail sales, U.K. Services PMI and US factory orders.