Daily FX Market Outlook by AceTrader-22-7-2011

Market Review – 21/07/2011 22:27 GMT

Euro surges after EU leader reached an aid package for Greece

The single currency rallied to a two-week high on Thursday as the euro zone leaders finally agreed on a second bailout package for Greece, easing fears of the crisis spreading.

  
  
The statement following the euro zone summit showed that net contributions of the private sector to the second Greek bailout will be 37 billion euros and the total official financing for the assistance package will be around 109 billion euros. The European Financial Stability Facility (EFSF) will lend to Greece at interest rates between 3.5% and 4.0% as well as allowing the EFSF to intervene in primary and secondary bond markets when the ECB permits.  
  
Although the single currency traded narrowly in Asian session and fell from 1.4295 to a low of 1.4138 in European morning after Eurogroup president Jean-Claude Juncker and Dutch Finance Minister Jan Kees de Jager said a selective Greek default was possible, euro later surged to a two week high after the release of draft summit conclusions. The pair climbed further when French President Nicolas Sarkozy said the EU leaders have agreed to create the beginnings of a European monetary fund and euro eventually climbed to a two-week high of 1.4435 near NY closing. Active cross buying of euro also gave support to the euro cross pairs, eur/jpy, eur/gbp and eur/chf rebounded strongly from 111.45 to 113.15, from 0.8763 to 0.8839 and from 1.1609 to 1.1802 respectively.  
  
Earlier in Australia, Reuters reported that Germany and France had reached a joint position late on Wednesday on a new bailout plan for Greece. This news sent the single currency higher from 1.4210 to 1.4275 ahead of Asian open.  
  
The British pound edged higher in Asian session and rose above Wednesday’s NY high of 1.6167 to 1.6200 in European morning. Later, although cable dropped in tandem with euro to 1.6121, renewed buying lifted the pair and price rallied on dollar’s broad-based weakness after the release of conclusion of the eurozone summit. Sterling eventually climbed to 1.6333 near NY closing.  
  
Versus the Japanese yen, although the greenback bounced briefly and swiftly from Asian low of 78.62 to 79.03 on short-covering ahead of European open, renewed selling pressured price and the pair tanked to 78.34 in NY morning. Later, despite dollar’s recovery to 78.66 in NY midday as New York Times reported that U.S. President Obama and Republican Boehner were close to a deal on the debt ceiling, price retreated immediately after White house denied this news and then fell to a four-month low of 78.28 at NY closing.  
  
The U.S. and European stock markets rose strongly on Thursday. DJI rallied by 1.21% or 153 points to 12724 while FTSE-100, CAC-40 and DAX rose strongly by 0.79%, 1.66% and 0.95% respectively.  
  
Data to be released on Friday include:  
  
Australia Import price index, Export price index, Germany Ifo business climate, Ifo current accessment, EU Industrial orders, Canada CPI, CPI core, Retail sales.

http://www.acetraderfx.com