Daily FX Market Outlook by AceTrader-2-8-2011

Market Review – 01/08/2011 21:51 GMT

Swiss franc sets new highs on fears of global growth slowdown

The Swiss franc rallied against the greenback and euro to fresh record highs on Monday on risk aversion as weak U.S. manufacturing data fanned worries about the pace of global economic growth, spurring demand for safe-haven currencies. The single currency also tumbled across its major counterparts.

  
  
Versus the Swiss franc, the greenback recovered from last Friday’s low of 0.7851 to 0.7952 in Asian morning. However, renewed selling sent the pair lower and price tumbled to a fresh lifetime low of 0.7734 on risk aversion after the release of weaker-than-expected U.S. ISM Manufacturing PMI (50.9 for July versus forecast of 54.9) before staging a recovery due to short-covering. Eur/chf also tumbled from 1.1452 to a fresh all-time low of 1.1030.  
  
Although the greenback rose strongly to an intra-day high at 78.05 against the Japanese yen after U.S. President Barack Obama said Republican & Democratic leaders had reached agreement to reduce the deficit and avoid default, dollar retreated to 77.42 on renewed risk aversion after the release of weaker than expected China manufacturing PMI data which came in at 50.7 in July, compared with 50.9 in June whilst HSBC’s China PMI fell to 49.3 in July, the first time below 50.0 in a year. Later, renewed selling at 77.77 pressured the pair and price pierced through last Friday’s low of 76.70 to a 4-1/2 month low of 76.29 after the release of weak U.S. ISM Manufacturing PMI. However, buying interest around March’s record low at 76.25 limited downside and dollar rebounded to 77.28 in NY afternoon.  
  
The single currency edged higher from NZ low of 1.4411 after U.S. President Obama announced leaders fm both parties had reached a deal to raise the U.S. borrowing limit and avoid a calamitous default, rose to 1.4453 in European morning. However, euro retreated sharply from there due to the reversal of U.S. stocks and the pair dropped further to an intra-day low of 1.4185 on risk aversion after the release of weak U.S. ISM Manufacturing PMI but price recovered to 1.4273 in NY afternoon on short-covering. Active cross selling of euro also pressured the single currency as eur/jpy and eur/gbp tumbled from 112.25 to 108.75 and from 0.8805 to 0.8722 respectively.  
  
DJI initially surged 139 points on news of a debt limit hike but later tumbled below 12,000 due to weak U.S. manufacturing data but eventually closed the day at 12,132.49, down by 10.75 points. CAC-40 and DAX tumbled by 2.3% and 2.86% respectively.  
  
Despite the British pound’s brief breach of last Friday’s high of 1.6471 to 1.6477 in tandem with euro in Asian morning, cable dropped from 1.6466 to 1.6396 in European morning after the release of much weaker-than-expected UK PMI data which came in at 49.1 vs forecasts of 51.0 and the previous revised figure of 51.4. Despite sterling’s recovery to 1.6458, the pair tumbled sharply with euro on risk aversions and pierced through last Friday’s low of 1.6261 to 1.6238 in NY morning before recovering.  
  
Data to be released on Tuesday include:  
  
Australia House price index, Building Approvals, RBA rate decision, Swiss Retail sales, PMI, U.K. PMI construction, EU PPI, U.S. Personal consumption, Personal income, PCE core, PCE index.

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