Daily Market Outlook by AceTrader

Market Review – 09/02/2010 22:48GMT   

Euro rallies on optimism due to possible European bailout for Greece

Euro rose sharply against the dollar on speculation that European officials’ meeting on Thursday will agree to assist Greece in tackling its budget deficit. Speculation about Greece prompted a recovery in global equities as well. DJI ended the day up 150 points to 10058.   

The single currency staged a strong rebound from an intra-day low of 1.3643 in Australia due to active short-covering on speculation that EU Council may be working on steps to help Greece as European Central Bank’s Trichet left Sydney early to attend a European Council meeting. Although the pair then retreated from 1.3746 to 1.3698 following the initial rise in European morning after a spokesman for the ECB played down the significance of the change in travel plans, saying Trichet had only moved up his return flight to ensure he did not miss a connection, buying interest around 1.3695/00 lifted euro again n the pair hit an intra-day high of 1.3840 in NY afternoon as European Union officials held out the prospect of aiding Greece if the country made progress in reducing its budget deficit. Despite subsequent strong retreat due to the fact that German government spokesman Ulrich Wilhelm called reports that a decision had already in effect been taken “unfounded”, the pair still ended the day at 1.3796 as the daily Financial Times Deutschland also said Germany was preparing an aid package for Greece.  
Cable recovered in Asia from yesterday’s selloff as mixed U.K. data prompted intra-day short-covering. U.K. RICS house prices rose by 32% in Jan versus the common forecast of 27% from previous reading of 30%, although BRC retail sales dropped by 0.7% from previous reading of 4.2%. In spite of cable’s retreat in European morning on active cross-selling in sterling (eur/gbp breached yesterday’s high of 0.8799 to 0.8818) after a report showed that the U.K. trade deficit swelled in December to the widest in almost a year as imports rose faster than exports, the pair rallied in NY due to speculation of a EU bailout plan for Greece. The British pound picked up more upward momentum to as high as 1.5749 in NY afternoon following European governments have agreed in principle to help heavily indebted Greece.  
Economic data to be released on Wednesday include Australia westpac consumer confidence, Japan domestic CGPI, machine orders, U.K. industrial production, manufacturing production, Bank of England quarterly inflation report, U.S. trade balance, Fed budget and Canada trade balance.