Daily Market Outlook by AceTrader

Market Review – 16/02/2010 21:57GMT

Euro rebounds on short-covering after Greece said it won’t need EU bailout

Euro rose against the greenback on Tuesday after a Greek official said the nation is ahead of its deficit-reduction goals and will not require any bailout from the European Union.   

Euro staged a rebound from 1.3588 low against the dollar in Asia as investors bet the single currency had slipped too far in recent weeks. Although the pair retreated from 1.3682 in European morning to as low as 1.3634 in European afternoon after EU finance ministers set Greece a deadline of May 15 to take ‘urgent measures’ to rein in its budget deficit in addition to a mid-March deadline for a review of its progress, euro rebounded and picked up more upward momentum after the release of U.S. economic data. U.S. NY Fed’s Empire state index rose to 24.91 in February (economists’ forecast was 17.00) from 15.92 in January. U.S. net overall capital inflows into the United States rose to $60.9 billion in December fm an inflow of $30.7 billion in November. NAHB housing market index came in at 17.0 versus the consensus forecast of 16.0. The single currency further rallied to intra-day high of 1.3780 in U.S. afternoon on the rise of U.S. equities. DJI ended the day up 1.68% to 10268.  
The British pound rose in tandem with euro in Asian trading and reached 1.5731 in European morning. Although cable reterated sharply to an intra-day low at 1.5628 on cross-inspired selling in sterling in U.S. morning (eur/gbp rose from 0.8686 to 0.8734), the pair subsequently rebounded in tandem with euro after the release of U.S. economic data and hit intra-day high of 1.5795 in U.S.afternoon on the rise of DJI. On other news, U.K. CPI for January came in at -0.2% m/m and 3.5% y/y, much or less in line with economists’ forecast of -0.1% m/m and 3.5% y/y respectively. U.K. RPI were 0.0% m/m as well as 3.7% y/y whilst the core RPI were 0.0% and 4.6%. U.K. house prices rose by a seasonally adjusted 0.8% on the month in December, leaving them up 2.9% on the year.  
Against the Japanese yen, the dollar rebounded from intra-day low of 89.71 in Asian afternoon and picked up more upward momentum after the release of higher-than-expected U.S. NY Fed’s Empire state index and TIC flows. Although the pair rose to intra-day high of 90.52 in NY mid-day, the greenback then retreated and closed at 90.13 due to profit taking.  
Economic data to be released on Wednesday include Australia westpac leading economic index, Japan Tankan reports, tertiary industry index, machines tool orders, U.K. average earnings, claimant count, unemployment rate, BOE meeting minutes, EU trade balance, U.S. building permits, export price index, import price index, housing starts, capacity utilisation, industrial production, FOMC meeting minutes and Fed budget.