Daily Market Outlook by AceTrader

Market Review – 23/02/2010 22:46GMT

Dollar weakens versus yen but gains against euro on weak US consumer confidence

The dollar tumbled against the yen but rose against the euro after US consumer confidence fell to a 10-month low and sapped risk appetite.  

Although in European morning euro rose to an intra-day high at 1.3693 against the greenback on active cross-inspired buying due to rumour of possible SNB’s intervention (eur/chf rose from an intra-day low of 1.4617 to 1.4687 high), the single currency then fell sharply after the release of weaker-than-expected German Ifo index which was 95.2 in February versus economists’ expectation of 96.1 and below 95.8 in January. The pair picked up more downward momentum as German Economy Minister Rainer Bruederle expressed dissatisfaction with Greece and indicated that each eurozone country is responsible for doing its own homework. Euro declined to an intra-day low of 1.3496 in U.S. afternoon after a report showed a decrease in U.S. home prices in 20 metropolitan areas in December and U.S. consumer confidence came in at a 10-month low at 46, compared to the consensus forecast of 55.0 from the revised previous reading of 56.5.  
Versus the Japanese yen, intra-day cross unwinding in the yen has continued to pressure the dollar in Asia despite a brief rise to 91.30 high in Australia. The pair fell to 89.92 low in U.S. afternoon on active cross buying in the yen (gbp/jpy fell to an intra-day low of 138.76) due to weakness in U.S. equities and fall in risk appetite after the release of the weaker-than-expected U.S. consumer confidence. DJI ended the day down 100 points to 10282.  
The British pound rose in tandem with euro in Asia and hit an intra-day high at 1.5575 in European morning. Cable then pared the early gain and tumbled after Bank of England Governor King said Britain’s economic recovery is fragile but some signs of a recovery are in demand abroad and at home. King’s comments were read as a reminder that the recovery is still tenuous and risk of another dip in economic activity cannot be ruled out. The pair reached an intra-day low of 1.5395 in European mid-day as BoE policymakers said further asset purchases under its quantitative easing programme were possible before staging a minor rebound on short covering and closing the day at 1.5422.  
Economic data to be released on Wednesday include Japan CSPI, export, import, trade balance, Germany GDP, Gfk index, Exports, Imports, EU Industrial orders and U.S. New home sales.