Daily FX Market Outlook by AceTrader-9-9-2011

Market Review – 08/09/2011 21:55 GMT

Euro tumbles on Trichet and Bernanke’s comments

The single currency continued its recent steep descent and tumbled on Thursday against all major currencies as ECB President Jean-Claude Trichet, whose 8-year term will end on October 31, said in ECB’s monetary policy press conference that there is ‘intensified downside risks’ in European economy and inflation has remained elevated. Later in NY afternoon, euro extended its intra-day decline after Fed Chairman Ben Bernanke did not provide details of any new stimulus measures, however, he said ‘Fed sees little indication that higher rate of inflation this year has become ingrained; will do all it can to restore high rates of growth, employment.’

Earlier in the day, although the single currency rose briefly from Asian low at 1.4051 to 1.4089 in European morning, euro then tumbled to 1.3945 in NY morning after dovish comments from ECB’s Trichet. Later, the pair tanked further to session low at 1.3875 on dollar’s broad-based strength after Fed’s Bernanke refused to offer more steps on new round of monetary policies.  
ECB president Jean-Claude Trichet held the usual press conference after ECB kept benchmark interest rate unchanged at 1.50% as expected and said ‘inflation rates are likely to stay above 2% over coming months; underlying pace of monetary expansion is still moderate; liquidity remains ample; expect moderate growth in months ahead, but uncertainty particularly high; downside risks to economy have intensified.’  
Active cross selling of euro vs other currencies pressured the single currency as eur/jpy and eur/gbp tumbled from 109.03 to 107.54 and from 0.8842 to 0.8695 respectively.  
Versus the Japanese yen, although the greenback traded narrowly in Asia and then rebounded to 77.15 in European session n later climbed to 77.59 in NY afternoon on broad-based strength of dollar due to Bernanke’s comments before stabilising.  
The British pound edged marginally lower below Wednesday’s low of 1.5919 to 1.5914 in European morning. However, short-covering and cross-buying in sterling quickly lifted cable to 1.6084, the pound retreated sharply in tandem with euro to 1.5952 in NY afternoon.  
The BoE maintained its bank rate at 0.5% as expected and asset purchase target remained unchanged at 200(gbp) billion.  
Data to be released on Friday:  
Japan GDP, Consumer confidence, China retail sales, Ind Prodn, Consumer n Producer price index, Germany CPI, HICP, WPI, UK PPI, Canada unemployment, Housing starts, U.S. Wholesale inventories.