Daily Market Outlook by AceTrader

Market Review – 27/02/2010 01:53GMT

Dollar falls vs euro & yen after weak U.S. home sales and Greek aid

Euro maintained a firm footing on Friday in Asia and European morning following its previous day’s rebound, however, price retreated in NY morning after the release of higher-than-expected U.S. revised GDP which came in at 5.9% y/y for the last quarter of 2009 compared to economists’ forecast of 5.7% and Chicago PMI (62.6 versus the consensus forecast of 60.0).  

Euro later rebounded near European closing when sales of U.S. existing homes unexpectedly fell last month. The pair climbed to an intra-day high of 1.3683 in NY mid-day on active cross-inspired buying versus sterling (eur/gbp rallied to a 6-week high of 0.8973) due to a Bloomberg report citing four unidentified German lawmakers that Germany may buy Greek bonds through lender KfW Group. The report also indicated that KfW’s actions would be part of the European plan to aid Greece with as much as 25 billion euros. Although the single currency retreated in NY afternoon, price still ended the day up 0.58% at 1.3630.  
Versus the Japanese yen, despite dollar’s initial recovery to 89.51 at Tokyo opening on speculation Japanese importers would settle overseas accounts on the last trading day of the month and Japanese finance companies were scheduled to raise 1.44 trillion yen ($16.1 billion) on Friday for Toshin mutual funds, the pair retreated on renewed cross-buying in the yen in European morning and hit an intra-day low of 88.74 in U.S. afternoon after release of weak U.S. existing home sales in Jan, sales had dropped by 7.2% to 5.05 million versus economist’s forecast of 1.0% increase to 5.5 million.  
The British pound rebounded very briefly in European morning to 1.5327 after UK Q4 GDP was revised slightly higher than expected. However, the data failed to offset deeper worries over the UK economy after U.K. Finance Minister Alistair Darling said Britain still faces much economic uncertainty despite better-than-expected fourth quarter GDP figures released earlier, the pair remained under pressure and fell further in U.S. morning to 1.5152 low before rebounding on short-covering and closed at 1.5234.  
Economic data to be released next week include Australia Current account, Germany Import price index, PMI manufacturing, Swiss PMI, EU PMI manufacturing, Unemployment rate, U.K. PMI manufacturing, U.S. Personal spending, PCE core, Personal income, Construction spending, ISM manufacturing, Canada GDP, PP on Monday, Japan Household spending, Unemployment rate, Australia Retail sales, RBA rate decision, Swiss GDP, Germany Import price index, U.K. PMI construction, EU HICP flash, PPI, Canada BOC rate decision on Tuesday, Australia GDP, Germany PMI service, U.K. PMI service, Nationwide Consumer Confidence, EU PMI service, Retail sales, U.S. ADP employment, ISM non-manufacturing, Beige Book on Wednesday, Japan Business capex, Australia Trade balance, Swiss SNB’s 2009 Annual Result, EU GDP, U.K. BOE rate decision, ECB rate decision, U.S. Jobless claims, Labour cost, Productivity, Durable goods (rev.), ex. Defense (rev.), ex. Transport (rev.), Factory orders, Pending home sales, Canada Building permits, Ivey PMI on Thursday, U.K. U.K. Halifax hse prices, PPI core, PPI input, PPI output, Germany Factory orders, U.S. Avg. hourly earnings, Non-farm payrolls and Unemployment rate on Friday.