Daily Market Outlook by AceTrader

Market Review – 01/03/2010 22:56GMT

Sterling tumbles against dollar on political woes

The single currency declined against the U.S. dollar on Monday, led by a sharp sell-off in pound and lingering uncertainty over a bailout for Greece. The cable hit a 10-month low and was on track for its biggest one-day drop since October after news of potential political stability in the coming U.K. election.

The cable extended recent selloff in Asia on Monday. The pound tumbled against the dollar as much as 3% to intra-day low of 1.4781 in European mid-day, the lowest level since May 1 as polls showed Britain may have its first minority government since 1974, hampering efforts to reduce the nation’s debt. However, cable staged a strong rebound from there on the release of weaker-than-expected U.S. economic data. Despite the pullback, sterling still closed the day down over 1.3%.  
The single currency fell as much as 1.3% against the dollar on Monday, the most since Feb. 17. Despite a brief rise to 1.3665 in European morning, the pair fell sharply from there as EU Monetary Affairs Commissioner Olli Rehn said that Greece must deepen measures to reduce its budget deficit. The euro tumbled to 1.3460 in NY morning before staging a strong rebound on the release of weaker-than-expected U.S. economic data. Despite the recovery, the single currency still dropped over 0.5% for the day.  
Data to be released on Tuesday include 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.