Daily Market Outlook by AceTrader

Market Review – 09/03/2010 22:52GMT

Euro declines on debt woes and Fitch’s comments

The dollar traded higher against most major currencies except the Japanese Yen on Tuesday. The safe-haven yen rose broadly amid Japanese repatriation flows while the single currency fell on concerns peripheral euro zone economies could face debt problems similar to those of Greece.  

Euro extended Monday’s decline against the greenback after staging a brief bounce to 1.3636 in Asia with reports circulating that Russia and BIS had been notable buyers. The recovery didn’t last long and downbeat comment from Fitch Rating caused the single currency to tumble an intra-day low at 1.3537 in NY morning before rebounding to around 1.3617 in NY afternoon. Fitch claimed that Portugal’s gradual approach to fiscal consolidation to 2013 is a concern and short term outlook for Greece may be okay but long term outlook remains open to question. Despite the late rebound, the single currency closed the day down over 0.29%  
Versus Japanese Yen, the greenback traded with a soft undertone in Asia on news that Japan’s leading index rose for the eleventh consecutive month in January. A preliminary report showed the index stood at 97.1 up from 94.7 in January while the index was forecasted to be 96.6. These data together showed Japan’s economy remained on a recovery path. Driven by an improving economic outlook and repatriation flows, the pair reached intra-day low of 89.63 in European morning before rebounding to around 90.05 in NY afternoon. The pair eventually closed the day falling just less than 0.4%.  
Poor RICS housing data and Moody’s warning of possible downgrades to UK banks/lenders had kept cable under pressure throughout the Asian trading session and the pair soon penetrated Monday’s low of 1.5031 in Asia mid-day. Worse-than-expected trade picture and comment from Fitch Rating also fueled the downward movement of sterling as U.K. trade balance was recorded at -7.98 billion pounds (forecast was -7.00 billion pounds) which was the biggest trade gap since 2008. These disappointing information raised further concerns about the strength of the country’s economic recovery and cable fell sharply to as low as 1.4936 at NY opening before recovering.  
Economic data to be released on Wednesday include Australia westpac consumer confidence, Japan domestic CGPI, machine orders, CPI final, export, HICP final, import, trade balance, current account, U.K. industrial production, manufacturing production, U.S. wholesale inventories and fed budget.