Daily Market Outlook by AceTrader

Market Review – 10/03/2010 22:51GMT

Euro rebounds on improved risk appetite and Greece’s plan to cut deficit

The single currency rebounded strongly on Wednesday after Greece submitted a report to EU on its plans to tame its budget deficit while the greenback slipped against most currencies but rose against the yen, as gains in global stocks brought a return of risk appetite, boosting demand for higher-yielding currencies.

The euro traded with a soft undertone in Asia initially and briefly tumbled to an intra-day low of 1.3544 in European morning on disappointing German trade data. German January trade surplus was narrowed to 8.7 bln euro from 16.6 bln in December, much worse than median forecast of 16.0 bln. However, buying interest emerged above previous good support at 1.3530 and lifted euro. News later came in saying Greece told EU implementation of deficit plan is ahead of schedule. Price surged above Tuesday’s high of 1.3636 on short-squeeze as well as cross-buying and hit an intra-day high of 1.3680 in NY mid-day before stabilizing.  
Versus the Japanese yen, dollar traded sideways in Asia with traders saying Japanese exporters had sold the euro and the dollar this week, repatriating some of their overseas earnings in the run-up to the fiscal year-end on March 31. However, the pair’s weakness was limited by speculation that the Bank of Japan may take measure to ease monetary policy as it remains under pressure to pull the country out of a nagging deflation. The greenback made an upside break in European morning and rose on improved risk appetites due to firmness in global stock markets. The pair rallied to an intra-day high of 90.83 in NY morning before retreating due to profit taking.  
The aussie rose to its highest level in seven weeks after a report showed employers added jobs for six straight month. Positive jobs outlook together with supportive data from China which showed the country’s exports increased the most in three years lifted the currency in Asia and Europe. Aussie hit a 25-year high against the pound and the strongest since 1997 versus the euro in the Asian morning as central bank Assistant Governor Philip Lowe said growth will likely be at or above average the next couple of years. Aussie surged to an intra-day high of 0.9193 in NY mid-day before retreating.  
RBNZ kept its cash rate unchanged at at record low of 2.5% as wildly expected and reiterated that a start to higher rates is likely around the middle of the year. Despite displaying apparent strength before the rate decision (rising to as high as 0.7100 in NY mid-day), price tumbled to 0.7010 after the announcement on profit taking.  
Economic data to be released on Thursday include Japan GDP, Australia employment change, unemployment rate, Swiss SNB rate decision, US jobless claims, trade balance, Canada capacity utilisation, export, import, new house price index and trade balance.