Daily Market Outlook by AceTrader

Market Review – 12/04/2010 19:46GMT

Euro rallies on EU’s formalized offer of aid to Greece

The euro strengthened across the board on Monday after EU offered Greece a rescue package worth as much as 45 billion euros ($61 billions) at below-market interest rates which would potentially reduce Greece’s default risk. However, gains were trimmed on continuing uncertainty associated with the bailout package.  


The single currency opened sharply higher on Monday and surged to 1.3692 in Asian mid-day as EU’s ministers approved a 30 billion euros ($40.5 billion) aid package of loans with at least 15 billion euros from the International Monetary Fund on Sunday. However, euro later retreated to 1.3566 on profit taking. In other news, ECB board member Lorenzo Bini Smaghi said the eurozone’s 30 billion euros rescue package for Greece would help the single currency and avoid what happened in the U.S. with Lehman. Bini Smaghi also said the EU council will work on reform to reinforce governance of public finances and structural divergences.  
  
Although the greenback briefly dipped to 92.90 versus the Japanese yen, active cross selling in yen on returned risk appetite lifted the pair to 93.61 in European mid-day before retreating to 93.14 in NY morning and the pair moved narrowly in NY afternoon. In other news, U.S. Fed’s budget in March came in at -65.4 billion versus forecast of -62.0 billion and the previous reading of -191.59 billion.  
  
The British pound rallied by ‘default’ in tandem with gap-up opening in euro and hit an intra-day high of 1.5486. However, cable erased early gains and fell to 1.5353 in NY mid-day as U.K.’s budget deficit was 11.8 percent of GDP in the past fiscal year, near to Greece’s deficit of 12.9 percent of GDP last year and this fueled speculation that Britain’s debt burden will pressure the nation’s currency.   
  
Economic data to be released on Tuesday include: U.K. house prices, BRC retail sales, Trade balance , Japan Domestic CGPI, Germany CPI and HICP, U.S. Trade balance, Export price , Import price, Consumer confidence, Canada Exports, Imports, New housing price index.