Daily Market Outlook by AceTrader

Market Review – 03/05/2010 22:01GMT

Euro falls on profit-taking and Greek bailout worries

The dollar rose against the yen and euro as upbeat US ISM manufacturing and construction data boosted optimism over the US economy recovery while euro weakened on doubts if Greece could implement drastic wage cuts to narrow budget deficit.

Although the European Union finance ministers approved the bailout for Greece over the weekend, euro plunged against the dollar on Monday due to worries that the 110 billion-euro ($146 billion) bailout package for Greece might not win support easily from the citizens of some EU countries . Despite brief rise to 1.3365 in NZ/AUS on short term speculator buying, buying dried up later and broad-based profit-taking together with renewed selling pushed euro sharply lower. The single currency extended weakness to 1.3154 in thin U.S. session before staging a minor rebound on short-covering.  
Versus the Japanese yen, the greenback fell briefly to 93.51 in NZ/AUS trading session as PBOC’s surprise announcement to raise banks’ reserve requirement (which is the 3rd time this year) provoked risk aversion. However, the pair swiftly rebounded from there on cross unwinding especially versus euro and the solid ISM manufacturing data and and construction spending together firmness in US stocks also supported the dollar. DJI ended the day up 143.22 points at 11151.83 while the usd/jpy pair eventually rallied to 94.79 in US session before stabilizing.  
On economic front, German April manufacturing PMI rose to 61.5 versus economists’ forecast of 61.3 and much higher than the reading of 60.2 in March. U.S. personal spending and income rose by 0.6% and 0.3% in March respectively whilst U.S. core PCE index rose by 0.1% m/m and 2.0%. U.S. construction spending rose unexpectedly by 0.2% in March against the economists’ forecast of a decrease of 0.3%. U.S. ISM manufacturing also came in higher-than-expected at 60.4 versus the forecast of 60.0.  
Economic data to be released on Tuesday include:  Australia RBA rate decision, Germany Retail sales, U.K. Manufacturing PMI, EU PPI , U.S. Durable goods, Pending home sales and Consumer confidence.