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Daily Forex Overview

Tue, Dec 2 2008, 08:25 GMT
by Raivis Zile

Dukascopy Swiss FX Group

Previous session overview

On Monday, the dollar ended lower against the yen but higher against most other currencies, after an array of weak economic data from nations around the world exacerbated fears of a protracted global downturn.

Currency markets in turn followed their well-established pattern of rewarding the yen and the dollar in times of mounting economic fear and intensifying risk aversion, and punishing the euro and other currencies.

The Euro came under pressure as Oil and Stocks crashed lower on recession fears. Data out of Germany showed a larger-than-expected decline in retail sales (month-on-month fall of 1.6% against forecast of a rise of 0.5%) and manufacturing PMI for Germany and the euro zone dropped to 35.7. The single currency weakened to 1.2582 before recovering in U.S. session due to profit taking.

Pound crashed lower as risk aversion and renewed scrutiny of the UK economy hurt sentiment. GBPUSD traded with a low of 1.4810 and a high of 1.5357 before closing the day at 1.4920.

USDJPY had one of the largest currency falls reflecting a new safe haven rush, from around 95.30 to just above 93, and is currently not higher at 93.30.

The Australian dollar weakened in Asia late Tuesday on the back a drastic reversal of last week's gains on Wall Street as evidence of significant stress in the real economy continued to build up.

Market expectation

The euro and dollar, while little-changed against each other Tuesday are both pressuring the yen, even though forecasters are calling for a much stronger yen soon.

GBPUSD currently trades around USD1.4885. Offers seen placed to USD1.4900, a break above to open a move back toward USD1.4940/50. Support remains in placed between USD1.4850/40. Through here and Monday's lows at USD1.4807 to move back into view, with demand noted around between USD1.4710/00.

The Reserve Bank of Australia's decision to slash its official cash rate at its monthly policy meeting Tuesday had provided some floor for the currency, although most analysts expect the near-term trend for the Aussie remains to the downside.

The RBA's policy meeting and the BOJ's mark the first in a series of central bank decisions this week, with most major banks, including the European Central Bank and the Bank of England, expected to cut rates further. This week would also see the release of a slew of U.S. economic data, including Friday's non-farm payrolls data for November. The U.S. dollar can benefit from more aggressive interest rates cuts that may arise around the world in the face of weak economic data, said analysts.

Most important events of the day

Published on  Tue, Dec 2 2008, 08:25 GMT

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