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Daily Forex Overview

Thu, May 22 2008, 10:28 GMT
by Raivis Zile

Dukascopy Swiss FX Group

Previous session overview

On Wednesday, the dollar fell to its lowest level against the euro in nearly four weeks, dragged down by record-high oil prices and signs that economies in Europe are improving.

As the price of oil pushed above USD133 a barrel and U.S. stock markets plunged, speculative investors once again took out short positions on the dollar, and went long on higher-yielding currencies such as the euro and the Australian dollar.

The Federal Reserve minutes from the April 29-30 meeting were more hawkish than markets had expected. They revealed that the 8-2 decision to cut rates 25bp was "a close call".

The Euro received another boost on the back of better than expected German IFO business climate index coming in at 103.5 (102.1 expected). The EURUSD traded with a low of 1.5634 and a high of 1.5789 before closing the day at 1.5785 in the New York session.

The Sterling traded in a soggy tone after the MPC minutes came in as expected with members voting 8-1 for a hold in rates at 5.00% this month The GBPUSD traded with a low of 1.9616 and a high of 1.9688 before closing the day at 1.9680 in the New York session.

USD/JPY held between a broad 103.00-103.70 range. USDJPY traded with a low of 102.99 and a high of 103.70 before closing the day around 103.05 in the New York session.

The Australian dollar was stronger late Thursday, having hit a fresh 24-year high in offshore trading, driven by continued weakness in the U.S. currency and continuing firm domestic fundamental drivers. Australian consumer inflation expectations hit a two-and-a-half-year high in May, likely adding to the Reserve Bank of Australia's concerns about broad-based price pressures, according to results issued Thursday of a survey.

Market expectation

EURJPY rising due to buying by European and U.S. investors. Players squaring their short-EUR positions, now going long, as Japanese stock prices, which players had expected to decline, recovered in late session.

EURCHF has fallen below 1.62 on continued uncertainty about the further development on financial markets.

Support for the EUR could soon run out of steam despite the latest euphoria over the German economy. German growth is still expected to falter and the deterioration in the smaller euro-zone economies, such as Spain, still looks set to spread. Some doubt the EUR will rise much beyond USD1.5850.

EUR - European Industrial New Orders m/m out today expected to come in at -0.4%.

GBP - Looking ahead, Retail sales out today expected to come in at -0.5%.

Most important events of the day

Published on  Thu, May 22 2008, 10:31 GMT