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Daily Forex Overview

Fri, Jun 13 2008, 08:15 GMT
by Raivis Zile

Dukascopy Swiss FX Group

Previous session overview

On Thursday, the dollar hit its highest level against the yen in more than three months on the back of stronger U.S. retail sales data and fresh concerns about inflation from the Federal Reserve.

The U.S. Commerce Department reported Thursday a 1.0% rise in May retail sales, double economists' expectations of a 0.5% rise.

The USD also received support from a Fed official who reiterated the possibility of more interest rate hikes, while a European central banker toned down expectations of rate increases in the euro zone.

Stronger Euro zone economic data and hawkish comments from the European Central Bank have failed to prevent the Euro from succumbing to the better than expected US retail sales report. In U.S. session, the euro was down to 1.5379, on track for its biggest weekly loss in percentage terms since early June 2005.

The British pound is closed at 3 month low despite the fact that inflation expectations hit the highest level in 15 years. Central Bank governor, Mervyn King attributed the rise in inflation to rising commodity prices. BoE officials are keeping a close watch on the wage rate, for indications of future inflationary pressure.

The Japanese yen traded sharply lower to February levels after a stronger than expected US retail report. Investors looking for possible break under 110.00 level.

The Canadian dollar weakened against the greenback after a stronger than expected US retail report supported the case that the economy is starting to stabilize and the US Fed may need to raise rates to keep inflation in check.

The Australian dollar was slightly firmer late Friday supported by comments from the Reserve Bank of Australia chief reinforcing views that interest rates are likely to remain high for a long time. The Australian currency has regained some its losses from Thursday after weak domestic jobs numbers and stronger-than-expected U.S. retail trade data.

Market expectation

USDJPY rises as European players buy in preparation for G8 weekend.

Friday sees the release of US May CPI, and the bank says this report should decide EURUSD's fate ahead of the weekend. With consensus already looking for a strong CPI print, an in line number will probably be only small USD positive, especially after Thursday's strong USD rise, and EURUSD should manage to hold 1.5360. If the report is much stronger than forecast, then EURUSD may quickly break 1.5360, which would worsen its technical outlook.

The strong US message that a weaker dollar is no longer in the advantage of the US should give the topside in EURUSD pair decent protection. So, in a day-to-day approach analysts slightly favour a sell-on-up-ticks approach as long as the pair stays below the recent highs in the 1.5840/1.5820 area. Interesting will be to see whether the G8 meeting will deliver support for EURUSD.

USDCHF is expected to move sideways in the short term, amid a failure to rise above 1.0500. Sees support at 1.0370.

Today, the euro zone data calendar contains the labor costs and employment data for the first quarter.

Today, the UK calendar is again empty.

Most important events of the day

Published on  Fri, Jun 13 2008, 08:17 GMT