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Daily Forex Overview

Thu, Jun 19 2008, 08:30 GMT
by Raivis Zile

Dukascopy Swiss FX Group

Previous session overview

On Wednesday, the dollar fell versus the euro and yen, but stuck to a narrow range due to a lack of major data releases.

On Wednesday, EURUSD showed a lackluster trading pattern. There were no eco data in the US or in Europe to guide trading and this kept EURUSD locked in a very tight range close to the 1.55 big figure. Stocks were the only market that showed a clear direction but the steep losses only had a limited impact on EURUSD trading.

Sterling fell against the dollar for the second day after the BoE minutes were released indicating that board members voted 8-1 in favor of keeping rates on hold.

On Wednesday, also USDJPY held again a very tight trading range close to the 108-mark. A brief attempt to move higher early in the session was aborted soon. Later, risk aversion and declining stocks capped the upside in USDJPY.

The Australian dollar touched a one week high in Asia Thursday, buoyed by robust commodity prices and a sagging U.S. dollar, with further gains expected offshore.

The Canadian dollar fell slightly against the greenback but remained in a tight trading range as investors wait for tomorrows CPI reading and next week's BoC interest rate decision.

Market expectation

A no change decision from the Swiss National Bank Thursday could leave the Swiss franc vulnerable to some weakness given the significant minority looking for a rate hike. SNB is likely to leave rates on hold at 2.75%, but pressure for higher rates is building.

JPY has yet to benefit like other low yielders. But, with risk appetite set to deteriorate further on new global inflation and credit concerns, high-yielders and emerging market currencies all look set to fall, with analysts suggesting that the JPY will eventually catch up.

UK economy faces the most challenging period since 1997 and the squeeze on real income growth will probably see house prices and consumer spending weaken together. Analysts admit that budget forecasts will not be met, and inflation will be higher than predicted.

AUD -poor domestic economic data means the currency focus remains squarely on the global inflation outlook, with the Federal Reserve meeting next week topping the agenda. Reasons for bullish view on the Australian dollar is that RBA could be hoping a higher Australian dollar will do its work and help it avoid having to hike rate further. Yet the gains on the local unit could hit strong resistance between USD0.9485 and USD0.9500.

Some traders are seeing that sentiment is turning negative toward the dollar.

Market participants further reduced their odds that the Fed would raise rates in August from 90% earlier in the week to just 50%. Investors are awaiting next week's FOMC meeting for hints on when interest rates will rise, if at all.

Thursday could change the buck's three-day pattern for USD, when the latest weekly employment data and the Federal Reserve Bank of Philadelphia Manufacturing Index for June are released in the morning.

Today, the UK retail sales, the money supply and lending data are on the agenda. Especially the retail sales have the potential to move the markets.

Most important events of the day

Published on  Thu, Jun 19 2008, 08:35 GMT