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Daily Forex Overview

Fri, Dec 5 2008, 11:19 GMT
by Raivis Zile

Dukascopy Swiss FX Group

Previous session overview

U.S. Dollar Trading weakened across the board as aggressive rate cuts around the world helped to improve global sentiment. US stocks weakened in the final hour going into the Nonfarm Payroll number today.

The ECB slashed rates by three quarters of a percentage point, which surpassed expectations and brought the central bank's benchmark rate down to 2.5%. Euro surged to 1.2850 versus the dollar and 119.29 against the yen in New York before retreating to 1.2778 and 117.83.

The Bank of England cut rates by a full percentage point Thursday to 2.0%, which was in line with economists' forecasts. The move seemed to allow the pound to strengthen some. Just prior to the rate cut, sterling had fallen to a new six-year intra-day low of USD1.4469. GBPUSD traded with a low of 1.4469 and a high of 1.4814 before closing the day at 1.4700.

The Japanese Yen strengthened against the USD and GBP as US stocks sank on concerns that Automakers will fail to survive in current form. USDJPY traded with a low of 92.09 and a high of 93.40 before closing the day around 92.30.

The Australian dollar was modestly higher in late Asian trade Friday as it continued to track marginal moves in regional equities indexes leading into thin end of year trade.

Market expectation

The lower ECB rates might, under normal conditions, turn investors away from the euro as it tends to lower returns on euro-based assets. But amid the global financial crisis, where frozen-solid lending conditions are the main problem, analysts said the rate reduction was seen as an overall positive for the euro.

The euro is slightly lower Friday, reversing some of its gains from Thursday, when the euro rose after an aggressive interest rate cut by the European Central Bank. That cut convinced investors that euro zone officials are doing what is necessary to improve their struggling economy.

The U.S. Department of Labor releases its November non-farm payroll figures in the New York session Friday with market participants expecting to see more evidence of deterioration in the U.S. economy. Economists expect 350,000 jobs were lost in November from 240,000 lost in October. The unemployment rate is forecast to rise to 6.8% from 6.5%.

The Australian dollar has struggled to hold any gains above US$0.6500 in the current market climate. Currency strategists expect this level will continue to prove challenging for the currency.

USDJPY - Support at 92 held but the market is looking very bearish as constant demand for Yen becomes the norm.

Most important events of the day

Published on  Fri, Dec 5 2008, 11:20 GMT