Daily Forex Overview

Previous session overview

On Thursday, a sustained aversion to risk bolstered the dollar's traditional safe-haven status to leave it with moderate gains against most of its major rivals, although a late reversal toward strength for U.S. stock markets served to pare earlier gains.

Following the ECB's trimming of its benchmark rate to 2.0%, Trichet hinted that the ECB isn't inclined to consider another rate cut again until March. But he also indicated that euro-zone economic news has been far bleaker than the ECB had been anticipating and that the outlook is darkening.

EURUSD after tumbling to USD1.3025 in the wake of the ECB rate announcement and press conference Thursday, recovered to close around USD1.3120. Also much of driven were by the Russian central bank supporting their beleaguered ruble by selling EUR.

Pound another volatile US session Thursday saw recovering from USD1.4475 to USD1.4685, with the rate ultimately closing around USD1.4640, while euro-sterling ended just off the stg0.8953 lows.

Japanese yen continues to maintain its strength, as investors move out of the tumbling Nikkei, which fell nearly 5%, in favor of the yen. USDJPY traded with a low of JPY88.50 and a high of JPY90.02 before closing the day around JPY89.90.

Modest gains in equities, steady commodity prices and buying from exporters helped the Australian dollar gain almost a cent and half Friday, although analysts cautioned those gains could quickly reverse if U.S. economic numbers again disappoint. The Australian dollar was trading at USD0.6735, up from USD0.6590.

Market expectation

The EURUSD is rebounding strongly Friday to pass 1.3200 on better risk appetite and hints the ECB will hold rates steady for a while.

Asian sovereign demand was noted through USD1.3200, with a US bank then triggering stops through USD1.3210. A Swiss name then provided added momentum, before the announcement of US govt aid for Bank of America provided a last boost with momentum strong enough to push euro-dollar to session highs at USD1.3277. Early European dealing has seen the pair easing back towards USD1.3200, with traders now reporting stops to the topside through USD1.3280/90. Light demand comes in around USD1.3200 with short-term stops below.

European dealing has seen euro-sterling extending the lows to stg0.8901; with traders eyeing a potential test of last week's lows at stg0.8843 should stg0.8900 give way. Cable trades around USD1.4870 at time of writing, in the middle of this month's wide range.

EURJPY off earlier high of JPY120.02 as U.S. banks' buying driven by Nikkei's 2.6% climb runs course, while some speculators jump on pair's rally to trim longs before weekend, say Tokyo traders. Pair could lose more ground if Europe equity markets drop despite recovery in Asia share prices, say traders.

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