Daily Forex Overview

Previous session overview

Upbeat comments on the economy by Australia's central bank governor Tuesday whetted investors' risk appetite, boosting the Australian dollar, euro and other currencies against the yen.

Reserve Bank of Australia Governor Glenn Stevens said that Australia's economic downturn "may turn out not to be one of the more serious ones of the postwar era, in contrast to the experiences of so many other countries."

He also said in a speech to economists that it's easier to imagine upside risks to the economy balancing out downside risks.

The Euro was bought heavily during Asia to set up a test of USD1.4300 in Europe before falling quite sharply in the US after failing at the Key level. German GFK in August climbed to 3.5 vs. 2.9 forecast and help support the pair.

The British pound rose against the dollar on Monday as confidence in the strength of corporate earnings continued to support European equities (FTSE-300 index ended the day at its highest close since November 10) and helped sterling recover losses after last week's much weaker-than-expected U.K. GDP data. Cable hit an intra-day low of USD1.6382 in Asia and rallied back to as high as USD1.6525 versus the greenback in European morning.

The Australian dollar rushed to a 10-month high Tuesday and short-end bond futures fell to a 10-month low after Reserve Bank of Australia Governor Glenn Stevens was upbeat on the economic outlook in a speech, fueling expectations that the central bank's next move in interest rates will likely be up.

Market expectation

The yen is gaining a little against the dollar and yen with Tokyo equities under pressure. Otherwise, the majors are little changed in narrow ranges as investors wait for fresh trading impulses.

Looking ahead, the market will be watching U.S. economic data and a U.S. Treasurys auction later in the day, with weak U.S. data or a rise in long-term interest rates on a poor auction likely to weigh on the dollar, traders said.

Traders said that thin trading conditions may have exaggerated the yen's losses, and that the Japanese unit might not stay weak for long.

For EURUSD Offers said to remain in place toward USD1.4300 (USD1.4299 Monday high), with talk suggesting that the figure holds an option barrier (topside of a USD1.38/1.43). A break above the figure expected to trigger stops, though any pressured move should see profit take offers quickly emerge to counter an initial break. If rate can clear higher expected to revisit year's highs at USD1.4339 (Jun 3). Support seen placed at USD1.4220, USD1.4205/00.

Pound traders report offers in place between USD1.6570/80 with stops placed on a break above. Rate currently holds back around USD1.6525 after the early rally extension to USD1.6558.

European stock markets are expected to open largely flat Tuesday, as the rallies that have defined the asset class for almost two weeks start to run out of steam.

Most important events of the day