Daily Forex Overview

Previous session overview

The euro rose against the yen and the dollar in Asia Thursday as firm Asian share markets spurred demand for the riskier euro.

Overnight comments by the Federal Reserve also led to a more optimistic economic outlook among traders, nudging them to take more risks and buy the single currency, dealers said. The euro's near-term direction is slightly upward, they added.

Regional share markets were broadly higher. As of 0530 GMT Japan's benchmark Nikkei 225 Stock Average index was up 1.0%, while stock markets in South Korea, India and Australia also gained.

Some Japanese banks sold the dollar for the yen due to redemptions of dollar-denominated bonds, traders said.

The Euro tested USD1.4100 before bouncing hard on USD weakness in the US session, shrugging off the FOMC report to finish above USD1.4200. June Industrial Production fell -0.6% vs. 0.3% forecast. EURJPY had a wild day trading in a 3 yen range on the change in risk appetite. EURGBP remained supported on GBP weakness.

British pound propped up by a weaker US dollar despite bearish sentiment in their country. Bank of England said inflation will stay below its 2 percent target as its economy undergoes a "slow and protracted" recovery. UK Central bank Governor Mervyn King said it is "more likely than not" that inflation will slow below 1 percent this year and unemployment reached a 14-year high. Thus, UK interest rates are expected to remain on hold for a while.

The Australian dollar reversed course Thursday, rallying as risk appetite regained lost ground while long-dated bond futures were sold. Spurring the risk-buying mood in Asia was a relatively optimistic outlook from the U.S. Federal Reserve, which didn't extend it's bond buying program and said the economy's contraction is slowing.

Market expectation

The euro is marginally higher against the dollar, yen and UK pound as short-term Asian investors buy on higher risk tolerance.

EURUSD reported offers placed between USD1.4265/70 able to contain the early GDP react driven rally, with underlying tone remaining firm. Rate currently trades around USD1.4257 after touching fresh intraday highs at USD1.4268 (50% USD1.4448/1.4086). Above USD1.4270 may open a move on toward USD1.4280/85.

For Pound offers seen placed above USD1.6585 through to USD1.6600, a break to open a move on toward USD1.6615/20 ahead of stronger level at USD1.6650. Support now seen placed at USD1.6550, a break below USD1.6540 to open a deeper move back toward USD1.6510/00.

Attention now turns to U.S. retail sales data at 1230 GMT and second-quarter earnings from Wal-Mart Stores Inc. later in the day to gauge whether consumption is recovering in the U.S.

The euro could rise toward JPY138.00 and USD1.4300, if those figures come in better than expected, adding to the positive outlook for the U.S. economy, dealers said.

European stock markets are expected to open higher Thursday, as investors react with optimism to the latest comments from the Federal Reserve about the strength of the U.S. economy, the world's largest.

Most important events of the day