Daily Market Outlook

Thu, Mar 27 2008, 08:10 GMT
by AceTrader Team

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Market Review - 26/03/2008 21:52 GMT

Dollar falls broadly on weak economic data amid further interest rate cut speculation

The greenback fell broadly against major currencies on Wednesday after an unexpected drop in durable goods orders, adding to speculation of further interest rate cuts by the Fed. Interest-rate futures showed a 40% chance that the Fed will lower the 2.25% target lending rate by a half-percentage point to 1.75% at its April 30 meeting, compared to 30% on Tuesday.   
  
U.S. durable goods fell by 1.7% in February (forecast was for an increase of 0.8%), while U.S. new home sales also dropped by 1.8% to an annual rate of 0.59 million in February versus the upwardly-revised 0.601 million in January.   
  
The Munich-based Ifo institute showed its business climate index increased to 104.8 this month from 104.1 in February, higher than the expectation of 103.3. Both U.S. durable goods and housing reports contrasted with European data on Wednesday, suggesting the eurozone economy was much healthier than that of the United States   
  
The single currency rallied from 1.5583 to 1.5859 and from 155.69 to 157.47 against the dollar and the Japanese yen respectively on Wednesday. ECB President Jean-Claude Trichet said in a testimony to European Union lawmakers in Brussels that eurozone interest rates at a six-year high will help contain inflation. His relatively hawkish comments also provided support to the single currency.  
  
The British pound weakened from 2.0112 to 1.9927 in European session after Bank of England policy makers said they expect sterling to decline as economic growth slows. Central bank governor Mervyn King told lawmakers the pound's decline is an ‘unwinding of the appreciation’ in 2006. However, cable rebounded to close at 2.0084 on short-covering together with renewed dollar’s weakness against major currencies.   
  
Dollar weakened against the Japanese yen from 100.33 to 98.87 and trimmed losses in U.S. session after the release of slightly better-than-expected U.S. new home sales report for February.  
  
Thursday will see the release of German Gfk index, U.K. CBI distribution trade, U.S. GDP, weekly jobless claims and personal consumption.
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Published on  Thu, Mar 27 2008, 08:25 GMT

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