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Daily Market Outlook
Wed, Apr 30 2008, 03:17 GMT
by AceTrader Team
AceTrader 1-wk TRIAL
www.AceTraderFX.com 24-Hr Real-time Signals Consistent Performance Intra-day, Daily, Weekly. with Email Alerts Function Try 1-week for $25 USDMarket Review - 29/04/2008 20:53 GMT
Euro drops to 1-month low on expectation of an end to Fed's easing cycle
The greenback strengthened to a one-month high against the single
currency on Tuesday, supported by investors' expectation that the
Federal Reserve is close to finish its easing cycle and may signal an
end after this week's policy-setting meeting on Wednesday. On the other
hand, soft European economic data (especially from France and Spain)
suggests the European Central Bank may not have the luxury to raise
interest rates in the near term. Economists are expecting the Federal Open Market Committee to cut the benchmark lending rate by 25 basis points from current 2.25 percent to 2.00 percent after the 2-day meeting and the accompanying statement may indicate to the market that a pause to this aggressive rate cutting campaign, which has already lowered interest rates by 3 percentage points since mid-September last year.
The single currency slipped to 1.5540 in European session before recovering as traders booked profit on shorts ahead of FOMC rate decision. The buck staged a biggest monthly gain for a year time on speculation the Fed may give a relatively hawkish tone in the FOMC's statement accompanying the rate decision.
The greenback tumbled versus the Japanese yen in European session as traders were betting the Bank of Japan will put focus on inflation in the central bank meeting on Wednesday following the release of higher-than-expected CPI data earlier, the pair dropped to as low as 103.22. However, dollar rebounded sharply in U.S. trading on reports from Japanese media that several Japanese banks are suffering more subprime losses.
The British pound fell sharply after the release of much weaker-than-expected U.K. CBI distribution trade data, at -26.0 vs forecast of -3.0, the soft number increased speculation that the Bank of England will need to cut rates to support the U.K. economy. Comments from BOE policy-maker David Blanchflower put extra pressure on sterling as he said Britain is facing a real risk of recession unless the Bank of England took 'aggressive' action.
On the data front, although the U.S. consumer confidence plunged to a five-year low at 62.3 in April, little impact was seen in forex markets as traders' focus remains on EU inflation data (09:00GMT), U.S. GDP data (12:30GMT) and the most important FOMC rate decision (18:15GMT) together with its accompanied statement on Wednesday.
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Published on Tue, Apr 29 2008, 06:04 GMT
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Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any doubts.
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