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Daily Market Outlook

Fri, Jul 11 2008, 07:45 GMT
by AceTrader Team

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Market Review -10/07/2008 21:20 GMT

The greenback falls against the euro on Thursday due to credit market concerns

The greenback fell against the euro on Thursday due to persistent worries about the health of the U.S. financial sector, as shares and bonds of the country's two mortgage finance giants (Fannie Mae and Freddie Mac) tumbled on capitalisation fears, however, investors were slightly reassured by comments by Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson who said in their in testimony to Congress that they were doing everything possible to restore calm to financial markets.  
  
Shares in Fannie Mae and Freddie Mac plunged to their lowest levels since 1991 on Thursday, severely limiting the ability to raise the capital needed to purchase home loans and hold down mortgage rates. The yield spread premium for the larger Fannie Mae rose to its highest since before the Fed's bailout of U.S. investment bank Bear Stearns in March.  
  
The credit market jitters pressured the U.S. dollar, which fell against the euro to a session low of 1.5803 and was last trading at 1.5780, however, U.S. stock markets rose on Thursday (DJI gain 81 points and closed at 11,229), helping the greenback to trade firmer against the Japanese yen, the pair rebounded from 106.79 to around 107.20. The Swiss franc also tended to attract a flight-to-quality bid as the low interest rates reflect the capital surplus of their respective countries and traded steady at 1.0280 at New York closing.  
  
On Thursday, Bank of England held interest rates steady at 5.0 percent but the market expects the rates will have to fall, making the pound less attractive. The cable started to drop before the announcement and fell to as low as 1.9712 versus the dollar in U.S. morning, however, renewed buying interest lifted sterling and the pair was able to recover early losses and closed at 1.9780.   
  
The dollar index traded on ICE futures in New York, which tracks the greenback against the currencies of six U.S. trading partners, declined as much as 0.2 percent to 72.412, the lowest level since July 2. On the other side, U.S. crude oil futures jumped more than $5.00 and climbed back above $140 per barrel.  
  
On Friday, economic data releases include Japan industrial production, capacity utilization and consumer confidence, German wholesale price index, Canada unemployment rate, new housing price index and trade balance, U.S. trade balance, export and import price indices, University of Michigan survey and Fed budget.

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Published on  Fri, Jul 11 2008, 08:24 GMT

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