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Daily Market Outlook

Thu, Jul 17 2008, 05:55 GMT
by AceTrader Team

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Market Review -16/07/2008 21:52 GMT

U.S. dollar rises versus euro on retreat in oil prices and rally in U.S. stock markets

The greenback rebounded on Wednesday, moving further away from a record low against the euro, on the back of slide in oil prices (August futures dropped $3.67 to $135.07 per barrel) and also surprisingly strong earnings at Wells Fargo & Co soothed fears about the U.S. economy and financial sector. U.S. stocks also rallied, while the dollar got an added boost after minutes from the Federal Reserve's June meeting showed officials believed inflation pressures meant the next interest rate move was likely to be an increase. With separate data showing U.S. consumer prices rose last month at their fastest rate since the aftermath of Hurricane Katrina in 2005, investors were increasingly certain of at least one Fed rate hike before the year is out.  
  
The euro dropped to 1.5800 versus the dollar as North American trade wound down, well off a record high made at 1.6040 a day ago. Sterling also slipped to as low as 1.9958 against the dollar before recovering in late U.S. session. Elsewhere, the Australian dollar fell to 0.9728 versus the U.S unit after reaching another multi-decade high at 0.9851 on Tuesday. The dollar’s strength across the board also pushed Swiss franc lower to 1.0189.  
  
Against the Japanese yen, the dollar gained to 105.12 on the back of the rise in U.S. stock markets, with DJI advancing to 11,239 (up 276 points). On the other side, the euro fell initially to as low as 165.33 versus yen in Europe but later rebounded to166.30.   
  
Concerns about the U.S. financial sector receded a bit on Wednesday after Wells Fargo, the fifth-largest U.S. bank, raised its dividend despite a 23 percent decline in profit caused by bad loans. The dollar also edged higher when Bernanke told the House panel that currency intervention may be warranted under certain conditions.  
  
U.S. short-term interest rate futures are pricing in a 76 percent chance that the Fed raises interest rates from their current 2 percent by December. The Dollar Index on the ICE market increased for the first time in six days, rising 0.1 percent to 71.965. It touched 71.508, the lowest level since April.  
  
On Thursday, economic data releases include Switzerland Zew index, U.S. building permits, housing starts, weekly jobless claims and Philadelphia Fed survey.

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Published on  Thu, Jul 17 2008, 09:19 GMT

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