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Daily Market Outlook

Tue, Jan 6 2009, 00:34 GMT
by AceTrader Team

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Market Review - 05/01/2009 18:33 GMT

Dollar rallies versus the Japanese yen and euro on U.S. stimulus plan and ECB's rate cut prospects


The greenback rallied from 91.80 to 93.59 and from 1.0705 to 1.1125 against the Japanese yen and Swiss franc respectively on Monday on speculation U.S. President-elect Barack Obama’s fiscal stimulus plan will include hundreds of billions of dollars of tax breaks (up to $310 billion) and will help the U.S. economy recover from recession.  
  
The single currency tumbled from 1.3964 to 1.3546 against the dollar on Monday on the likelihood that the European Central Bank will cut interest rates by 50 basis points to 2.00% next week from current 2.50% after ECB Vice President Lucas Papademos said on Sunday that more rate cuts may be needed to shield the eurozone economy from recession. Some investors and economists are expecting ECB to cut the borrowing costs further to 1.75%.  
  
Cable rebounded from last Friday’s low of 1.4375 to 1.4740 due to active cross buying in sterling on bets that the U.K. government will guarantee asset-backed securities to revive bank lending. Investors are expecting the Bank of England to expand the 200 billion-pound (US$290 billion) program that allows banks to swap illiquid securities for government debt.  
  
Tuesday will see the release of U.K. Nationwide house prices, German, eurozone and U.K. services PMI data, eurozone HICP, U.S. durable goods, factory orders, ISM non-manufacturing and pending home sales.

Published on  Tue, Jan 6 2009, 00:41 GMT


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