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Daily Market Outlook

Wed, Jun 3 2009, 02:52 GMT

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 Market Review - 02/06/2009 20:48      All times in GMT  
Dollar falls as strong U.S. housing data dampens the greenback's safe-haven appeal

Dollar fell against the euro and British pound to fresh 2009 lows on improving risk tolerance, with the greenback extending recent decline against a basket of currencies as more data showed the global economy is on the path to recovery. The ICE dollar index weakened to its lowest level at 78.33 since December even though U.S. Treasury Secretary Timothy Geithner committed to keeping the U.S. currency strong and inflation low and stable.  
 
Although U.K. posted a much stronger-than- 
expected construction PMI index (45.9 in May vs 38.1 in April), the British pound pared some of its gains from Monday against the greenback and hit an intra-day low of 1.6324 in European morning session on news that Abu Dhabi's Sheikh Mansour sold its stake in Barclays (stock price fell 13.52%). However, sterling found good buying interest and resumed its uptrend in U.S. session after U.S. pending home sales M/M in April came out at 6.7%, which was much better than the forecast of 0.5% and the 3.2% reading in March. This upbeat data sent the cable to a seven-month high of 1.6595 versus the dollar.  
 
In European morning trade, the euro retreated to as low as 1.4102 against the dollar. Although the unemployment rate in the eurozone rose to 9.2% in April from 8.9% in March, investors kept their focus on the recent global economic recovery and increased their demand for higher-yielding assets. Euro strengthened to an intra-day high of 1.4332 in late New York afternoon before easing.  
 
Investors also started to accumulate Japanese yen carry trades again on optimism that the worst of the global recession is over. Eur/jpy touched a multi-month high at 137.45 while aud/jpy and gbp/jpy rose to 78.85 and 159.22 respectively. 
 
Earlier in the day, the Reserve Bank of Australia left its official rate unchanged at 3.00% and the aussie slipped to 0.8050 before rising again in tandem with the New Zealand dollar to multi-month highs of 0.8232 and 0.6595 respectively. 
 
Data to be released on Wednesday include Australia GDP, German, eurozone, U.K. service PMI, U.K. nationwide consumer confidence, Halifax house prices, eurozone GDP and PPI, U.S. ADP employment, durable goods orders, factory orders and ISM non-manufacturing index. Fed Chairman Bernanke will testify about U.S. economy at 14:00GMT.

Published on  Wed, Jun 3 2009, 02:54 GMT