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Daily Market Outlook

Tue, Jun 9 2009, 00:44 GMT

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  Market Review - 08/06/2009 21:34      All times in GMT  
Dollar rises versus euro on concerns over credit worthness of eurozone nations after Ireland ratings downgrade

Dollar rose against euro as a credit rating firm downgraded sovereign rating on Ireland. In addition, investors raised bets the Federal Reserve will increase the target lending rate by the end of this year as recent data showed the economy of the U.S. had reached a trough and is recovering.   
 
The single currency fell from its intra-day high of 1.4004 against the greenback to as low as 1.3806 in European morning session as ratings agency Standard & Poor's downgraded Ireland’s sovereign credit rating for a second time this year to AA in London morning trade. The rumours of a nationalisation of a major German bank also weighed on euro. German factory orders in April came out at 3.4% slightly worse than the forecast of 3.5% and the market reaction to this data was somehow muted. However, in late New York afternoon, euro pared its losses against the dollar after Executive Board member Juergen Stark said that the European Central Bank would reverse the current low interest rate policy once the economy starts to recover and inflation risk increases. Stark also stated that although the eurozone economy has contracted about 4% in the last two quarters and the second quarter would shrink further, the pace was slowing. Eur/usd rebounded to as high as 1.3929 in U.S. session. Eur/jpy dropped to 135.98 while eur/gbp tumbled from 0.0796 to 0.8649 before recovering in late U.S. afternoon trade. 
 
In European morning session, the British pound remained under pressure against the greenback as Prime Minster Gordon Brown confronted a fresh attempt to force him out, after support for his ruling Labour Party in European elections plunged to its lowest level in a century. However, cable found good buying interest on dips and it subsequently rebounded sharply highly from its intra-day low of 1.5803 in late New York afternoon as Brown won over Labour members of parliament after admitting mistakes and taking responsibility for a week of political turmoil. Cross buying in sterling also helped gbp/jpy rally from 155.57 to 158.49 while eur/gpb tumbled from 0.8796 to 0.8649.  
 
Data to be released on Tuesday include Japan leading indicators, Australia NAB business confidence, German current account, trade balance, U.K. BRC retail sales, RICS and DCLG house price, German industrial production, U.S. wholesale inventories. U.S. Treasury Secretary Geithner is also scheduled to speak on Tuesday.

Published on  Tue, Jun 9 2009, 16:32 GMT