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Daily Market Outlook

Fri, Oct 2 2009, 01:15 GMT

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  Market Review - 01/10/2009 20:47      All times in GMT  
Euro declines on dovish comments and falling equities

The single currency dropped against the greenback on Thursday due to weak equities and dovish comments from EU's Almunia and ECB's Trichet. Almunia, the commissioner for economic and financial affairs said that euro's appreciation will be discussed ahead of the G-7 meeting and he was not sure if 2011 was the time to withdraw fiscal stimulus. Euro fell sharply from Asian high of 1.4668 to 1.4551 after his comments and despite subsequent recovery on short-covering, price declined again on Trichet's comments, he said 'disorderly movements in exchange rates have adverse implications for economies'. The 203-point drop in DJI also pressured euro to an intra-day low of 1.4517 before recovering in late U.S. session.   
 
Dollar-yen hovered around 90.00 level in Asian and European session amid thin markets (with China and Hong Kong on holiday) and then dropped to as low as 89.41 following the release of U.S. jobless claims data (which showed a larger-than-expected rise to 551,000 compared to the consensus forecast of 535,000), however, price recovered from there as the weak data was balanced by robust consumer spending, while a weak ISM manufacturing index (52.6 versus forecast of 54.0) was in contrast to the larger-than-forecasted increase in pending home sales (6.4% versus forecast of 1.0%).  
 
Cable gyrated inside near term range of 1.5925-1.6025 as market focus was on the euro. Despite early drop to 1.5925 in tandem with euro in European opening, sterling was able to rebound from there to 1.6025 as euro's weakness encouraged cross selling on eur/gbp (the pair dropped from 0.9179 to 0.9081). Price then retreated and traded sideways in U.S. session. Earlier in the day, U.K. manufacturing PMI came out at 49.5 in September (compared to economists' expectation of a rise to 50.3).  
 
Economic data to be released on Friday include:  
Household spending in Japan; Nationwide house price in U.K.; PPI in eurozone; non-farm payrolls, unemployment rate, average hourly earnings, revised durable goods and factory orders in U.S.

Published on  Fri, Oct 2 2009, 01:18 GMT