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Daily Market Outlook

Thu, Oct 22 2009, 02:45 GMT

AceTrader

  Market Review - 21/10/2009 22:09 All times in GMT  

Euro rallies above 1.5000 for the first time since August 2008 on low U.S. interest rate expectations

The dollar fell broadly except the Japanese yen on Wednesday on increasing speculation that the Federal Reserve would hold U.S. interest rates near zero level for some time. The ICE futures U.S. dollar index, which tracks the greenback against a basket of six major currencies, hit a fresh 14-month low of 74.94. Although U.S. shares traded higher for most of the session, the DJI nose-dived later in the day and ended down 92.12 points after Rochdale Research analyst Richard Bove cut his rating on Wells Fargo. In addition, U.S. President Obama said that the government is winding down the major banks' portion of TARP program as they no longer need new assistance from the government compared to a year ago.  
  
Euro penetrated the 1.5000 level In NY morning session for the first time in 14 months versus the dollar despite European officials' comments earlier this week voicing their concerns over the strength of the euro. Earlier in Asian session, the single currency dipped to 1.4888 on long-liquidation, however, buying interest above previous day's low at 1.4888 dips lifted euro to a fresh 2009 high of 1.5047 in New York afternoon before another retreat was seen.  
  
The British pound rallied on Wednesday after hawkish comments from England Governor Mervyn King. King was quoted in a newspaper as saying that U.K. interest rates 'at some point will return to normal levels'. In addition, the Bank of England October policy meeting minutes showed that policymakers voted unanimously this month to leave the size of its asset purchase programme unchanged at 175 billion pounds. The MPC also said recent economic developments had generally been positive and inflation is likely to rise in the short-term. Although sterling retreated after the release of weaker-than-expected U.K. CBI manufacturing data (-51 versus the expectation of -45 n previous month's reading of -48), the euro-led rise lifted cable to as high as 1.6638 against the greenback in New York afternoon.  
  
Earlier in Asian session, New Zealand's central bank chief Alan Bollard said that the strength of the kiwi would not necessarily prevent an increase in interest rates. Nzd/usd rallied to 0.7635 while aud/usd rose to 0.9330 in New York trading.  
  
Data to be released on Thursday include Japan trade balance and all industry activity index, Swiss trade balance, eurozone current account, U.K. retail sales; U.S. jobless claims, house price index and leading indicator and Canadian retail sales.

Published on  Fri, Oct 23 2009, 06:11 GMT