Daily FX Market Outlook by AceTrader 12-4-2011

Market Review – 11/04/2011 20:14 GMT

Euro retreats from 15-month high on long liquidation

Euro retreated on Monday on long liquidation after recent ascent following a strong rise to a 15-month high of 1.4489 last Friday due to worries over possible U.S. federal government shutdown. However, the single currency failed to penetrate 1.4489 and retreated after meeting selling interest at 1.4485 in Asian morning as President Barack Obama signed a short-term spending bill on Saturday and averted such shutdown. Price later dipped to 1.4421 in New York morning before trading sideways on quiet U.S. afternoon session.

  
  
The British pound was little changed on volatile Monday trading. Despite ratcheting lower from Asian high of 1.6392 to 1.6314, cross-buying in sterling versus euro lifted the pound in New York morning to an intra-day high of 1.6427. However, failing to penetrate Friday’s 15-month high of 1.6430 prompted cable to retreat in New York midday. Eur/gbp fell sharply from 0.8860 to as low as 0.8793 before rebounding on short-covering.  
  
Bank of England’s Monetary Policy Committee member Andrew Sentance was quoted on Reuters Sunday as saying that Bank of England should raise interest rate gradually to help stave off the threat of future inflation.   
  
Reuters also reported on Sunday that voters in Iceland rejected a second plan to repay debts to Britain and the Netherlands from a bank crash, Prime Minister Johanna Sigurdardottir told state television that economic and political chaos could follow.  
  
The Japanese yen strengthened across the broad. Despite the dollar’s cross-inspired rise to 85.16 in Australia against the Japanese yen (eur/yen climbed to an 11-month peak of 123.33), sellers quickly emerged at Tokyo opening with price continued to edge lower in Europe and dropped to a day’s low of 84.51 in late New York before trading sideways. Eur/jpy, aud/jpy and gbp/jpy retreated sharply from multi-month highs of 123.33 to 122.03, from 90.04 to 88.74 and from 139.63 to 138.04 respectively.  
  
In the other news, International Monetary Fund lifted European area’s 2011 GDP growth forecast to 1.6% from 1.5% in January and raised 2012’s forecast to 1.8% from 1.7%. IMF saw gradual and uneven expansion with 1.7% in 2011’s growth in advanced Europe and 3.7% growth in emerging Europe. IMF cut UK’s 2011 GDP growth forecast to 1.7% from 2.0% in January and kept 2012’s growth forecast at 2.3%. IMF also lowered U.S.’s growth forecast to 2.8% in 2011 from 3% in January and raised 2012’s growth forecast to 2.9% from 2.7%. IMF trimmed Japan’s 2011 GDP growth forecast to 1.4% from January estimate of 1.6% and raised Japan’s 2012 GDP growth forecast to 2.1% from January’s 1.8%.  
  
Data to be released on Tuesday include:  
  
U.K. RICS house prices, BRC retail sales, CPI, RPI, trade balance and DCLG house prices; Japan machine tools orders; Germany CPI final, HICP final, ZEW index and current situation; Canada new housing price index, trade balance, exports and imports and BOC rate decision; U.S. export and import price index and Fed budget.

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