Daily FX Market Outlook by AceTrader-11-5-2011

Market Review – 10/05/2011 20:36 GMT

Euro posts moderate gains on Greece’s potential new financial aid 

Euro swung between gains and losses on Tuesday driven by conflicting reports about a potential new deal for Greece and lots of remarks from European Union officials.

   
  
Although renewed selling at 1.4378 in Australian session capped Monday’s strong rebound from 1.4254, the euro retreated briefly after comments from European Central Bank Governing Council member Ewald Nowotny who said that international community had underestimated Greece’s problems and price then fell further to a day’s low of 1.4270 in European morning following the euro-bearish comments from European Central Bank Executive Board member Lorenzo Bini Smaghi. However, the single currency later rebounded strongly due to a Dow Jones report which quoted comments from a senior Greek official that Greece could clinch a new financial aid totaling 60 billion euros as soon as in June, which was later denied by Greek Finance Minister George Papaconstantinou. Euro eventually climbed to an intra-day high of 1.4412 in late New York trading.  
  
European Central Bank Executive Board member Lorenzo Bini Smaghi said that ‘restructuring of Greek debt would bring banking system to its knees; Greek disaster would be contagious for whole eurozone; Greek exit from eurozone would damage Greece but also other countries’.  
  
Another European Central Bank Governing Council member Yves Mersch said that ‘Europe must take strong steps to ensure confidence that it respects the basic principles of market economy, which ruled out any question of not repaying debt; debt restructuring for Greece not an option’.  
  
The British pound fell against the dollar and the euro on speculation that the Bank of England will lower its economic growth forecasts in its inflation report on Wednesday. Cable ratcheted lower from 1.6422 in Asian and European sessions before staging an euro-led rebound from an intra-day low of 1.6317 in New York midday. Eur/gbp rebounded from 0.8721 to 0.8808.  
  
U.K. Chancellor George Osborne made a statement in a question and answer session in the Parliament that fiscal strategy gave Bank of England freedom to keep rates lower for longer and his comments pressured sterling in New York morning.   
  
Elsewhere in the market, the Swiss franc fell sharply versus the greenback and the euro after the release of lower-than-expected Swiss inflation data. Usd/chf rose briefly above last week’s high of 0.8800 to a high of 0.8806 in European morning and although usd/chf traded sideways in European midday, buying interest around 0.8755 limited downside and price then extended upmove from last week’s lifetime of 0.8554 to an intra-day high of 0.8824 in New York midday. Eur/chf also rallied from 1.2490 to 1.2687.   
  
Data to be released on Wednesday include:   
  
China consumer price index, industrial production, retail sales and fixed assets investment urban YTD; Japan leading indicators; Germany CPI and HICP final; U.K. trade balance; Canadian exports and imports and trade balance; U.S. trade balance and Fed budget.

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