Daily Market Outlook by AceTrader-23-7-2010


AceTrader.com Representative
Market Review - 22/07/2010 22:12 GMT

Euro rallies on strong European manufacturing and services data

Although the single currency traded sideways at Asian morning following Wednesday's selloff from 1.2914 to 1.2732 and short-term speculators sold euro from 1.2787 at early European morning, buying interest at 1.2741 lifted the pair up and the single currency rebounded strongly as better-than-expected EU and German PMI data prompted traders to buy euro. Later, euro extended intra-day rally to a high of 1.2933 in New York after the release of better-than-expected U.S. home sales data, as U.S. existing home sales in June fell less sharply than expected to a 3-month low by 5.1% (consensus forecast was -8.1%).

German July's PMI for services and manufacturing sectors came in at 61.2 and 57.3 respectively, better than the economists' forecast of 58.0 and 54.5. EU PMI for services and manufacturing in July were released as 56.0 and 56.5, versus the expectations of 55.0 and 55.2. EU industrial new orders rose in May at their fastest annual pace in 10 years by 22.7% y/y, compared to the forecast of 20.2%.

The single currency was supported by the firmness in U.S. and European equities as DJI ended the day up by 202 points, or 1.99% at 10322 due to upbeat outlooks from 3M, UPS and Caterpillar, while S&P-500 and Nasdaq surged by 2.25% and 2.68%. FTSE-100, DAX and CAC-40 also rallied by 1.9%, 3.05% and 2.53% respectively.

Versus the Japanese yen, although the greenback remained under pressure in Asia in reaction to Wednesday's Fed Bernanke's gloomy and uncertain outlook on the U.S. economy and hit an intra-day low of 86.34 at European morning on Thursday, the greenback rebounded from there and ratcheted higher to 86.92 as the rally in European equities improved risk appetites. Later, although the greenback dropped to 86.59 after the release of worse-than-expected U.S. jobless claims, which rose by 37,000 to 464K ( versus the forecasts of 445K), the dollar rose briefly but strongly to an intra-day high of 87.22 after the release of better-than-expected U.S. home sales data before stabilising.

Although the British pound traded narrowly in Asia following Wednesday's selloff from 1.5335 to 1.5125, buying interest at 1.5150 lifted the pair up at European morning and cable rallied to an intra-day high of 1.5296 after the release of stronger-than-expected U.K. June's retail sales, which came out at 0.7% m/m and 1.3% y/y, versus the expectations of 0.5% and 1.0%. Later, the pound retreated to 1.5234 on long liquidation and traded sideways in NY afternoon.

The commodity-linked currencies rallied against the US dollar due to the return of risk appetites, as the Australian dollar surged from 0.8737 to 0.8952, the New Zealand dollar rose sharply from 0.7098 to 0.7274 while usd/cad dropped from 1.0504 to 1.0356.

The market is focusing on the European banks stress-test results which will be announced around 16:00GMT on Friday.

Economic data to be released on Friday include: Australia Export prices, Import prices, Germany Ifo index, U.K. GDP, Canada CPI, EU Bank Stress-Test results.