Acetrader-Daily Market Outlook 21-10-2010

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Market Review - 20/10/2010 22:57 GMT

Dollar weakens broadly on Fed policy outlook

The greenback fell sharply against other major currencies on Wednesday, as market expected U.S. Fed would ease monetary policy further to spur the economy. Dollar tanked to a fresh 15-year low of 80.84 against the Japanese yen.

Dollar fell from 81.66 against the Japanese yen in Asian morning on active cross buying in yen due to renewed risk aversions and edged lower in European morning. Later, the greenback dropped sharply to a fresh 15-year low of 80.84 in NY morning on dollar's renewed broad-based weakness before staging a recovery.

Although the single currency extended Tuesday's selloff from 1.4005 to 1.3697, euro rebounded strongly on active short-covering and extended its gain after German Chancellor Merkel said it might be time to think about exit strategies. Euro rallied to 1.3991 in NY morning before trading narrowly.

The British pound rebounded on short-covering after extending Tuesday's selloff to 1.5650 in Asian morning and edged higher to 1.5755 in European morning. Although cable fell briefly to 1.5683 after the release of BOE's minute and U.K. Public borrowing data (MPC voting split three ways of 7-1-1 in October while U.K. public borrowing hit a record high in September), sterling rose again and rallied in tandem with euro to 1.5878 in NY mid-day.

Dow Jones index surged above 11000 on Wednesday and closed the day up by 129 points or 1.18% at 11108.

Fed Beige book said 'economy continued to grow at a modest pace in period to early October; manufacturing continued to expand in most districts; consumer spending steady to up slightly, purchases mostly limited to necessities; housing markets remained weak, house price seen stabilising, commercial real estate subdued, construction weak.'

Economic data to be release on Thursday include:

Japan All industry index, Swiss Trade balance (chf), ZEW index, Germany Services PMI, Manufacturing PMI, EU Manufacturing PMI, Services PMI, Consumer Confidence, U.K. Retail sales, Major banks mortgage appr., U.S. Jobless claims, Leading indicators, Philadelphia Fed survey, Canada Leading indicators.

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Acetrader-Daily Market Outlook 21-10-2010

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This article was published on 2010/10/21