Thursday, July 7, 2011

Forex Morning Overview - July 7, 2011

Previous session overview

The euro dug in its heels against the dollar in Asia on Thursday as investors refrained from further selling amid strong expectations for the European Central Bank to announce a rate hike later in the global day. 

Strong jobs data in Australia pushed the Australian dollar up, and also buoyed demand for risk-sensitive currencies such as the euro. 

At 0450 GMT, the euro was little changed against the dollar at USD1.4315 compared with USD1.4318 late Wednesday in New York. It was at JPY115.85 compared with JPY115.88. 

The Australian dollar rose sharply Thursday morning in Tokyo after a report showed the number of employed Australians rose 23,400 in June, exceeding the forecast for a 15,000 rise. 

At 0450 GMT, the Australian currency was at JPY86.88, compared with around JPY86.52 late Wednesday in New York. The Aussie was at USD1.0735 compared with USD1.0691. 

The dollar was little changed against the yen, at JPY80.93 compared with JPY80.90, as investors awaited the June jobs report from U.S. payrolls giant Automatic Data Processing due at 1215 GMT, for clues on what Friday's non-farm payrolls report may hold in store.

The ICE Dollar Index was at 75.052 compared with 75.024 late Wednesday in New York.

The Pound was pushed lower under the weight of heavy Euro selling and broke below USD1.6000. EURGBP still fell however as the Pound outperformed the single currency and could pull back further if Trichet is dovish tonight.

Market expectation

The almost certain 25 basis point hike by the ECB, which is due to announce its rate decision at 1145 GMT, would be positive for the common currency in the near-term, said dealers. 

If ECB President Jean-Claude Trichet stresses ongoing upside inflationary risks, at his press conference following the rate call, that could buoy the common currency further, dealers said. 

But any rises in the euro will likely face resistance around USD1.4500, as there are still plenty of concerns over the possibility of contagion of sovereign debt problems in Portugal, Italy and the other peripheral countries. 

Some dealers said the Australian dollar could continue up gradually in the near-term toward resistance around USD1.090, most said the boost from Thursday's data had likely run its course.

European stocks are expected to open higher Thursday, taking their cue from a positive U.S. session, as investors await interest rate decisions by the Bank of England and European Central Bank, as well as a raft of key data releases.

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