Thursday, August 11, 2011

Market Morning Overview - August 11, 2011

Previous session overview
The euro rebounded from early session lows in Asian trade Thursday, led by a rally in regional stocks that caught many analysts by surprise given investors globally remain downbeat on the prospects for world growth. 

Catching the eye of traders was the daily fix of the yuan against the U.S. dollar after the Chinese central bank guided its currency to a stronger-than-expected level for the third time this week, reinforcing the perception Beijing is allowing the yuan to play a key role in containing inflation. 

Europe's common currency rose to USD1.4213 as of 0450 GMT, from a low of USD1.4122 early in the Asia session. The euro was at USD1.4176 late Wednesday in New York.

The dollar was at JPY76.63 as of 0450 GMT from JPY76.85 late New York, while the euro was at JPY108.91 from JPY108.95. The U.K. pound was at USD1.6168 from USD1.6130. The dollar was at CHF0.7275 from CHF0.7265. 

The ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at 74.585 from 74.779. 

The Pound tumbled overnight as riots rocked the UK for a fourth straight night. Initially prompted by a questionable police operation that resulted in the death of a North London man already in custody, the riots have spread beyond the nation's capital, embraced by underemployed youths feeling the pinch of British austerity measures.

The Australian dollar slid under the weight of another stock market sell-off in the U.S., but pared some of its losses late in Asia action Thursday. At 0610 GMT, the Australian dollar was at USD1.0258, down from USD1.0358 late Wednesday but up from an intraday low of USD1.0108. Against the Japanese yen, the Australian dollar was at JPY78.665, down from JPY79.58.
Market expectation
Still, the euro is unlikely to extend its gains much as sovereign debt problems in some European nations remain in focus, said dealers. 

Also in focus is the pace of the U.S. economic recovery. If U.S. economic indicators continue to fall short of market expectations, that would "test the Fed's stance" on the monetary policy, dealers said. 

U.S. trade data and weekly jobless data will be released later in the global day. 

European stocks markets are expected to open higher Thursday, as market participants look to use recent losses in global equities as an excuse to snap up bargains. 

Although talk of a possible downgrade of France Wednesday and problems at some French banks have reignited concerns that the euro-zone debt crisis is fast spreading beyond the periphery, stock prices are looking quite cheap down at these levels, said dealers.