Tuesday, August 16, 2011

Market Morning Overview - August 16, 2011

Previous session overview
The euro eased slightly against the dollar in Asia Tuesday and traders expect the single currency to fall further later in the global day as a meeting between French and German leaders is unlikely to produce any surprises and concerns about the European debt concerns could persist. 

French President Nicolas Sarkozy and German Chancellor Angela Merkel will meet on Tuesday to discuss "euro-zone issues." Speculation that they may talk about euro-zone bonds boosted the euro overnight. 

At 0500 GMT, the euro was at USD1.4428 from USD1.4445 late Monday in New York. The dollar was unchanged at JPY76.85, while the euro was at JPY110.85 from JPY111.00. The U.K. pound was at USD1.6366 from USD1.6391. The dollar was at CHF0.7816 from CHF0.7844.
The ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at 73.927 from 74.607.

The Australian dollar edged slightly higher Tuesday on the back of strong stocks across the world, though concerns grew about the state of the local economy. 

Weighing on sentiment locally, in minutes from its early August policy meeting, the Reserve Bank of Australia said global instability underpinned its decision to keep interest rates on hold at 4.75%, adding that sustained market volatility will hit confidence and could ease inflation concerns. The comments came on the same day the nation's largest airline Qantas, as well as steel producer OneSteel, both disclosed upcoming job cuts. At 0600 GMT, the Australian dollar was at USD1.0474, up from USD1.0429 late Monday. Against the Japanese yen, the Australian dollar was at JPY80.495, up from JPY80.20.
Market expectation
The EURUSD may fall later in the global day as a meeting between French and German leaders is unlikely to produce any surprises like the introduction of euro-zone bonds, while European debt concerns are likely to persist. The meeting won't be able to sweep away concerns over peripheral countries in Europe, say dealers.  The euro should continue to face a rough ride; dealers tip the EURUSD in a USD1.4250-USD1.4600 range in the near term; the pair is at USD1.4417, off an earlier high of USD1.4455. Market participants remain alert for possible currency intervention whenever the USDJPY is about to fall to its post-war record low of JPY76.25. The JPY76.50 level is becoming psychologically important, after talk of BOJ rate-checking last Thursday temporarily lifted the USD.

Investors also remain focused on the Swiss franc amid continued speculation that Swiss authorities may be working toward establishing a Euro-Swiss peg.

European stocks are seen opening tentatively higher Tuesday, with investors encouraged by gains on Wall Street Monday, but unwilling to take significant new positions ahead of a meeting between French President Nicolas Sarkozy and German Chancellor Angela Merkel to discuss the European debt crisis.