Acetrader-Daily Market Outlook 17-12-2010

Acetrader-Daily Market Outlook 17-12-2010

Market Review - 16/12/2010 21:55 GMT

Euro recovers as European leaders discuss solving the region's debt crisis

Euro edged higher against the dollar on Thursday after EU leaders agreed to set up a permanent crisis management mechanism to solve sovereign debt problems by making minor changes to the EU's governing treaty.

The single currency rebounded against the dollar on Thursday after the selloff in the previous session. Euro briefly rose to 1.3266 but retreated to 1.3181 later and the pair rebounded again in NY afternoon.

In other news, Spanish bond auction results were slightly better-than-expected as bid-to-cover ratio of Spanish 10-year bond was 1.7 versus 1.8 at previous auction, the bond average yield rose significantly to 5.446% from 4.615% at previous action. In addition, Moody's placed Greece's Ba1 bond ratings on review for a possible downgrade.

The greenback fell against the Japanese yen on profit-taking and fell to 83.97 before rebounding to 84.45, however, the pair dropped again and reached 83.88 ahead of NY closing. The dollar was once supported by higher Treasury yields together with robust US economic data.

On economic front, US Philadelphia Fed. business conditions index came in at 24.3 in December, much higher than forecast of 15.0 and the previous reading of 22.5. U.S. housing starts rose by 3.9% to 555,000 unit rate in November versus consensus forecast of 550,000.

The British pound rose from 1.5542 and edged higher to 1.5637 on Thursday before trading narrowly. Cable was supported by the release of U.K. retail sales data which came in at 0.3% m/m and 1.1% y/y versus the expectation of 0.4% m/m and 0.7% y/y respectively. In addition, a Bank of England survey in November showed U.K. inflation expectations for year ahead was 3.9% y/y versus the August's forecast of 3.4% y/y.

Swiss National Bank kept interest rate unchanged at 0.25% as widely expected. SNB's Hildebrand said aggravation of eurozone crisis would further hurt Swiss economy. The eur/chf tumbled from 1.2872 to a record low of 1.2736 on Thursday.

Economic indicators to be released on Friday include:

UK consumer confidence, Germany Ifo index, EU trade balance and US leading indicators.

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