[AcetraderFX]

Market Review - 31/01/2012 21:26 All times in GMT

Euro falls on weak U.S. economic data

The euro declined on Tuesday despite initial optimism of progress in the Greek debt swap talks but later fell in New York morning session as poor U.S. economic data eroded risk tolerance and prompted a return to the relative safety of the dollar.

Earlier in Asia, the single currency ratcheted against the dollar after Greek Prime Minister Lucas Papademos said significant progress had been made in the debt swap talks. Although an unexpected drop in German unemployment lifted euro to an intra-day high of 1.3213 in European morning, the pair later tumbled to a session low of 1.3043 as much weaker-than-expected U.S. consumer confidence and Chicago PMI figures dampened risk appetite. However, euro later recovered to 1.3093 before easing.

Greek PM Lucas Papademos said 'significant progress has been made in PSI talks; seek to reach accord on PSI, in parallel with consultation on new loan package for Greece; seek to conclude negotiations with troika by end of the week.' Later in the day, Greek finance minister Evangelos Venizelos said they are 'discussing net present value losses of more than 70% in debt swap talks.'

U.S. consumer confidence fell to 61.1 in January vs forecasts of 68.0, down from a revised reading of 64.8 whilst Chicago PMI was reported at 60.2 vs forecast of 63.0 and 62.2 last month.

The British pound rose in tandem with euro in Asia and climbed further to a session high at 1.5798 in European morning. Despite intra-day selloff in euro, strong cross-buying of sterling vs euro (eur/gbp fell from 0.8385 to 0.8280) limited cable's fall to 1.5746 in New York following the weak U.S. economic data before staging a minor recovery.

In other news, ECB Executive Board Member Joerg Asmussen said 'more ambitious measures must follow European fiscal compact, which is important first step to fiscal union; effective implementation of fiscal pact should reinforce market confidence in eurozone public finances.'

On the data front, German unemployment rate fell to 6.7% in January, better-than-forecast of 6.8%. The U.S. S&P/Case-Shiller home price index fell more than expected, down 0.7% m/m and 3.7% y/y vs forecasts of -0.5% and -3.3% respectively.


Data to be released Wednesday includes:

Australia house price index, China manufacturing PMI, HSBC manufacturing PMI, U.K. Nationwide house prices, manufacturing PMI, Switzerland Retail Sales, PMI, Germany manufacturing PMI, EU HICP flash, U.S. ADP employment, construction spending, ISM manufacturing.

[alzhanghunan1]

All of us are aware of that the unemployment rate in Germany decreased, the euro finally recovered.