Market Overview - 06/12/2011

Market Review - 06/12/2011                       21:57 All times in GMT  

Euro orbits near 1.3400 after recovering from early decline

Euro traded near 1.3400 in late New York trading on Tuesday after erasing early losses amid cautious optimism eurozone leaders would take further measure to resolve the eurozone debt crisis at a summit this Friday.  
 
Earlier in the day, although the single currency extended decline from Monday's high of 1.3486 in early trading and dropped to a session low of 1.3334 in European morning following rating agency Standard & Poor's (S&P) warning of downgrades of 15 eurozone economies on Monday, renewed buying on cautious optimism ahead of Friday's EU summit lifted euro and the pair later climbed to a session high of 1.3428 in European midday in part due to active cross buying of euro (especially versus chf).  
 
In cross trading, the single currency strengthened against the Swiss franc and touched a session peak of 1.2430 (the highest since November 17) on speculation that the Swiss National Bank may intervene and raised the floor on the EUR/CHF after data showed growing risk of deflation in Switzerland. Switzerland's consumer prices dropped 0.5% from a year earlier and fell an annual 0.1 percent in October, the biggest drop since October 2009, due to lower cost for imported goods.  
 
Earlier in Asia, Australia's central bank reduced its benchmark interest rate by a quarter percentage point for a second straight month to 4.25 percent as worries of Europe's fiscal crisis may slow the nation's commodity exports. The Australian dollar fell against the usd after the announcement in Asia and hit an intra-day low of 1.0156 in European morning before rebounding on greenback's broad-based weakness (expect versus franc). The pair ratcheted higher in Europe and New York sessions to a high of 1.0268, last seen around 1.0245 in late New York trading.  
 
US dollar weakened against the Canadian dollar after the Bank of Canada announced to hold its target for the overnight rate at 1 percent and gave no signal of an impending rate cut. USD/CAD swiftly tumbled from 1.0198 to 1.0122 after the rate decision and later dropped to a session low of 1.0085 near New York closing before stabilising.  
 
On the data front, eurozone economic growth remained steady in the third quarter as rising exports helped offset the impact of a slump of construction, reported a rise of 0.2% from the second quarter and a yearly gain of 1.4%.   
 
Data to be released on Wednesday:   
 
Japan Tankan manufacturing and leading indicators, Switzerland jobless rate, UK BRC shop price index, industrial production and manufacturing production, Germany industrial production, and New Zealand RBNZ rate decision.