Daily Fundamental Analysis

by: Finotec

The euro fell against the dollar after European Central Bank President Jean- Claude Trichet said the central bank must do everything possible to boost confidence, signaling he may cut interest rates further. The euro lost ground against the yen as well, helping the Japanese currency gain broadly. The euro's fall accelerated after European Central Bank President Jean-Claude Trichet said in Tokyo on Friday that the ECB must balance the need for immediate action to tackle the credit crunch with a sound exit strategy for such policies. “Economies around the world, particularly Europe, are still in a recession,” said Yuji Saito, at Societe Generale SA. “ECB officials are increasing their rhetoric that they’ll cut rates. The bias for the euro is to the downside.” The EUR/USD is currently trading at $1.3105 as of 8:40am, London Time.

Sterling fell broadly on Thursday as global economic and U.S. earnings jitters encouraged market participants to pare back their exposure to risk, causing the UK currency to reverse much of its recent gains. The pound and other currencies seen as higher risk came under pressure as figures showing the weakest quarterly Chinese growth since records began in 1992 encouraged investors to seek the safety of the dollar and the yen. However, there have been some more positive data out of the UK recently, with a survey on Wednesday showing that the pace of house price declines in the UK fell to its slowest in a year. The GBP/USD is currently trading at $1.4823 as of 8:55am, London Time.

Australia’s dollar rose today against the U.S. currency as European Central Bank President Jean-Claude Trichet signaled he may cut interest rates further. That would add to the attractiveness of Australia’s higher yielding assets. “The U.S. earnings season started off pretty strongly but the biggest drag on the Australian and New Zealand dollars this week was China’s GDP,” said David Forrester, a strategist at Barclays Capital in Singapore. “There’s quite a bit of yen cross unwinding in both currencies as we are running into a big week next week for U.S. earnings especially non-financial earnings. People are scaling back and taking some profit.” The AUD/USD is currently trading at 0.7203 as of 9:05am, London time.