Daily Forex Overview

Previous session overview

On Wednesday, the euro hit a new high against the dollar, just near of $1.60, after benign U.S. inflation data suggested the Federal Reserve will have to cut rates more without risking a spike in prices.

The core consumer price index, which excludes volatile food and energy costs, and is a preferred inflation indicator for the Fed, raised a mere 0.2%.

The euro-zone consumer inflation rate in March rose to an unprecedented 3.6% - way above the European Central Bank's 2% target. That all but shuts the door on near-term interest rate cuts by the ECB. EURUSD traded at a high of 1.5980 and a low of 1.5762, before closing at 1.5951 in New York.

Sterling fell to its lowest-ever level against the euro after a report showed European inflation accelerated more than initially estimated in March, supporting the view that the UK currency's yield advantage will diminish. The pound slightly gained against the greenback on disappointing March US housing starts. GBPUSD traded at a high of 1.9805 and a low of 1.9603, before closing at 1.9706.

The Japanese yen rose against the dollar after China raised banks' reserve requirements, adding further pressure on the dollar after euro zone March inflation data beat analysts' expectations. USDJPY traded at a high of 101.92 and a low of 100.83, before closing at 101.73 in New York.

The Australian dollar was the big winner, rising about 1.5% from yesterday's lows. The stronger euro, improved risk appetite and higher metals prices helped to push the AUD higher, and once stop-loss buying was triggered at around 0.9350 the currency raced to 0.9400 in short order.

Market expectation

EUR/USD's ascent to 1.60 likely later in day; "massive" amount of stop-loss buying orders just above. If triggered, pair may soon hit 1.65.

Many traders said the $1.6-mark is a big milestone. However, once above that mark, the common unit's ascent will likely continue since the overall European economy remains robust while the U.S. economy is weakening.

Players will pay attention to comments from European officials such as Gertrude Tumpel-Gugerell, a member of the European Central Bank.

Also very high oil price is now becoming a huge component and, creating real problems for the dollar.

Meanwhile, the dollar may rise against the yen, because earnings reports so far from large U.S. firms on closer inspection "aren't so bad.

EUR/JPY rising as robust Japanese stock prices prompting investors to increase carry trades.

Today we will see the release of Japan's capacity utilization and industrial production, euro zone trade balance, U.S. jobless claims, leading indicators and Philadelphia Fed survey.