London Session Recap

Daily Forex Fundamentals | Written by Forex.com | Jun 24 09 10:05 GMT |

As calmer conditions extended, stock markets have pushed higher aided by better earnings in the tech sector and an upturn in commodity prices. Coincident with the rise in stocks and commodities, risk trades were again in favour with the AUD, NZD and to a lesser degree the CAD all making headway vs the USD. Sterling stole the limelight in early London hours by surging through the 1.6500 level. USD/JPY has failed to hold its stronger tone after Japanese economic data overnight reported a 40.9% decline in May exports. This served as a reminder of the detrimental influence of yen strength and also the difficulties facing an export-led economy in the present environment. The yen remains weaker on the crosses. The solid results of yesterday's US 2 yr note auction has calmed underlying concerns about the expansion of US debt and rising interest rates. Today's outcome of the FOMC remains the prime focus with the market consensus focusing on the need of the Fed to assure the market that there is no near-term tightening in the pipeline. A discussion of exit policies may be necessary in order to assure markets that the necessary procedures are in place. However, the Fed is expected to reassure the markets that the risks remain of a potential expansion of asset buying rather than a reversal in the immediate term. Insofar as Fed tightening during the remainder of this year is not expected to be up for discussion today, the dollar started the European session with a softer bias. However, aided by improved US growth forecasts from the OECD the dollar found buying interest ahead of EUR/USD1.4140 bringing it back towards last night's closing levels. Sterling was one of the biggest beneficiaries of USD weakness at the start of the session with cable bursting through the 1.6500 before running into resistance ahead of 1.6600. Upside for the pound was then dampened by news from a revised GDP forecast by the OECD to -4.3% in 2009 from a previous forecast of -3.7%. This throws cold water on hopes that the UK could see growth returning before the end of this year. There were no UK economic data releases today. This afternoon BoE Governor King is due to testify to parliament on the Inflation Report and financial crisis. The market will be hoping for signs that the pessimism with respect to the economy which was very evident in last month's Inflation report may have begun to subside. Following its recent gains, sterling could be vulnerable if King maintains a pessimistic tone. Aside from the FOMC outcome, the market will be focused on the May durable goods release this afternoon in addition to new home sales data. Forex.com http://www.forex.com DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.