Daily Forex Outlook: Renewed Greece Hopes Boost the Euro (EUR)

on Nov 22, 2012

With the long Thanksgiving weekend starting in the US, traders’ attention is focused on Europe, where the EU Member States are scheduled to discuss the Union’s budget. The single currency advanced ahead of the meeting, boosted by renewed optimism that Greece will receive its additional funding. Outside Europe, manufacturing surveys both in China and the US spurred appetite for riskier assets, benefiting the Australian and New Zealand dollar.

**Euro up ahead of EU Budget Summit**
On November 22, Bloomberg reported that the euro strengthened versus most of its 16 major peers ahead of the EU budget meeting. The single currency benefitted from renewed optimism that Eurozone ministers are on the way to reaching an agreement on Greece’s additional aid. “Eventually Greece will get its money,” points out Callum Henderson, global head of currency research at Standard Chartered Plc (LON:STAN, LON:STAC, HKG:2888), as quoted by Bloomberg. “Given that the European crisis clearly has not been solved, I wouldn’t expect the euro to go beyond $1.2950.”

The single currency gained 0.1 percent versus the greenback to $1.2846 as of 6:44 a.m. GMT, after reaching $1.2868 earlier, its highest level since November 7.
Yet, despite the renewed optimism as regards the euro, the news related to the EU budget summit as well as the Eurozone PMIs scheduled to be released on Thursday are likely to influence the performance of the single currency. “With U.S. markets closed tonight for the Thanksgiving holiday, investors’ focus will be squarely on French, German and composite-European manufacturing PMIs and the kick-off of yet another EU summit,” notes Cameron Peacock, market strategist at IG, as quoted by Reuters.

**Yen Headed for Weekly Decline**
!m[Higher-Yielding Currencies Advance On China Manufacturing Data](/uploads/story/874/thumbs/pic1_inline.png)Japan’s currency, which yesterday suffered from stimulus speculation as well as disappointing export data, is headed for weekly decline against all 16 major counterparts, as reported by Bloomberg on November 22. Japan’s currency has been under pressure since last week when the government announced an election in December, with polls showing that the likely winner will be the opposition Liberal Democratic Party (LDP) whose leader Shinzo Abe has called for aggressive monetary easing. “I’m worried that if the new government were to follow through the policy the LDP is proposing, the yen will tumble to around 100 per dollar,” notes Noriaki Murao, managing director at Bank of Tokyo-Mitsubishi UFJ, as quoted by Bloomberg. “The risk of a sudden drop in the yen is increasing.”

**Aussie, Kiwi Advance on China Report**
The yen also lost ground versus the Australian and the New Zealand dollar, with both Asia-Pacific currencies advancing after a private report indicated that China’s manufacturing output expanded for the first time in 13 months. The Australian dollar reached ¥85.791, the strongest since April 2, whereas its New Zealand counterpart climbed to ¥67.38. In addition, the Aussie rose 0.2 percent to $1.0387, whereas the Kiwi added 0.1 percent to 81.55 US cents.

“Today’s report underscores the halting of China’s slowdown,” notes Teppei Ino, an analyst at Bank of Tokyo-Mitsubishi UFJ, as quoted by Bloomberg. “While we have to see further signs of improvement, it’s positive for the Australian dollar.” Reuters reports that the Chinese report was preceded by an overnight report showing that US manufacturing grew in November at its quickest pace in five months, which also helped boost demand for riskier assets.


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