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Market Review - 07/09/2011 22:00 GMT

Euro maintains a steady bias ahead of Thurday's ECB rate meeting

The single currency briefly rallied in European morning on Wednesday after German Constitutional Court rejected lawsuits aimed at blocking the country's participation in eurozone bailouts, easing worries about eurozone debt crisis.

The single currency edged higher from Australian low at 1.3994 and briefly climbed to session high of 1.4150 after German top court rejected challenges to the participation in ECB rescue funds. Despite euro's strong retreat to 1.4013 in NY morning, active cross buying of euro vs other currencies lifted the pair to 1.4108 in late NY afternoon.

Euro was supported in New York session by the rallies in U.S. and European stock markets as DJI surged by 275.56, or 2.47% to 11414.86. FTSE-100, CAC-40 and DAX rose sharply by 3.14%, 3.63% and 4.07% respectively.

Versus the yen, although the greenback extended its fall from Tuesday's NY high at 77.73 to 77.07 in Asian morning partly due to BOJ's rate decision, the pair staged a minor bounce to 77.37 but retreated to 77.08 in European morning. However, buying interest around 77.00/07 supported the pair to 77.45 at NY midday before retreating.

BoJ kept its overnight call rate unchanged at 0-0.1% and announced 'no new monetary easing steps; economy to resume moderate recovery; output and exports continue to rise; need to watch developments in U.S. economy and Europe sovereign debt problem.'

Although the British pound rose in tandem with euro from Australian low at 1.5938 to session high of 1.6040 in European morning, renewed selling there sent the pair below Tuesday's low at 1.5921 to a marginal low of 1.5919 in NY midday on cross selling of sterling, however, rebound in euro also lifted the pound.

Earlier in European morning, the British pound was pressured as UK Halifax house prices for Aug. was weaker-than-expected at -1.2% m/m and -2.6% 3m y/y versus forecasts of -0.3% and -2.3% respectively.

On the data front, German industrial production was much better than expected at 4.0% m/m and 10.1% y/y vs forecasts of 0.5% and 6.5% respectively. UK Manufacturing output for July was up 0.1% m/m and 1.9% y/y vs forecasts of 0.0% and 1.9% respectively.

Data to be released on Thursday:

Japan Current account Jul, Machinery orders, economic watch, Australia Unemployment, Swiss Unemployment, Germany Trade balance, Import n Export, Current account, U.K. BOE rate decision, Canada Building permits, housing index, trade balance, imports n exports,U.S. Jobless claims.

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