Forex News

The euro rebounded against the U.S. dollar and Japanese on Tuesday on the back of the rise in the Dow Jones Index which ended the day up 270 points after falling 679 points on Monday. The single currency initially declined to 1.2562 in line with the weakness in Asian equity markets before rising in Europe and U.S. session on short-covering. Trading volume was relatively thin ahead of the European Central Bank interest rate decision due out on Thursday (ECB is expected to reduce interest rates by 50 basis points).

In other news, the Reserve Bank of Australia cut interest rates yesterday by 100 basis points from 5.25% to a six-year low at 4.25% (economists were expecting a reduction of 75 basis points). The central bank said in its statement that inflation would moderate next year and that the target lending rate is now at a level that will stimulate growth. The Australian dollar rebounded from its intra-day low of 0.6332 versus the U.S. currency to 0.6495 before retreating to close at 0.6428.

The U.S. dollar declined to 92.63 against the Japanese yen before rebounding to 93.69 on cross selling in yen, however, the pair retreated in New York afternoon to end the day relatively unchanged at 93.18. The Swiss franc strengthened to 1.1996 against the dollar before retreating to 1.2061 on cross selling. The British pound rebounded versus the greenback from 1.4776 to 1.5070 before falling to 1.4920 on speculation that the Bank of England would cut rates by more than the expected 50 basis points on Thursday.

In addition to Thursday's ECB and BOE interest rate decisions, traders will focus on Friday's important U.S. non-farm payrolls data, with the U.S. ADP employment figure released on Wednesday expected to show a fall of 200,000 jobs. Other economic data due out on Wednesday include Australian GDP, services PMI for Germany, eurozone and the U.K., eurozone retail sales and U.S. ISM (non-maufacturing).