Previous session overview

The euro sank below USD1.2500 Friday to its lowest level since November 2008 as concern mounts over the negative fallout from measures taken to deal with the euro-zone debt crisis.

The common currency has bounced back from its worst levels of the day, but remains down against most major rivals as doubts about the USD1-trillion support package announced last weekend plague the euro. Criticism is widening about the European Central Bank's decision to start buying sovereign bonds in an effort to boost market liquidity and prevent contagion from Greece's debt crisis. Fear is also growing that austerity measures to reduce budget deficits will stir further civil unrest.

Stronger-than-expected U.S. retail sales data for April had little impact on the market Friday morning, as attention remains fixed intently on Europe.

USD has hit a session low of JPY92.10 vs JPY, its lowest level since May 10, as risk aversion remains paramount in the market. It has since rebounded modestly to JPY92.20.

The euro was at was USD1.2488, down from USD1.2531 late Thursday. It struck a low of USD1.2432 overnight, its lowest since November 2008.

The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was higher, at 85.620, up from 84.848.

Market expectation

The euro fell earlier to a new downtrend low of USD1.2431. It's targeting daily support at USD1.2342, which charts suggest may be a prominent interim low. If trades are stopped above USD1.2598 look for an intraday rally to USd1.2733.

Forecasters are more optimistic about growth and hiring, and continue to expect low inflation, according to a closely watched survey released by the Federal Reserve Bank of Philadelphia Friday.

The better outlook for growth translates to an improved employment outlook, but even so, forecasters see years of difficulty. The average unemployment rate for 2010 is seen at 9.6%, falling to 8.9% in 2011, 8.0% in 2012 and 7.1% in 2013. All of those annual average forecasts represent improvements over the outlook from the prior quarter. For the second quarter, the unemployment rate is seen at 9.8% it was at 9.9% in April falling to 9.6% in the third quarter and 9.5% in the fourth quarter.

Average monthly payroll growth for the second quarter is seen at 207,000, cooling to 121,000 in the third quarter. The current year is expected to see an average monthly job loss of 38,000 jobs, although 2011 is predicted to have an average monthly 184,000 job rise.

Disclaimer: the data made available by Dukascopy (Suisse) SAis for informational purposes only. Publication of this data by Dukascopy (Suisse) SA does not constitute provision of investment advice and Dukascopy (Suisse) SA assumes no responsibility with regard toany information, forecast or recommendation herein contained and assumes no responsibility with regard toany losses resulting from any activities conducted the basis of this data, including any investment decisions.