USD Stabilizes vs EUR as Next Step in Debt Saga Awaited, Weaker Equities Help JPY... |
Currency markets were relatively sideways in today’s trading, though the Japanese Yen strengthened as Asian and European equities were lower and that helped spur some move into the safe-haven Yen.
The EUR/USD pair was flat throughout the session, unable to move above the 1.4655 level. The tentative Euro-zone deal on new financing package for Greece helped the EUR rally to end last week, but there are still unanswered questions regarding what constitutes a “credit event” which kept the EUR from extending its gains.
One hurdle is that Standard & Poor declared last week that a delay in repayments would constitute a default by Greece, while other possibilities such as a “voluntary” offer to exchange debt could also constitute default. In any case, the market awaits further developments in the sovereign debt crisis as the Greek financing deal has yet to be signed off on. A spokesperson for Germany’s finance minister said it was not certain there will be a second bailout and under what terms. So the optimism from the end of last week was tempered a bit.
Jean-Claude Juncker, head of the group of euro-zone finance ministers, and Economics Commissioner Olli Rehn face questions in European parliament in Strasbourg between 1800 GMT and 1930 GMT, which is expected to provide further details on Greece.
The US Dollar for its part remains in a tough spot as a result of its weak fundamentals – a gain of only 56K jobs in May adding to the list of weak releases – and what that could mean for the central bank in terms of needing to keep interest rates at their low levels for longer, a fundamental factor that undercut the USD the past 2 weeks.
Global stocks opened the week in the red today, and oil prices retreating to start the week:
From Marketwatch: “Asian share markets fell Monday, pressured by last week’s disappointing U.S. economic data, while Tokyo Electric Power Co. shares plunged after a report that the firm is facing a massive fiscal-year loss.
Japan’s Nikkei Stock Average closed down 1.2%, while Australia’s S&P/ASX 200 index lost 0.3%, and Singapore’s Straits Times Index traded down 0.5%. Stock markets in Hong Kong, Seoul and Shanghai were all closed for holidays.”
From Marketwatch: “European stocks moved lower Monday, adding to a three-session losing streak driven by weak economic data, though Bayer AG led gains for most pharmaceutical stocks after a successful drug trial.
The Stoxx Europe 600 index slipped 0.3% to 272.82 in morning trading. The index had fallen 2.6% over the previous three sessions, on a string of weak economic announcements that culminated in disappointing nonfarm-payroll figures in the U.S. on Friday.
Financial stocks traded weaker Monday, led by banks that are seen as having a significant exposure to Greece.”
The USD managed to hold its own against higher yielders, and was a bit stronger against the GBP and CAD, though flat against the AUD. As we mentioned earlier the Yen was stronger and it gained on the USD, while the CHF consolidated its recent gains against the USD.
Currency markets therefore have not taken much of a direction to start the week, though there is a sense that traders and investors are re-assessing risk. Not much in the way of fundamentals to look out for, so US equities and commodities may be crucial to driving today’s price action.
Nick Nasad
Information and opinions contained in this report are for educational purposes only and do not constitute an investment advice. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness. FXTimes will not accept liability for any loss of profit or damage which may arise directly, indirectly or consequently from use of or reliance on the trading set-ups or any accompanying chart analysis.
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