The U.S. Dollar rallied at the start of the week amid concerns a two-day summit scheduled for June 28^th won’t produce the positive results needed to stem the debt crisis, now in its third year. Appeal for the greenback remained strong on speculation European leaders won’t move forward towards fiscal integration. In the U.S., economic reports showed that New Home Sales hit a one-year high during the month of May, suggesting the housing market is recovering faster than expected. According to the Commerce Department, New Home Sales surged 7.9 percent to a seasonally adjusted 369,000 units. The average price for a new home posted at 234,500 USD. Meanwhile, the Canadian Dollar fell to a two-week low against its American counterpart on doubts the upcoming E.U. summit will produce palpable results. The declining price of crude oil further weakened the Loonie.

The Euro dropped against the U.S. Dollar in anticipation of the upcoming E.U. summit while Italy and Spain prepare for another debt auction today. The currency was also weighed down by news that Cyprus has requested a bailout; and to add to the pressure, German Chancellor Angela Merkel indicated that she opposes any “joint Euro bonds or bills.” There were also rumors that Greece’s Finance Minister may resign, though this hasn’t been officially confirmed. In addition, Spain announced that it needs another 100 Bn Euros to recapitalize all banks, a request that came after and independent audit showed Madrid needs at least 62 billion Euros to aid its troubled banking sector. The British Pound traded slightly lower against the U.S. currency as concerns over the debt crisis in the Euro region continued to weigh on sentiment despite positive economic reports out of the U.S. In the U.K., investors believe the Bank of England will implement further quantitative easing, especially after policy maker David Miles suggested that more easing was needed in order to boost economic growth, as the economy seems to have stalled out.

The Yen gained against most of its peers as demand for refuge increased on worries the upcoming E.U. two-day summit may not produce progress towards stemming the debt crisis.

And the South Pacific currencies slipped versus the greenback on the likelihood the Euro-zone’s debt crisis may be spreading to the larger economies. The Kiwi dipped following a decline in Asian stock prices.

EUR/USD- Disagreements Weigh On Euro

Disagreements over how to implement the proposals agreed upon by E.U. leaders caused the Euro to weaken. Furthermore, Spain issued an official request wherein it asked for an additional 100 bn Euros to solve the banking crisis, while Cyprus became the next nation to ask for a bailout. Worries over the outcome of the upcoming summit increased appetite for safety, especially as market participants suspect the two-day meeting won’t bring the leaders closer towards fiscal integration. According to official reports, German Chancellor Merkel opposes a “joint Euro bond” as she doesn’t wish the German people to carry the load of heavy debts. In the days to come, the E.U. will report on Consumer Confidence and German Unemployment.

GBP/USD- BOE May Implement Further Easing

The British Pound traded slightly lower against the U.S. Dollar after the U.S. reported an increase in New Home Sales, suggesting the real estate market is recovering. In an interview with a major newspaper, policy maker David Miles indicated that he supports a 50 billion GBP expansion of the current monetary easing program, raising speculation that the Bank of England will implement further easing.

USD/JPY- Yen Rises Strongly

The Yen rose against most of its peers on comments by the country’s Finance Minister indicating that he would do all that’s possible to settle bilateral trade between Japan and China. The Yen gained further as risk aversion increased after Spain officially requested an additional 100 bn Euros to bailout its troubled banks. The currency remained strong while talks between E.U. leaders about a fiscal union broke down.

USD/CAD- Crude Oil Declines

Canada’s Dollar fell as crude oil futures dropped to $79.22. The Loonie remained weak as demand for safety increased on speculations European leaders won’t succeed in coming up with measures to finally stem the debt crisis. This also dampened the outlook for commodity exporting countries, causing the Canadian currency to fall to the lowest rate it’s traded at in almost two weeks against the greenback.

Today’s Outlook

Today’s economic calendar is light. It shows that the U.S. will report on CB Consumer Confidence. New Zealand will release data on its Trade Balance. And in the E.U., Germany and France will issue figures on the Consumer Confidence Climate.

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