The U.S. Dollar weakened as risk appetite returned to the markets, thereby reducing the demand for refuge currencies. The U.S. currency was further weighed down by the fact that Greek Prime Minister, George Papandreou, obtained 155 votes to approve his austerity measures. In addition, investors began speculating that the Federal Reserve may bring on another bout of quantitative easing given the disappointing Consumer Confidence figures. Due to the belief that a QE3 may have a positive outcome for global economies, equities continued to rally and commodity prices advanced. Even gold went up for a second day in a row, thereby causing the Dollar to weaken further. But better than anticipated reports on Pending U.S. Home Sales caused a reversal in risk appetite thus benefitting the Dollar, since it diminished possibilities of a QE3. Meanwhile, the Canadian Dollar advanced against all of its peers following reports indicating that inflation levels are increasing. This raised speculation that the Bank of Canada may soon hike the cost of interest rates.
The Euro rallied on news that the Greek Parliament voted to approve the budget cuts and plans to buy State assets in order to obtain 78 billion Euros in aid. The 17-nation currency strengthened against the Dollar as investors now consider that the ECB will boost interest rates as soon as lawmakers pass the austerity measures. On the economic front the Euro-Zone’s Business Climate Indicator revealed better than anticipated data. Consumer Confidence was also higher, although Industry growth came up short. But soon after the Greek Parliament’s vote, the Euro erased some of its earlier gains. Analysts think this may be because investors are still concerned about Greece sustaining the debt.
The Pound Sterling rallied on news that Papandreou succeeded in obtaining the needed votes, despite the negative metrics released in the U.K. Stats revealed a drop in Mortgage Approvals as well as in Net Consumer Credit; Money Supply didn’t fare too badly as it increased by a small percentage. Lending on Dwellings rose to 1.1 billion. The data for Money Supply helped the British Pound regain some of its losses against the Euro.
The Yen was affected by the lack of appetite for safe havens brought on by the Greek Parliament’s vote. The Japanese currency rebounded on positive Industrial Production figures; however, as U.S. yields continue to advance, the Yen may weaken against the greenback.
Other news showed that the hike in raw material prices caused the Australian and New Zealand Dollars to advance against most of their counterparts.
EUR/USD- Papandreou Succeeded
The Euro traded at a two-week high versus the U.S. currency on increasing sentiment that the European Central Bank will raise interest rates now that the vote is out of the way. Meanwhile, Greece’s Prime Minister, George Papandreou, succeeded in obtaining the votes needed to pass his proposed austerity measures despite two days of rioting on the streets of Athens. This caused the Euro to rally against the Swiss Franc as well. Despite the positive outcome and the better than expected economic metrics, the Euro slumped to below $1.4350.
GBP/USD- Currency Rallied Despite Data
The British Pound was unaffected by the negative metrics and rallied as the Greek Parliament voted to approve the austerity measures. Economic reports out of the U.K. were worse than anticipated; these showed that Mortgage Approvals decreased by 45,900 and Net Consumer Credit dipped by 0.3 billion. Money Supply is what actually boosted the Pound, causing it to erase some of its prior losses mainly against the Euro. The outlook for the U.K. has improved as investors believe that the Euro-zone still faces problems especially if Greece is unable to sustain its debt.
USD/JPY- Industrial Production Advanced
The Yen traded mixed; at first it fell as risk appetite dominated the market. But better than anticipated Pending Home Sales out of the U.S. brought on a big sell-off. In addition, U.S. yields grew with the ten-year
Treasury increasing the most; however, this surprisingly enough didn’t have a negative effect on the Japanese currency. Analysts think this was due to the stellar reports on Industrial Production, probably resulting from all the work done on damages from the earthquake and tsunami. The stellar metrics boosted the Yen’s value.
USD/CAD- Currency Traded At The Highest This Year
The Canadian Dollar reached the highest level this year against the U.S. currency following releases that indicated a rise in Consumer Prices. This prompted traders to increase bets on an interest rate hike. The Loonie advanced against most of its peers as commodities rose following Greece’s approval of the austerity plan. Investors will keep an eye on the currency as today’s economic data may show that GDP fell for the month of April.
Today’s economic calendar shows that Japan will release a report on Housing Starts. The U.K. will announce Nationwide HPI while the Euro region issues Italian CPI, German Retail Sales, German Unemployment Rate, French Consumer Spending, M3 Money Supply and French PPI. In addition, ECB President, Jean-Claude Trichet, is scheduled to speak. The U.S. will report on Initial Jobless Claims and Chicago PMI while Canada announces its MoM GDP.