Market Review – 31/05/2011 19:41 GMT
The single currency rises as Greece may avoid debt restructuring
The single currency rose to a three-week high of 1.4424 on Tuesday after news report that Germany was considering dropping its push for an early Greek debt restucturing.
Euro jumped from 1.4279 in Australia as Wall Street Journal reported that Berlin has made concession that it must lend Greece more money, even without burden-sharing by bondholders in the short term, would help Europe overcome its impasse over Greece’s funding needs before the indebted country ran out of cash in mid-July.
The single currency maintained a firm undertone in Asian and European sessions, price extended gain to 1.4424 in European morning on active cross-buying in euro before retreating to around 1.4360 after Free Democrat Parliament member Frank Schaeffler told business paper that
“Greence should leave Eurozone’ in New York morning.
Earlier in the day, eur/jpy jumped from 115.63 to as high as 117.80 in European morning before retreating sharply to 116.74 whilst eur/gbp rose from 0.8675 and rallied to 0.8754 in New York.
Versus the Japanese yen, the greenback quickly jumped fm 80.71 to 81.39 in Asian morning as Reuters news reported that Moody’s had put Japan’s sovereign ratings including the ‘Aa2’ local and foreign currency bond ratings on review for possible downgrade, four days after a similar move by Fitch Ratings. The pair later rose sharply to as high as 81.77 in European session after Moody’s also took actions on rated Japanese banks further to sovereign rating review, however, the greenback retreated strongly after the release of much weaker-than-expected U.S. economic data. Earlier in the day, aud/jpy rose sharply from 86.47 to 87.43 in European morning before retreating sharply to 86.46/48 in New York morning.
The British pound also jumped in tandem with eur/usd in Australia and price climbed to 1.6547 in Asian morning, however, cross-selling in sterling versus euro and jpy in European and New York session pushed price lower and cable reached intra-day low of 1.6423 in New York midday. Earlier in the day, gbp/jpy rose sharply from 133.33 to as high as 135.12 in European morning before retreating sharply to 133.48/50 in New York morning.
In other news, Moody’s senior Vice President and regional credit officer Tom Byrne said ‘we didn’t see any progress on whether government and Liberal Democratic Party (LDP) could reach consensus on fiscal policy; Japan macroeconomic outlook also weaker than expected.’
On the data front, German retail sales rose by 0.6% in April versus the economists’ forecast of 1.8% increase whilst German unemployment change in May was -8,000 against consensus forecast of -30,000.
U.S. Chicago PMI dropped to 56.6 in May versus economists forecast of 63.0 and previous reading of 67.6. U.S consumer confidence in May also came in at 60.8, much weaker than the expectation of 66.5. Bank of Canada rate decision in May remained unchanged at 1.00% as expected.
Data to be released on Wednesday include:
U.K. Halifax house prices, manufacturing PMI and mortgage approval; China PMI Manufacturing and HSBC Manufacturing PMI; Australia GDP; Swiss retail sales and PMI; German manufacturing PMI; Eurozone manufacturing PMI; U.S ADP employment, construction spending and ISM manufacturing.