Market Review – 06/06/2011 21:26 GMT
Euro weakens on Monday as second Greek bailout was uncertain
The single currency weakened on Monday after a German Finance Ministry spokesman said ‘not certain whether there will be second bailout for Greece and under what terms’. The spokesman also said ‘Chancellor Angela Merkel indicates Germany will decide on its bailout moves, now in Europe there are only suggestions’.
Euro retreated after climbing briefly above Friday’s 1.4643 high to 1.4659 in Australian session and later ratcheted lower to 1.4593 at New York opening before light support emerged on rumours that European Central Bank would raise rate in July, however, cross-selling in euro pressured price again at 1.4629 and the single currency fell to a session low of 1.4557 in New York afternoon after comments from Eurogroup Chairman Jean-Claude Juncker who said ‘Eurozone FX rate objectively overvalued versus other major currencies’.
The British pound pared last Friday’s gains and fell sharply on Monday after early brief rise above Friday’s 1.6438 high to 1.6460 at Asian opening due to active cross-selling in sterling. Cable extended intra-day losses to as low as 1.6341 in New York afternoon on comments from International Monetary Fund which said ‘Britain does not need to change its current economic policies as recent weak growth and high inflation is likely to be temporary but if growth faltered further and inflation also eased, then a mix of more quantitative easing by the Bank of England and tax cuts would needed to be considered’. Gbp/jpy retreated from 132.27 to as low as 130.83.
Versus the Japanese yen, the greenback edged lower to intra-day low of 79.98 in European morning after brief recovery to 80.40 in Asian morning before moving narrowly in New York session as market’s focus was on other currencies. Eur/jpy edged low from session high of 117.71 to as low as 116.59 in New York afternoon before recovering.
In other news, European Central Bank President Trichet said “this is not a crisis of the euro as a currency; have seen in recent months upside risks to outlook for price stability over medium term; Greek fiscal adjustment is a must; doesn’t believe there is a need for restructuring or haircuts on Greek debt.”
On the data front, Eurozone Sentix investor confidence in June came in at 3.5 versus economists’ expectation of 9.3 and previous reading of 10.9. Eurozone PPI m/m and y/y in May came in at 0.9% and 6.7% versus economists’ forecast of 0.8% and 6.6% respectively. Canada building permits in April dropped 21.1% versus expectation of 6.0% decrease. Canada Ivey PMI in May came in at 69.1 versus economists’ forecast of 60.0.
Data to be released on Tuesday include:
U.K. BRC retail sale; Australia RBA rate decision; Japan leading indicators; Swiss CPI; Eurozone retail sales; Germany factory orders.