Market Review – 27/06/2011 21:30 GMT
Euro rises on improved risk appetite ahead of Greek parliament vote
The single currency rose on Monday due to optimism that the Greek parliament will approve austerity measures later this week. Euro ratcheted higher after intra-day decline from 1.4224 in New Zealand to 1.4103 at Asian open before beginning to rally in Europe.
Despite a brief pullback from European morning high of 1.4237 to 1.4169 ahead of New York opening after comments from rating agency Moody’s which said ‘continued deposit outflows are “key credit negative” for Greek banks; estimates private-sector customer deposit outflows from Greek banks at 8% so far this year; Greek banks would have “severe shortage” of cash if deposits fall by more than 35%’, investors shrugged off the news as risk appetite improved on the back of rising stock markets in U.S. and some European countries, price climbed to a session high of 1.4294 in New York morning on improved risk appetite on rumours of buying interest from sovereign funds.
The single currency strengthened across the broad and rose strongly against the Japanese yen, pound and Swiss franc with eur/jpy, eur/gbp and eur/chf jumped from session lows of 113.85, 0.8860 and fresh record low of 1.1808 to as high as 115.61, 0.8944 and 1.1957 respectively.
Sterling edged higher after intra-day volatile movement, price traded around 1.5985 near New York closing. Earlier in the day, although the pound retreated after early rise from Australian morning low of 1.5913 to as high as 1.6010 in European morning, euro-led rebound contained weakness at 1.5925 in New York morning and cable then ratcheted higher to a session high of 1.6012 later in the day before easing on active cross-selling on sterling (especially versus euro) which limited intra-day gain there.
Versus the Japanese yen, the greenback rose from session low of 80.29 to 80.98 in New York morning on improved risk appetite and renewed political uncertainty in Japan after news that Japanese Prime Minister Naoto Kan said he would step down after a second budget (and 2 other bills) have been passed.
In other news, French government source said ‘French plan for Greek debt rollover would cover bonds maturing in 2011 to 2014; French plan involves creating a special purpose vehicle (SPV) for bond rolled over; French plan would mean banks then hold equity in SPV, rather than having Greek debt on balance sheets.’
On the data front, U.S. May personal spending and income came in at 0.0% and 0.3% versus the expectation of 0.1% n 0.4%. U.S. May core PCE index rose by 0.3% versus the consensus forecast of 0.2%. U.S. core PCE rose by 0.3% m/m and 2.5% y/y, the largest year-over-year rise since Jan 2010.
Data to be released on Tuesday include:
Japan retail sales; Germany CPI and HICP preliminary and Gfk consumer confidence; U.K. current account and GDP; U.S. SnP/CS home price, consumer confidence and Richmond Fed manufacturing.