Euro
The European currency strengthened to its highest since May 11 against the greenback amid speculations the European Union will provide Greece with additional financial aid in order to resolve the regional debt crisis. The single currency followed its last week gains after Jean-Claude Juncker, the Prime Minister of Luxembourg and the head of the group of European finance ministers, said that the new aid program will be decided by the end of June. At the same time he added that a “total restructuring” of the Greek debt is unacceptable. In the nearest term the International Monetary Fund and the European Central Bank are expected to renegotiate the terms of the last year’s 110 billion euro loan. However it is still possible that the IMF will not provide the next part of the bailout, as Greece does not meet the requirements of the organization. According to the Financial Times, international institutions will have to extend an additional 30 billion euro credit to Greece within the next year.
As for important economic data, today investors will be closely watching the May estimation of the Euro Zone consumer price index. According to expectations, the index remained unchanged at 2.8%, which is the highest level since October 2008. A higher price pressure in the region as well as the confirming will of the European nations to resolve debt problems are supporting expectations of a coming interest rate raise by the ECB. Moreover the market attention will be also focused today on German labor market reports. The data is expected to show the number of unemployed fell in May, pushing down seasonally adjusted unemployment rate to 7% from 7.1% in the previous month. Pair EUR/USD rocketed today in the Asian trading hours from 1.4285 to 1.4405.
Japanese Yen
The yen dropped against all its peers after rating agency Moody’s announced that is had placed Japan’s credit ratings on review for possible downgrade. The agency reported that the current policy, growing unemployment and a lack of fiscal consolidation will elevate the nation’s debt in a “inexorably from” and added that this “level is already well above that of other advanced economies.” According to some estimations, Japanese gross debt already exceeds 200% of the nation’s GDP. “The review has been prompted by heightened concern that faltering economic growth prospects and a weak policy response would make more challenging the government’s ability to fashion and achieve a credible deficit reduction target,” Moody’s said. The outlook of the current “Aa2” Japanese sovereign rating was changed to “negative” in February and may be downgraded in the coming three months. Meanwhile Japanese Prime Minister Naoto Kan said he would not step down. Pair USD/JPY advanced during Asian trading session from 80.70 to 81.50.
Canadian Dollar
Yesterday Canada’s GDP report was released. According to the data the economy expanded by 3.9% in the first quarter of 2011 in comparison with the previous 3.1% and expectations of a 4% growth. However annual pace was a bit lower than previous figures, slowing to 2.8% from 3%. The Loonie gained ground after the statistics was published. Pair USD/CAD fell this morning to 0.9712 from yesterday’s 0.9785. Today Bank of Canada, headed by the Governor Mark Carney is expected to keep the target rate for overnight bank lending unchanged at 1%.
