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FOREX: US Dollar Gains as EU Continues to Dither on Greek Aid

By , Currency Strategist
20 June 2011 02:16 GMT

Talking Points

  • US Dollar Gains as EU Continues to Dither on Greek Aid
  • Stock Futures Point to Continued Risk Aversion in Europe

The US Dollar rose anew against the major currencies in overnight trade, with risk appetite on the defensive again after another sit-down of Euro Zone finance ministers over the weekend failed to pave the way for Greece to receive the full €12 billion payment on tap to be disbursed in July as part of last year’s €110 billion EU/IMF rescue package. Instead, officials continued to press Greece on further austerity measures, with Luxembourg Prime Minister Jean-Claude Juncker (who chairs meetings of the currency bloc’s finance chiefs) saying policymakers “forcefully reminded the Greek government that by the end of this month they have to see to it that we are all convinced that all the commitments they made are fulfilled.”

Renewed sovereign stress caught the markets a bit off guard after negations seemed to pick up traction as recently as Friday when German Chancellor Angela Merkel backtracked on a demand to make private investors play a “substantial” part in further Greek assistance efforts. Merkel said any such participation would be voluntary and taken up with the agreement of the ECB (which has vocally opposed it, fearing it would amount to a de-facto default). To add punch to the announcement, Merkel issued her statement alongside French President Nicolas Sarkozy, telegraphing that the core Franco-German axis that steers EU policy was in agreement on the matter.

Looking ahead, an uneventful economic calendar suggests sentiment will continue to hold their sway over the markets. With that in mind, S&P 500 stock index futures are pushing lower overnight, suggesting the greenback will continue to find support on safe-haven demand as EU debt crisis fears continue to spoil investors’ mood. However, the conviction behind the push lower seems somewhat lackluster for now with many of the components of the Greek fiasco still up in the air, making it decidedly difficult to commit to a directional bias. Indeed, Greek Prime Minister George Papandreou faces a confidence vote on Tuesday, and EU leaders are set to begin a two-day summit in Brussels on Thursday. This means the absence of any new bad news in the interim may allow risky assets to stage a relief rally, putting the US currency under pressure.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

-

EUR

Meeting of the Eurozone Finance Ministers

-

-

-

22:30

NZD

Performance Services Index (MAY)

52.8

-

52.6

22:45

NZD

Manufacturing Activity Volume SA (1Q)

1.9%

-

3.7% (R+)

22:45

NZD

Manufacturing Activity (1Q)

2.9%

-

3.0% (R-)

23:01

GBP

Rightmove House Prices (MoM) (JUN)

0.6%

-

1.3%

23:01

GBP

Rightmove House Prices (YoY) (JUN)

1.1%

-

0.7%

23:50

JPY

Merchandise Trade Balance Total (¥) (MAY)

-853.7B

-710.1B

-464.8B (R-)

23:50

JPY

Adjusted Merchandise Trade Balance (¥) (MAY)

-474.6B

-538.5B

-496.4B (R-)

23:50

JPY

Merchandise Trade Exports (YoY) (MAY)

-10.3%

-8.4%

-12.4% (R+)

23:50

JPY

Merchandise Trade Imports (YoY) (MAY)

12.3%

11.6%

8.9%

5:00

JPY

Coincident Index (MAY)

-

103.8

5:00

JPY

Leading Index (MAY)

-

96.4

-

JPY

Cabinet Office Monthly Economic Report

-

-

-

Euro Session: What to Expect

GMT

CCY

EVENT

EXP

PREV

IMPACT

6:00

EUR

German Producer Prices (MoM) (MAY)

0.1%

1.0%

Medium

6:00

EUR

German Producer Prices (YoY) (MAY)

6.3%

6.4%

High

7:00

JPY

Convenience Store Sales (YoY) (MAY)

-

1.6%

Low

8:00

EUR

Euro-Zone Current Account n.s.a. (€) (APR)

-

-3.8B

Low

8:00

EUR

Euro-Zone Current Account s.a. (€) (APR)

-

-4.7B

Low

8:00

EUR

Italian Industrial Orders s.a. (MoM) (APR)

-4.0%

8.1%

Low

8:00

EUR

Italian Industrial Orders n.s.a. (YoY) (APR)

22.0%

21.2%

Low

8:00

EUR

Italian Industrial Sales s.a. (MoM) (APR)

-1.0%

2.0%

Low

8:00

EUR

Italian Industrial Sales n.s.a. (YoY) (APR)

12.2%

Low

9:00

EUR

Euro-Zone Labor Costs (YoY) (1Q)

1.9%

1.6%

Low

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.4176

1.4387

GBPUSD

1.6057

1.6269

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20 June 2011 02:16 GMT