Economic data released last week left currency markets uninspired as developments in the European debt crisis continued to command a stronger grip on where currencies are headed. The US dollar began at seven-week highs against the euro, which faced heavy selling pressure. The dollar’s advance was cut short mid-week after China appeared willing to take part in buying Portuguese “bailout bonds”. On the other hand, uncertainty over the direction Greece would take to secure its fifth tranche of bailout funds from last year’s package prevented the euro from making any sustainable gains. UK economic data and general euro weakness helped to push sterling to two-and-a-half month highs against the euro.
Sterling
First quarter GDP figures were left unrevised despite investors’ fears that weak industrial output figures would have a negative impact on the initial release. PMI manufacturing and service sector surveys are due out this week with the figures, alongside trade figures, likely to set the tone for sterling going into June’s Bank of England MPC policy meeting.
US dollar
The US dollar opens near three-week lows against the euro. Reports that Germany might be willing to make concessions over a new Greek bailout programme has resulted in a higher euro. With the verdict of whether Greece has or has not met guidelines laid out in last year’s bailout programme still out, and not expected until the end of the week or beginning of next, it is entirely possible that attention will shift back to economic data to guide markets in the interim.
Euro
Local elections in Italy have gone the same way as those held in Germany and Spain. The ruling party has lost ground in all three regional elections which have taken place recently as popular support for bailouts wane. Nevertheless, news that EU officials have held hold emergency talks with the Greek government over the weekend and that a new bailout programme is being discussed to avert imminent default on Greek debt has helped lift the euro to three-week highs against the US dollar.
Japanese yen
The Japanese yen is trading lower as the yen is being sold by investors looking for higher yield elsewhere. The news that the Moody’s ratings agency, like Fitch last week, lowered the outlook for Japanese debt rating fell flat.
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