Currency markets appeared rather subdued with very few investors willing to make any significant new commitments before the busy economic and events calendar. The Japanese yen slid following local data highlighting the difficult road ahead for the Japanese economy. The New Zealand dollar led currencies tied to commodities and growth higher after the Reserve Bank of New Zealand held interest rates at 2.5 per cent and discussed the possibility of tighter policy. Investors had already began to flirt with riskier currencies, albeit cautiously, after solid US ADP employment report that helped stock markets stabilise. The Bank of England will announce its latest monetary policy decision and no change is expected after policymakers injected another £50 billion into the UK economy last month. The Bank of Canada is forecast to keep interest rates at 1 per cent in its while the spotlight is likely to fall on the eurozone and its shared currency in front of the crucial announcement from Greece on whether it will successfully complete its troublesome bond-swap deal with private investors. The European Central Bank will also hold a press conference this following its monetary policy meeting and the benchmark interest rate is likely to stay at one per cent. President Mario Draghi, however, is widely expected to hint at the possibility of more rate cuts this year, adding even more pressure on the euro.
Sterling
The Bank of England will announce its latest monetary policy decision although the event is not likely to impact currency markets. Policymakers are expected to make no changes to the central bank’s target interest rate which currently sits at a record low 0.5 per cent nor are any modifications anticipated for the Asset Purchase Facility following last month’s £50 billion stimulus that took quantitative easing to a total of £325 billion.
US dollar
An early burst for the US dollar on Greek concerns faded once US markets opened and traders were relieved by another glowing US employment report. The euro will be under the spotlight and any hint of the European Central Bank cutting rates, or Greece defaulting on some of its creditors, could see the US dollar surge across the board after already settling near two-week highs against a basket of currencies.
Euro
The euro slipped deeper into negative terrain although its decline was somewhat limited as investors remained firmly focused on the potential outcome of the Greek debt swap announcement. German economic data failed to impact the euro as it usually would while the European Central Bank is widely expected to leave its benchmark interest rate at one per cent.