Market Review – 21/06/2011 21:43 GMT
Euro gains after Greek government won confidence vote
The single currency briefly climbed to 1.4435 in Australia shortly after the release of Greek voting results where the Greek Socialist government won confidence vote in the Parliament. Euro ratcheted higher against the greenback and touched a session high of 1.4423 in New York afternoon on speculation that Greek Prime Minister George Papandreou would survive a confidence vote on late Tuesday in order to secure backing for a new round of austerity measures needed for funding from European Union and International Monetary Fund.
Earlier in the day, although euro trimmed gains from Asian high of 1.4377 after the release of weaker-than-expected eurozone and German ZEW economic sentiment which came in at -5.9 and -9.0 versus the expectation of 6.1 and -2.0 respectively and fell to European low of 1.4315, buying interest emerged after comments from Bank of Spain Governor Miguel Angel Fernandez Ordonez who said ‘hopes Greek parliament approves austerity package; restructuring of Greek debt would be a disaster’ lifted price and euro later strengthened versus the greenback in New York morning after U.S. National Association of Realtors data showed sales of existing homes in the U.S. decreased in May.
In euro crosses, eur/jpy, eur/gbp and eur/chf rallied from 114.65, 0.8828 and 1.2070 to as high as 115.64, 0.8881 and 1.2150 respectively and eur/jpy and eur/gbp rose to 115.85 and 0.8885 respectively after the Greek’s parliament vote.
The pound weakened on cross selling in sterling (especially versus the euro) and ratcheted lower from Australian high of 1.6255, price touched a session low of 1.6167 in European morning after dovish comments from Bank of England policymaker Paul Fisher, however, rumours of heavy demand at 1.6150-60 contained weakness there and price then rebounded strongly after the release of better-than-expected U.K. CBI orders which came in at 1.0 in June against the economists’ forecast of -5.0 and well above previous reading of -2.0 in May, price traded around 1.6245 near New York closing.
Fisher said ‘if get stuck in deflationary rut, not clear could get out easily; would have to do a lot more quantitative easing; fall in sterling was probably necessary given external imbalances.’
Versus the Japanese yen, the greenback traded inside a relatively narrow range of 80.05-80.35 during the day as focus was on the single currency and other major currencies ahead of the outcome of the Greek government’s confidence vote in the Parliament.
In other news, Reserve Bank of Australia (RBA) released minutes on broad meeting in June and said ‘inflation outlook suggested further tightening needed at some point; but flow of data has “not added any urgency” to the need for a tightening; board judged prudent to hold rates pending data on domestic demand & inflation, global events.’
On the data front, the U.K. public sector net cash requirement climbed to 11.1 billion pounds in May. US existing home sales in May dropped to the lowest level in six months (purchases of existing U.S. homes fell 3.8% to a 4.81 million annual pace last month, in line with estimates).
Data to be released on Wednesday include:
Australia Westpac leading economic index; U.K. BOE releases minutes of the MPC’s meeting; EU industrial orders and consumer sentiment; Swiss ZEW investor sentiment; U.S. monthly home price and Fed rate decision.