The U.S. dollar continued to trade in favorable ranges versus most of its counterparts even as stocks and commodities rose on speculation the global recovery will be sustained. The greenback gained against the British pound as minutes of the Bank of England’s may 5th meeting showed most policy makers said higher interest rates might hurt the recovery. Sweden’s krona advanced as the National Budget Office reported that the nation will have a larger budget surplus than previously forecast. Meanwhile, the economic docket showed that mortgage applications in the U.S. increased last week to the highest level since December as cheaper borrowing costs made refinancing more attractive. Applications rose 7.8% in the week ended May 13th. With no other data slated for release today, traders will shift their focus to the Federal Reserve’s FOMC meeting minutes for clues for future interest rate policy. With no surprises expected from the minutes, the U.S. dollar could remain range bound throughout our trading session.
The Euro remained near its lows of recent trading even as global equities rose, increasing the demand for higher-yielding assets. European Central Bank officials ruled out a Greek debt restructuring, clashing with political leaders over a solution to the sovereign financial crisis. “A Greek debt restructuring is not the appropriate way forward – it would create a catastrophe” because it would damage the banking system, ECB Executive Board member Juergen Stark said today. Fellow board member Lorenzo Bini Smaghi said in Milan “a solution for reducing debt but not paying for it will not work.” As the European debt crisis continues to dominate trade, expect the Euro to remain weak versus the U.S. dollar.
The Japanese yen retraced some of its losses from yesterday overnight but remains near 2-week lows versus the U.S. dollar. The yen could see modest selling pressure throughout our trading session ahead of a report tomorrow forecast to show Japan’s economy contracted in the first quarter. GDP from the first three quarters of the year is expected to shrink 1.9% after contracting 1.3% in the previous quarter. The report may bolster bets the Bank of Japan will trail its counterparts in normalizing monetary policy.
The British pound fell as minutes from the Bank of England’s last meeting showed the majority of policy makers warned against raising borrowing costs, and a report revealed unemployment claims rose. The Monetary Policy Committee voted 6-3 to hold interest rates at 0.5% as members said an increase “could adversely affect consumer confidence.” The Sterling stayed lower after a report showed U.K. unemployment claims rose in April at the fastest pace since January 2010. Jobless benefit claims increased by 12,400 from March to 1.47 million, the Office for National Statistics said today in London.
