After falling yesterday on a “risk on” move, the U.S. dollar retraced some of its losses overnight despite a rise in Asian equities. The greenback stiffened against the Euro as Greek police fired tear gas to disperse protesters in the center of Athens as labor unions shut down government services before a vote by lawmakers on austerity measures that may determine if the nation can avoid a default. The U.S. dollar rose the most against the Swedish Krona after Statistics Sweden said retail sales slipped an annual 1.1% in May. The median estimate of economists was for a rise of 2.0%. Later this morning, the S&P CaseShiller Home price index is expected to register negative price growth in the month of April and Consumer confidence is expected to rise to 61.0 in June from 60.8 in May. As U.S. equity futures foreshadow a largely flat open for American shares, expect the U.S. dollar to likely hold a rather tight range versus the Euro and other higher-yielding counterparts as market participants await the results of the Greek parliament’s vote tomorrow.
The Euro held a tight range against most of its counterparts overnight before Greek lawmakers vote on austerity measures needed to prevent the currency bloc’s first sovereign default. Greek Prime Minister Papandreou called on lawmakers to obey their “patriotic conscience” as they began to debate the five-year budget plan yesterday. Many analysts believe that the common currency will maintain current ranges throughout our trading session ahead of the vote, given that it is so crucial and so imminent. If the Greek parliament doest now pass the austerity measures, the Euro will likely plummet. However, there seems to be an underlying assumption that the votes will be successful. Indeed, European Central Bank Executive Board member Juergen Stark said “There is only this one plan A” for Greece. He added that he doesn’t doubt the will of the Greek parliament overall to implement the agreed savings plan.
The Japanese yen held a tight range against the U.S. dollar despite a steady stream of negative economic data from the island nation. Japan’s retail sales fell, albeit a slower pace than economists estimated, in May. Sales slid 1.3% from a year earlier, the Trade Ministry said in Tokyo today. However, the print showed the smallest drop since the March 11 earthquake. The data had little affect on the USD/JPY as the currency pair continues to rise and fall with global equities.
The British pound fell against most of its rivals, but held tight against the U.S. dollar, as Bank of England policy maker Adam Posen said the U.K. economy is at “little risk of inflation,” adding to market speculation that interest rates may stay at a record low in coming months. Posen, who has voted since October to extend the Bank’s bond buying under the quantitative easing program, said that there is “little or no credit growth, little wage growth beyond productivity, little evidence of rising inflation expectations” in the U.K., adding to the bearish outlook.
