The U.S. dollar strengthened against most of its rivals as declines in commodities and stock markets around the world boosted demand for safer assets. Indeed, the Stoxx Europe 600 Index of European equities fell over 1.0% and U.S. stock futures foreshadow a lower open for American shares. In addition, the price of crude oil has fallen nearly 1.5% today on global growth concerns. There is no major economic data slated for release today, but a report tomorrow is expected to show U.S. home sales shrank last month to the lowest level of the year. Attention will then shift to the Federal Reserve’s meeting on Wednesday, with the FOMC not expected to signal a third round of quantitative easing. The Fed will conclude its $600 billion dollar bond-buying program, known as quantitative easing, by the end of this month. On Thursday, weekly jobless claims and New Home sales are set to hit the wire, followed by Gross Domestic Product and durable goods orders on Friday.
The Euro pushed lower against the U.S. dollar and most of its other trading parents after European governments failed to agree on releasing a loan payment to spare Greece from default on its debt. Greek Prime Minister George Papandreou kicked off a three-day debate yesterday on a confidence motion in his government. He called for a vote last week after opposition parties rejected pleas for national consensus and the prime minister’s handling of the crisis led to defections from his party. Greece needs parliamentary approval of a 78 billion-euro package of budget cuts to ensure the payment of a fifth loan under last year’s 100 billion-euro bailout. Euro-area finance ministers pushed Greece to pass laws to cut the deficit and sell state assets, and left open whether the country will get the full 12 billion euros promised for next month.
The Japanese yen gained across the board, save the U.S. dollar, as global equities continued their march lower. The yen snapped two days of gains versus the greenback after the Finance Ministry said Japan’s exports fell 10.3%% in May from a year earlier, adding to signs the economy may struggle to recover from the March 11th earthquake and tsunami. In the long term, Japan’s deteriorating finances may restrain the yen. The nation’s debt is twice the size of its economy, the most among developed countries, and its Aa2 credit rating was put on review for a downgrade by Moody’s Investor Service.
The British pound opened this week’s trading largely unchanged from Friday, even though higher-yielding currencies have become under pressure as equities tick lower. Average home prices in London jumped 1.8% from May according to London-based Rightmove Plc, the operator of the U.K.’s biggest property website. Nationally, values increased 0.6%, which added it doesn’t expect gains to be sustained. Later this week, the Bank of England is set to publish the minutes of its last policy meeting. Growth and leading indicators remain weak, so over all the MPC is likely to offer a cautious tone in the minutes. Therefore, the sterling could come under pressure during the second half of the week.
