After falling drastically following reports the European policy makers have come to an agreement to deal with Greece yesterday, the U.S. dollar recovered modestly overnight. However, the greenback remains near recent lows against most of its major rivals. The U.S. dollar gained the most versus the Canadian dollar, which fell from a three-year high after a government report showed the nation’s inflation rate slowed in June more than forecast. The loonie, as the currency is also known, pared its weekly rise on bets the report discouraged speculation that the Bank of Canada will resume increasing borrowing costs. With no major economic data set for today, the greenback also got a boost following reports the White House is cutting a deal with House Republicans to boost the U.S. debt ceiling and reduce deficits by about $3 trillion over 10 years without immediate revenue increases. Expect U.S. equities and news surrounding a debt ceiling deal to dictate the direction the U.S. dollar today.
The Euro pared some of its impressive gains from yesterday’s trading session as global equities ticked slightly lower. The Euro is still headed for a weekly gain versus the U.S. dollar after policy makers eased terms of loans for cash-strapped nations and expanded aid for Greece. After eight hours of talks in Brussels, euro-area leaders announced 159 billion euros in new aid for Greece yesterday, with bondholders agreeing to contribute to the package. They also empowered their 440-billion euro rescue fund to buy debt across distressed euro nations, to aid troubled banks and to offer credit lines. The Euro also traded lower as German business confidence declined more than economists forecast to the lowest level in nine months in July.
The Japanese yen slid from a four-month high against the U.S. dollar amid speculation the U.S. is closing in on a deal to raise its debt ceiling. Obama’s team has told congressional leaders it is pursing a deal that will cut the deficit by $3 trillion with our raising taxes immediately, according to two officials familiar with the talks.
The British pound fell slightly versus the U.S. dollar as the greenback was able to retrace some of its steep loses from yesterday’s session. However, the British pound remains near its highest level against the U.S. dollar since mid-June. With no major economic data slated for today, expect the sterling to hold familiar ranges before liquidity thins this afternoon as traders leave early and head to the Hamptons for the weekend.
