G8 Stands firm with Greece

Leaders at the G8 summit over the weekend indicated their desire for Greece to remain in the Euro zone and urged Europe to focus on growth rather than austerity. However, with the meeting providing little of substance, traders are likely to shift their focus onto the EU Summit and PMI numbers across Europe due later this week. In the UK, a raft of data is scheduled including inflation, BoE minutes of the last meeting and revised GDP data. All are likely to keep traders busy. With little noteworthy in terms of macro releases globally today, it is expeted that the major currency pairs will trade in a tight range.

Pound Sterling – UK Markets

On Friday, the Pound rose against the US Dollar while it was under pressure against the Euro. Striking a cautious tone, BoE policymaker, Adam Posen, suggested he may revise his call on dropping additional easing, amid weaker outlook for the British economy. In today’s trading session the Pound has moved higher against the US Dollar as traders await a key set of macro releases during the week to understand the stance that the BoE might take in its next monetary policy meeting. Consumer price inflation due for release tomorrow is expected to ease for April. Later this week the minutes from the BoE’s latest monetary policy meeting will be closely eyed for hints on the voting pattern underlying the decision on further easing. The second estimate of first quarter GDP, retail sales and speeches by BoE members during the week are also expected to garner market attention. On the housing front, data from Rightmove released earlier today indicated that the monthly asking prices for UK homes were unchanged for May.

US Dollar – US Markets

In today’s trading session, the greenback is trading on a weaker footing against the Euro and the Pound after G8 leaders called for Greece to stay in the Eurozone and urged Europe to balance austerity with growth. Striking a positive note, the National Association for Business Economics projected the US labour market to strengthen significantly in 2013 with the unemployment rate sliding to 7.5% by the end of 2013. Meanwhile, key regional manufacturing indicators during this week, including today’s Chicago Fed National Index will be closely eyed, as last week’s manufacturing figures offered a mixed picture. Moreover, durable goods orders, existing home sales and consumer confidence data are few releases which will be closely watched by market participants. The PMI reading from Eurozone and China due later this week is also likely to aid in gauging the future trend for safe haven currencies. In an attempt to soothe fears surrounding the Chinese growth story, the nation’s Premier, Wen Jiabao, called on for additional efforts to support economic growth.

Euro – European Markets

On Friday, the Euro was initially under pressure against the majors following credit rating downgrades on Greece and sixteen Spanish banks. However, talks surrounding a ban on short-selling of Spanish banks helped the Euro to pare its losses against the majors during the session. The Euro has gained against the US Dollar this morning, as world leaders at the G8 meeting backed keeping Greece in the Eurozone and welcomed the ongoing discussion in Europe on generating growth alongside a firm commitment on fiscal consolidation. The EU summit on Wednesday is expected to provide further insights into actions political leaders would undertake to deal with the region’s debt crisis. In today’s trading session, the Eurozone construction output and Italian current account data are the key economic releases on tap. Outcome of debt auctions in France, Germany, Netherlands and Belgium will also be closely eyed to gauge the risk appetite among traders. The PMI readings of key Eurozone nations scheduled for release later this week is expected to provide hints over the state of manufacturing in the region amid the prevailing recessionary environment.

Other Currencies – Highlights

The Japanese Yen has slipped against its major counterparts in today’s trading session amid mounting speculation that the Bank of Japan might resort to additional stimulus measures in its monetary policy meeting starting tomorrow to support the nation’s growth. Moreover, data indicating a third consecutive monthly decline in the Japanese all industry activity index, coupled with deterioration in the leading index for March, also underpinned losses in the Japanese Yen. Additionally, risk appetite among market participants improved after leaders at the G8 summit indicated that they would want Greece to remain a part of the Eurozone and urged leaders to focus on growth measures in order to improve Europe’s ailing economic recovery. Moreover, Chinese Premier, Wen Jiabao indicating that China would focus more on bolstering economic growth sapped out demand from safe haven currencies.