While stock markets seem to be tentative awaiting ECB's and BoE's rate decisions later this week, currency markets are gaining since this morning, where the euro reached a one month high on speculations Greece will get a portion of the second aid from EU and the IMF.
The European currency recovered the losses suffered on Monday when Jean-Claude Juncker said the single currency was "overvalued" and Greece's aid program was not certain. However, the dollar's downside trend, and the speculations that ECB may signal a rate hike next month gave the euro support.
The single currency rose today to the highest of 1.4680, especially after the European Central Bank President Jean- Claude Trichet encouraged buying Greek bonds for the first time, increasing speculations that Greece may obtain a portion of the second aid next month to avoid a default.
Meanwhile, the source of the E. Coli outbreak that killed 22 people and sickened more than 2,000 in Europe remains unknown. Early tests on bean sprouts from a German farm in Uelzen came back negative. This means that bans on certain vegetables from Europe will persist, causing major financial losses in agriculture.
Europe released today its retail sales which rose in April more than forecasted by 0.9% from -1.0% previous, while Germany is expected to release a factory orders report for April that will show improvement from the previous month. Meanwhile, price rose in Switzerland by 0.4% in May from 0.3% previous.
There will be no major data from U.K. today; therefore the pound will hover in a euro centric mode today. The European and Asian stocks markets were tentative today, and volatility might persist in the equity markets on the short and medium term until the global recovery shows a strong upside direction.
The dollar index fell today to the lowest of 73.55 as the US economy shows more weakness signs through the latest economic reports, which could determine policy makers to continue their quantitative easing program. Ben Bernanke is scheduled to speak about the health of the American economy.
The speech will be given to a banking conference in Atlanta, and his tone will be watched carefully, yet it is doubtful that will present anything new, as he is expected to acknowledge the problems his economy is facing, but he will confirm once again that they are temporary.
The AUD dropped today after the RBA held rates steady at 4.75% for the sixth straight meeting, and did not give any hints of tightening during the next meeting. Meanwhile, gold remains steady around the $1.5480 per ounce level, and oil is steady around the $99.00 per barrel level.
Originally posted here
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