Global Themes

Major currencies remained home to much uncertainty and volatility, getting jostled this week by reports – one denied – about world leaders’ views on the value of their currency. Japan’s central bank chief viewed the yen as “very weak.” A report, later refuted by the White House, suggested President Obama thought a strong dollar was a problem. Meanwhile, Germany’s leader indicated a strong euro was counterproductive for the bloc’s recovery. The dollar eked out a gain Friday but was on pace for a week in the red, supported by the German Chancellor’s remarks and data suggesting the U.S. economy was reawakening after its winter downturn. Market activity should remain choppy and unpredictable ahead of next week’s Federal Reserve announcement on June 17. A report comes dues today on U.S. consumer sentiment.

EUR

The euro weakened Friday as Greek talks on badly needed rescue money suffered a setback in the IMF walking away from negotiations. The euro was also hurt by comments from German Chancellor Angela Merkel that indicated the strong euro was counterproductive for efforts under way in the region to reform economies. Hope remains for Greece to eventually win more rescue money. But efforts to date have done little to bolster optimism in a deal anytime soon. The euro zone economy ended the week on a tepid note with industrial production up a mere 0.1 percent in April, a fraction of forecasts of a 0.3 percent increase.

CAD

The loonie made little headway Friday though it was on track for a week of gains against the greenback. An uptick in oil to above $60 helped the commodity-linked loonie, finding further support in the greenback’s generally down week. Canada’s currency remains on vulnerable ground however with commodity currencies seen vulnerable to New Zealand’s earlier than expected move to slash borrowing rates. Should America’s central bank next week start to prepare markets for a U.S. rate hike at a coming meeting, the loonie would be susceptible to slipping since its central bank isn’t expected to lift rates for a while yet.

USD

The dollar recovered above multiweek lows though its recent behavior suggests it’s been assigned a lower speed limit. Despite denied reports of America’s president having a problem with a strong dollar, the currency’s strength was undeniably a factor behind the world’s biggest economy’s downturn in the first quarter. Next up to drive the dollar will be a 10 a.m. EDT report today on consumer sentiment that is expected to brighten to 94.5 in early June from 90.7 in May. The Fed announcement on June 17 will be a major event with the central bank also issuing fresh forecasts on the outlook for the economy and its leader, Janet Yellen, will speak with the media where she is sure to be peppered with questions about when U.S. interest rates will rise.