Currency Market Analysis
May 26, 2015 | Currency Market Analysis
The U.S. dollar emerged from the long holiday weekend a little stronger, supported by escalating worries about Greek finances and nascent signs the world’s biggest economy is rebounding from its weak start to the year. Fears are on the rise that Greece may not have enough in its coffers to cover the hundreds of millions of euro it owes the IMF next week. Athens needs to soon win more rescue money or risk an imminent debt on its obligations. U.S. durable goods fell 0.5 percent in April as expected but a gauge of business spending fared solidly for a second month in a row, rising 1 percent after a 1.5 percent gain in March. The data followed heartening news last week of an uptick in core inflation and lowest count of a gauge of weekly jobless claims in 15 years. Moreover, Fed chair Janet Yellen last week signaled that U.S. interest rates are poised to rise this year which neutralized market bets the central bank would wait until next year. The holiday-shortened week features U.S. data later today on consumer confidence and new home sales. Friday brings a revision to U.S. first quarter growth.
The loonie fell to six-week lows against its reinvigorated U.S. counterpart. Lots of risk on tap for the loonie this week with a Bank of Canada decision due tomorrow and Friday numbers on first quarter growth. Should the events serve to reinforce Canada’s low interest rate outlook for the foreseeable future the Canadian unit could quickly take a crack at multi-year low levels closer to C$1.30.
The euro hit one-month lows, hurt by mounting worries about Greek finances. Greece has a massive payment of around €300 million to make to the IMF next week and it reportedly won’t have the funds to cover it unless it soon strikes a reform for rescue cash deal with its creditors. Political risk in Spain added another headwind on the single currency.
U.S. durable goods fell 0.5 percent in April as expected. However, a gauge of business spending topped forecasts with a solid 1 percent rise. The U.S. economy has flashed mixed messages recently but the most important corners of the world’s biggest economy, such as employment and inflation, have shown some of the progress the Fed wants to see before boosting interest rates.
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