The greenback was up albeit slightly versus the euro and rest of the majors as the Greek austerity vote approaches. A bounce higher in the euro may occur should the Greek parliament approve the additional tax increases, spending cuts, and asset sales. This afternoon US housing and consumer confidence data will be released which could continue to support the dollar until tomorrow’s Greek vote.
Early support for the euro faded while European banks squabble over an extension of the maturities for Greek debt. French banks have the largest exposure to Greek debt and yesterday released their suggestions which would call for a 30-year extension of the debt, similar to the Brady bond plan that was initiated in Latin American. A 48-hour general strike in Greece is also not supporting the euro as participants take to the streets of Athens to protest the austerity package. Previous protests have turned violent; such was the case on June 15th when the euro shed 1.9%. Today’s selling has been lighter as expectations are for the austerity measures to pass parliament tomorrow. This could give the euro a short term bounce to resistance at last week’s high of 1.4440 followed by 1.4500. To the downside the current consolidation pattern is found at 1.4110. A break here might have scope to the May low at 1.3970.
Sterling was lower after a host of negative factors underline the recent weakness of the pound. The Q1 current account showed a larger than expected deficit. The Q4 2010 numbers were also revised to show a greater trade deficit and underscored the report’s negative tone. BOE MPC member Adam Posen spoke for greater BOE independence as he lashed out at yesterday’s Bank of International Settlements report that called for an increase in UK interest rates. Posen called the report’s advice “nonsense.” UK Q1 GDP went unchanged and remained at a tepid 0.5% increase. The negative data, bearish comments, and low growth numbers all underscore the reasons for sterling’s recent weakness.
Turning towards the US trading session the S&P/Case-Shiller index is expected to show further declines in US housing prices, a factor that is not likely to change in the near-term. Also due out are US consumer confidence numbers which are expected to remain the same. Disappointing data could feed into additional USD buying but market participants will be more focused on the outcome of the Greek Austerity vote. This could keep the majors in their current ranges for the meanwhile.
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