The dollar block currencies are advancing versus the USD on an improving risk environment with the passage of the Greek austerity measures. Sterling is down sharply across the board while the euro looks to have stalled at a technical level. Month end portfolio rebalancing could make things interesting as traders look towards tomorrow’s ISM PMI release.
Both the AUD and NZD were up this morning while the NZD/USD climbed to a new high of 0.8316 before pulling back near 0.8270. Spurring the gains was a carryover from yesterday’s Greek austerity vote that should secure the fiscally strapped nation the 5th tranche of funding from the last bailout from the EU/IMF.
ECB President Trichet used comments today to emphasis the ECB will take “strong vigilance” towards inflation and warned today on any potential debt settlement that was not purely “voluntary”. Meanwhile German holders of Greek debt appear to have formed a consensus on how to approach a potential rollover of their holdings. More details will follow and it will be interesting how it compares to the French rollover plan which calls for a rollover into new bonds of 5-year and 30-year maturities. While German banks hold a greater share of Greek sovereign debt, French banks recently took large equity stakes in Greek banks that hold large amounts of Greek debt and are therefore committed to working out an agreement. The euro was up against the dollar but the rally stalled at the top of the triangular consolidation pattern that has support near 1.4540. This should cap the gains today barring any new dramatic improvement in risk sentiment though a breach higher and the EUR/USD would likely test the June high at 1.4700. Support is seen at 1.4440.
Sterling fell sharply as month end demand for euros by a few major UK banks may have caused the quick spike lower. Nevertheless the flows were able to push the EUR/GBP to a 40-day high which underscores sterling’s weakness even versus the flawed euro. Cable is also weaker and a negative release for tomorrow’s UK manufacturing PMI numbers and the GBP/USD may have scope to push beyond the 61.8% Fib level at 1.5910 from the January to April move.
US unemployment claims and the Chicago PMI are due up in the afternoon but the Canadian Q1 GDP release highlights the list of news events during New York trading. Yesterday’s surprise uptick in Canadian inflation caught traders on the wrong side of the market as positioning had moved in favor of the dollar as of last week’s COT report. The CAD is again performing well and a strong GDP reading may allow the USD/CAD to test support at 0.9510.
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