Tuesday trading focused on Greece headlines and disappointing inflation data from China. Eurozone GDP was a nonevent and the US JOLT jobs data helped stop the fall of the US dollar as the greenback ended trading close to flat for the day. Asian markets are trading lower on account of weak US Dollar that prompted the investors to book profits on its recent robust job claims data which raised expectations of a rate hike. Furthermore, soft inflation data from China infused expectations of more stimuli in the economy that created jitters in the Asian markets. China’s Consumer Price Index for the month of May declined to 1.2 percent as compared to 1.5 percent in April and Producer Price Index for the month of May remains unchanged at -4.6 percent.
The greenback weakened by 1.1 percent yesterday owing to concerns expressed by the US President at the Group of Seven summit over persistent Dollar strength that is hampering the currency of emerging markets. Recent robust economic indicators from the nation prompted the investors to book profits despite the early rate hike expectations. Trade remained directionless in the currency markets, however dollar traded marginally weaker and is likely to remain so today. The euro, Pound and Yen will opened on a positive note today as well and all majors are likely to remain volatile with GBP being in focus in the afternoon. The euro corrected marginally to trade at 1.1291 and continues to remain close to the 1.13 mark amid uncertainty in the markets. The GBP continued to appreciate and is currently trading at 1.5382 before key data is to be released today. The yen is trading on a weak note at 124.51 even after machine orders data came in positive as BOJ left policy unchanged.
The euro strengthened by 1.6 percent yesterday after the US President Barack Obama and German Chancellor Angela Merkel at the G7 summit meeting emphasized on the need for an emergency financing aid for Greece and its creditors thereby urging them to show flexibility to secure an agreement. Robust industrial data release from Germany signaled that Europe’s biggest economy is on the growth path which provided strength to the shared currency.
In the Asian session on Wednesday morning the Aussie is trading at 0.7644 falling 46 points after disappointing consumer data from Westpac and a speech by RBA Governor Stevens. Mr Stevens said he remained open to lowering interest rates further as the outlook for economic growth remains soft, but warned that the benefits of doing so may be limited and that it could even be risky. The official cash rate is currently sitting at a record low 2 per cent. After tumbling on Tuesday the kiwi recovered its composure on hopes of stimulus from China after the release of lackluster inflation data.
The JPY eased a bit after Reuters reported that Bank of Japan Governor Haruhiko Kuroda said on Wednesday there was “no discussion at all” about currency moves, including the dollar’s strength, at a Group of Seven finance leaders’ gathering in Germany late last month. He also told parliament that while diverging monetary policies of the United States and other countries may have affected dollar moves, many other factors influence dollar/yen rates. “I therefore don’t think we can assume that the dollar will strengthen more and more against the yen from here,” Kuroda said.
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