The euro managed to avoid being pinned down below 1.4000 EUR/USD. But, in the event of bad news regarding Greece, the risk of a fall below this level remains. Should there be no bad news, the euro ..…
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should move in response to the US data. These data will also affect JPY, which might weaken to/above 82.00 USD/JPY if they are positive. GBP appreciated vs. USD, but if the UK data due out in the coming days are disappointing, these gains might be wiped out.
EUR – This week the euro temporarily fell below 1.4000 EUR/USD on concerns over the Greek crisis, but it stopped at 1.3970. From here, it merely climbed back to the upper reaches of area 1.42. This was a technical recovery following the failed breaching on the downside of 1.4000. If the coming days bring bad news on Greece, EUR might again fall below 1.40 – with downside confined to 1.35. Otherwise, EUR will be driven by the data, particularly the USA figures for May, and especially the employment report. Overall, the data are expected to weaken moderately. In the event of negative US data, EUR should strengthen and might approach 1.45.
GBP – Sterling also appreciated against USD this week, aided by (1) an imprecise reading of the 1Q11 GDP data, in respect of which the market looked only at the improvement in exports and did not take into consideration the worrying contraction in private consumption, and (2) a speech by Tucker of the BoE, who said there was concern at the BoE over the upside inflation risks, adding that although he has been voting for no change in rates since 2010, his decision is always finely balanced. Key data are due out next week, notably PMI for May and consumer credit in April. The risks to these data lie on the downside, in our view. If they disappoint, GBP would lose its recent gains vs. USD, nearing 1.6000 GBP/USD.
JPY – Fitch has lowered the outlook for Japan from stable to negative. JPY, which had strengthened from 82 to 80 USD/JPY, fell slightly on the news. But for JPY to fall significantly, passing 82 USD/JPY on the upside, next week’s US data would have to be positive.
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