The Euro climbed to a one-month high against the Dollar in the Asian session, lifted by easing concerns about Greek debt after Euro zone finance ministers approved a 12 billion Euro installment of the indebted nation’s bailout over the weekend. It was also mentioned that the second aid package would be finalized by September. The focus is now on the upcoming ECB meeting on Thursday when a rate hike is expected. The Single currency is also supported due to a weaker Dollar and light trading due markets being closed in the U.S. for 4th of July Independence Day holiday today. EURUSD hit a high of 1.4576 from the open of 1.4532.
Sterling has been vulnerable recently due to a spate of weak economic data giving evidence of a struggling UK economy. UK Construction PMI is due to be released today. Predictions are for a decline, which does not bode well for the British currency, and will add more confirmation to the view that the Bank of England will not raise interest rates until next year. Cable remained in a range most of the session, as investors are waiting for the news. GBPUSD opened Asian session at 1.6053 and closed at 1.6086, with expectations to fall in the next session.
The Japanese Yen strengthened against the Dollar after the release of positive economic data indication that Japan’s monetary base increase in June to 17 percent compared to a year earlier. The monetary base is strongly correlated with interest rates because an increase in the supply of money circulating in the economy results in more spending, which consequently results in higher prices and higher inflation, thereby the Bank of Japan would have to raise interest rates to curb inflation. This expectation causes Yen to rise. USJPY edged down to 80.75 from 80.90.
The Aussie dollar weakened following the release of weak domestic data indicating the country’s retail sales unexpectedly fell 0.6 percent in May from 1.2 percent, much more than the predicted 0.3 percent. The data leads investors to drop their expectations of a rate hike by the Reserve Bank of Australia in its July policy meeting on Tuesday. AUDUSD fell to a session low of 1.0721 from a high of 1.0784.
Gold moved off its six-week low from Friday, to edge up to a high of $1,493.83 from the open price of $1,486.03. What boosted the precious metal was speculation that the European Central Bank will raise interest rates at their policy meeting on Thursday, based on rising inflation on the Euro zone. Investors buy gold to use it as a hedge against rising inflation.
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