Greek Prime Minister George Papandreou won a vote of confidence as expected, bolstering his new government’s chances of pushing through the austerity plan needed prior to receiving further international financial aid. Attention now turns to whether the premier can push through parliamentary approval next week of a 78 billion-euro ($112 billion) package of budget cuts to stave off the threat of default. The Euro slipped after touching a one-week high immediately after the vote as there was opportunity for profit-taking. Further losses may be limited as the market’s focus turns to the Federal Reserve and its comments on the slowing U.S. economy. EURUSD was at 1.4432 pre-news, then dipped to lows of 1.4344.
Sterling mirrored the Euro in that it dipped against the Dollar after the Greek vote, again due to profit-taking, falling from highs of 1.6246 to lows of 1.61995. Helping support the Pound were market expectations that a U.S. Federal Reserve policy statement and a news conference by Fed Chairman Ben Bernanke later on Wednesday would likely provide little boost to the US Dollar.
Then Yen weakened against the Dollar as USDJPY was driven to a high of 80.32 from the prior session low of 80.04, based on Dollar demand by sovereign buying on dips and Japanese importers buying the cheaper Dollar. The greenback’s fate will be known later today after the US Fed policy meeting ends. Expectations are for US interest rates to remain at record lows.
The Australian Dollars was little changed after the news that the Greek government won the vote of confidence. The AUDUSD seems to be heading into a range due to a cautious mood being taken on by investors waiting for the outcome to the Federal Reserve’s two-day policy meeting which ends today. The focus is on what the Fed will say about the slowing economy and the end of QE2 (quantitative easing expires June 30). AUDUSD traded between 1.0608 and 1.0568.
Gold dipped briefly after the news of the confidence vote as investors booked profits. Gold had been driven to highs in anticipation of the vote. The precious metal rebounded soon after and stabilized near its highest level in two weeks reached yesterday, still in demand as a safe haven asset. Gold will most likely stall at these levels as markets take a wait and see approach ahead of the much anticipated US Federal Open Market Committee meeting this week. Spot gold reached a high of $1,547.75 prior to the Greek vote then after dipping, rebounded back to near that high to $1,547.58.
Note: Daylight Saving Time is in effect for GMT