Euro recovered from earlier losses and climbed back above $1.28 against the dollar during the US trading session to move off the lowest levels since January. However, this rally could be brief since it may be more about a technical adjustment. The euro is expected to remain under pressure due to continued uncertainty over the future of Greece in the euro zone with four weeks to go until Greek elections on June 17. Also, there is concern over contagion in the region and Spain’s fragile banking system.
EURUSD hit a session high of 1.2823 from a low of 1.2724.
EURGBP rose to a 0.8097, the highest in two weeks.
Markets will focus on a Summit of EU leaders this Wednesday, on May 23, expecting a follow up to the G8 Summit over the weekend which called for focus on global growth and recovery in Europe. The G8 did not provide concrete solutions to the euro zone debt crisis but it is hoped more will be achieved at the EU Summit, and that Germany will soften its stance on austerity in favour of more growth.
Sterling initially gave up gains against the dollar but soon reversed direction. GBPUSD bounced from 1.5778 to 1.5835. Later in the week inflation and retail sales data, and minutes from the Bank of England May policy meeting, will be watched for clues to whether policymakers opt for a further round of monetary stimulus to boost growth.
USDJPY was little changed, trading the session between 79.22 and 79.39. Investors are waiting on the sidelines ahead of the Bank of Japan policy meeting held on Tuesday and Wednesday. Speculation is growing that the BOJ will add to stimulus measures this week to support growth and curb yen strength. EURJPY climbed slightly to 101.69.
The Canadian dollar strengthened against its US counterpart on the back of rising crude oil, which is a major Canadian export. Crude oil rallied to end a six day losing streak, rising US$3 today to hit $93.05. USDCAD fell from a four month high of 1.02445 down to 1.0163.