Forex Review – Euro holding steady on Trichet’s hawkish speech

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The Euro advanced to the highest level in three weeks against the Dollar early in the European session following ECB President Jean-Claude Trichet’s speech at the European Parliament’s Economic and Monetary Affairs Committee. His pretty hawkish speech hinted to likeliness of a rate hike soon and helped lift EURUSD to 1.4520 before retracing slowly edging down to 1.4447 as investors booked profits. Weak US employment data at 13:30GMT weighed the USD and Euro rose again. Gains will likely be capped since before buying into the Euro again, many investors are waiting for the outcome of the second round of voting in the Greek parliament today, when legislation must be approved in order to implement austerity measures. Additionally, Germany’s biggest banks and the government agreed on a draft proposal to roll over Greek debt holdings on bonds maturing soon. A meeting is underway today with German Finance Minister Schaeuble who will make a statement at around 13:00GMT so markets are focusing on the outcome, which could result in big movements in Euro.

Sterling fell across the board following a poor housing data which showed that the UK housing sector is slumping and the overall British economy is still struggling to recover. The Pound declined for the fourth day against the Euro, reaching its lowest level since March 2010, just over 15 months ago. Cable declined by over 130 pips to 1.5972 since opening the session at 1.6105. Dim expectations of a rate hike by the Bank of England in the near future are now weighing the Sterling.

The Swiss Franc fell against the Euro as expectations of a rate hike by the ECB helped strengthen the Single Currency. EURCHF reached its highest level in a week, peaking at 1.2094 from an earlier low of 1.2046. The Franc also weakened against the Dollar, with USDCHF rising to 0.8352 from 0.8313. The Swiss National Bank released data on Switzerland’s current-account surplus which declined by around 2 billion Swiss francs in the first quarter of 2011 compared with the fourth quarter of 2010. This weighed down the Swiss currency today.

The Dollar-Yen settled in a range after declining in the two prior sessions then spiked down over 7 pips within seconds following data that US unemployment claims rose in the past week despite expectations for a drop in number. USDJPY dipped to 80.29 from the pre-news level of 80.35. The greenback was already weakened by ratings agencies announcements from Moody’s and Standard & Poor’s yesterday which said they will cut the U.S. credit rating if the government fails to raise the debt ceiling, resulting in the U.S. getting into serious debt. President Barack Obama in his speech yesterday challenged U.S. lawmakers to make progress on a budget deal to avert a possible default in early August.

Note: Daylight Saving Time in effect for GMT