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Mid-European Session – Dollar edges higher ahead of US retail sales, euro steady as Greece bailout talks continue

The market’s focus was shifting back to US data today and away from Greece for now since there has not been any new headlines regarding the debt talks between Greece and its creditors so far today. A meeting on Wednesday between Greek Prime Minister Alexis Tsipras, German Chancellor Angela Merkel and French President Hollande appeared optimistic on a bailout deal as the leaders agreed to continue talks today with higher intensity. There were reports by Reuters that a senior EU official said a deal could be reached before the Eurogroup meeting which is on June 18.

Meanwhile, the sell-off in German bonds continued today, leading to a rise in yields. But the yields on the 10-year bund remained below the 1% mark that was reached yesterday and had lifted the euro to 1.1385. The single currency eased lower today to 1.1240.

Sterling slipped from yesterday’s 3-week high of 1.5553 as there was little excuse to buy the currency since a much anticipated Mansion House speech by Bank of England Governor Mark Carney late on Wednesday did not offer any rate hike clues. The pound fell to a low of 1.5428 by mid-European session trading before steadying around 1.5470.

The dollar managed to recover half of the losses made against the yen following Thursday’s tumble on the news that the Bank of Japan Governor did not like the recent weakness in the yen. From a 2-week low of 122.44 the dollar rose to a high of 123.79 and will likely hold steady ahead of the US retail sales and jobless claims data. The US 10-year treasury yield closed at a 9-month high of 2.47% on Wednesday and rose higher today to an intra-day high of 2.49%. Rises in US bond yields tend to increase the greenback’s appeal.

Meanwhile, upbeat US economic data today would also further support the dollar as it would increase the case for the Federal Reserve to increase rates this year. The recent string of data shows the US economy is recovering but many economists expect a rate hike by September and not by next week’s FOMC meeting.

Retail sales are expected to have risen by 1.2% in May after being flat in April. Initial jobless claims are not expected to have changed drastically from the prior week’s 276,000 claims and are forecast to remain below the key 300,000 threshold which indicates a healthy labour market.



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