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European Session – Euro vulnerable to Greece risk, dollar set for weekly losses versus yen despite good data

The euro dipped sharply early in the European session after German Chancellor Angela Merkel commented on the currency’s strength. Merkel specifically referred to challenges that countries like Portugal, Spain and Ireland would face. Since the April low of 1.0519 till present day, the euro has gained over 6% against the dollar.

The euro fell from 1.1246 down to 1.1150 today but managed to recover to 1.1242. However, the single currency remains vulnerable to risk concerning Greece. The negotiations with Greece’s creditors deteriorated substantially, with the IMF leaving the talks yesterday citing major differences. There is a meeting of the Eurozone finance ministers on June 18, during which it is hoped a deal will be reached but for now there are rumours of capital controls, haircuts and default. It was reported in the media today that EU officials formally discussed one of the scenarios for Greece would be a default.

Sterling was mostly trading within a range versus the dollar today, being capped just under yesterday’s high of 1.5532 and touching a low of 1.5465. The pound hit its highest level since May 22 on Wednesday at 1.5553. With no economic data today to provide a catalyst for a considerable move, cable was trapped in a range. The next key risk event for the British currency will be the Bank of England meeting minutes and UK jobs data out next week.

Another highlight next week will be the FOMC meeting, followed by a press conference by Fed Chair Janet Yellen. All eyes will be on any clues she may provide regarding the date of the first rate hike. Most forecasts are for a September hike and not likely at this meeting.

The University of Michigan consumer sentiment index released today was much better-than-expected at 94.6 versus 91.5 forecast and up from a previous 90.7. This was a preliminary reading for the month of June. The dollar had a knee jerk reaction to the news and spiked up against the yen to 123.62 before reverting back to pre-data levels around 123.50. The greenback is set to end the week with losses against the yen after being dealt a blow by Bank of Japan Governor Kuroda on Wednesday when he mentioned it was unlikely for the yen to fall further. Next week’s Bank of Japan policy statement would be interesting to watch.



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