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Asian session – Euro backs down ahead of Greek crunch time; dollar recovers

The euro sold off while the US dollar tried to recover some of Wednesday’s and Thursday’s losses as the aftermath of the Fed’s meeting and speculation about Greece’s exit from the euro dominated other themes.

The dollar has been on the defensive overall in the last few sessions – although it was doing better today – as the market is guessing that the Fed will only raise interest rates once this year. May US inflation data released on Thursday – although showing an improvement from April – did not match economists’ expectations, which weighed on the greenback. The dollar however managed to claw back above the 123 yen level at 123.07, while pushing the euro back to 1.1343 from a previous day high of 1.1435.

The end of the Bank of Japan meeting had little effect on the yen, as monetary policy was kept steady – with one dissenting vote who wanted to reduce the monthly pace of bond purchases. Governor Kuroda said the economic recovery is continuing and that the 2% inflation will be hit in 2016. The BoJ will adjust policy as necessary, according to Kuroda.

With respect to the Greek debt talks, the previous day’s meeting of Eurozone finance ministers did not resolve anything and an emergency meeting of EU heads of state will now take place on Monday. The European Central Bank was also holding an emergency call today on the Greek situation – most probably as to extend Emergency Liquidity as depositors have been pulling money out of Greek banks at an accelerating pace. The June 30 deadline for the repayment of approximately 1.5 billion that Greece owes to the IMF was a hard one, according the Fund’s Director Christine Lagarde.

Looking ahead, it is likely to be a relatively quiet day, with the exception of course of the emergency call of the ECB on Greece. Canadian retail sales for April and inflation will be the main items to watch for the loonie.

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