Major Currency Pairs

The euro traded down against the U.S. dollar Thursday, as skepticism that a summit of European leaders in Brussels will deliver meaningful steps to tackle the debt crisis in the region combined with positive U.S. employment data, weighed on the single currency. Hurting the single currency, hopes that European leaders would make headway on dealing with the crisis dimmed after a German government official indicated that the summit would not result in any detailed decisions and warned against high expectations among investors ahead of the conclusion of the summit on Friday. Earlier in the week, German Chancellor Angel Merkel reiterated her opposition to the idea of joint euro zone bonds, while EU Economic and Monetary Affairs Commissioner Olli Rehn said Wednesday that the summit would focus on short-term measures to stabilize markets and ease pressure on at-risk countries. Adding to the negative tone, Italy saw long term borrowing costs rose to 6.19%, their highest level since December, following an auction of 10-year bonds, while yields on five-year bonds rose to 5.84% compared with 5.66% at a previous auction, as investor sentiment on the country continued to deteriorate.
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GBP/USD
The pound remained lower against the U.S. dollar on Thursday, as uncertainty over the outcome of this week’s European summit continued to weigh on market sentiment amid fears that political leaders will not manage to agree on ways to tackle the region’s debt crisis.  Market sentiment weakened after a German government official indicated earlier that the European Union summit would not result in any detailed decisions and warned against high expectations among investors ahead of the conclusion of the summit on Friday. In the U.K., official data confirmed that the country’s economy contracted by 0.3% in the three months to March, but the contraction in the previous quarter was revised up to 0.4%, from a preliminary estimate of 0.3%. A separate report showed that the U.K. current account deficit widened to GBP11.17 billion in the first quarter, from a shortfall of GBP7.22 billion in the fourth quarter. Economists had expected the current account deficit to widen to GBP9.0 billion. The weak data reinforced expectations that the Bank of England may implement a third round of quantitative easing measures to shore up growth, possibly as soon as next month.
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USD/JPY
The U.S. dollar declined against the yen on Thursday; following the release of better-than-expected retail sales data from Japan while investors eyed the outcome of a European Union summit in Brussels due to begin later in the day. Government data showed earlier that retail sales in Japan rose more-than-anticipated in May, advancing 3.6% after a 5.7% increase the previous month. Analysts had expected retail sales to rise 3.1% in May. Meanwhile, investors remained cautious ahead of a two-day EU summit, amid worries the talks will not result in any effective steps to strengthen fiscal integration and allow the euro zone’s rescue funds to buy government debt. Hopes that European leaders would make headway on dealing with the debt crisis in the region faded after German Chancellor Angel Merkel reiterated her opposition to the idea of joint euro zone bonds on Wednesday. The safe-haven greenback weakened broadly on Thursday after positive U.S. data reassured investors over the strength of the country’s economic recovery. Industry data showed that U.S. pending home sales jumped 5.9% in May, blowing past expectations for a 1% increase, to match a two-year high hit in March. A separate report showed that U.S. durable goods orders rose 1.1% in May, beating expectations for a 0.4% increase, indicating that the manufacturing sector is stabilizing following a 0.2% drop in May.
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USD/CAD
The U.S. dollar climbed to a three-day high against its Canadian counterpart on Thursday, as investors eyed developments at a European Union summit in Brussels which few expected to deliver fresh measures to tackle the debt crisis. Hopes that European leaders would make headway on dealing with the crisis dimmed after a German government official indicated that the summit would not result in any detailed decisions and warned against high expectations among investors ahead of the conclusion of the summit on Friday. The loonie, as the Canadian dollar is also known, was weaker against the euro, with EUR/CAD rising 0.34% to 1.2822. In the U.S., the Department of Labor said number of people who filed for unemployment assistance last week fell by 6,000 to a seasonally adjusted 386,000, compared to expectations for a decline of 7,000 to 385,000. The previous week’s figure was revised up to 392,000 from a previously reported 387,000. A separate report confirmed that the U.S. economy expanded at an annualized rate of 1.9% during the first quarter, in line with expectations.
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