Major Currency Pairs Analysis : June 28, 2013

European Union ministers settled on guidelines for assigning losses to private creditors and regulating public assistance following seven hours of emergency negotiations in Brussels. They also spelled out when governments can step in and established a role for the European Stability Mechanism, the euro area’s 500 billion-euro firewall fund. The ECB’s monetary policy “will stay accommodative for the foreseeable future,” Draghi said yesterday in Paris. “We have an open mind about all other possible instruments that we may consider proper to adopt.” An end to the policy remains “very distant,” he told reporters. Italy’s securities advanced as demand increased at a 5 billion-euro ($6.5 billion) auction of five- and 10-year debt. Spain (GSPG10YR)’s 10-year yield dropped to the lowest level in a week after falling the most since January yesterday on a pledge by European Central Bank President Mario Draghi to keep monetary policy accommodative. German bunds rose for a third day.
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GBP/USD
The pound touched a three-week low against the dollar after a report showed Britons’ disposable income plunged the most since 1987 in the first quarter. The U.K. government announced it will sell off 15 billion pounds ($23 billion) of state-owned assets by 2020 to help bring down its debt, as it detailed future spending on infrastructure to boost growth. Chief Secretary to the Treasury Danny Alexander said 10 billion pounds would be generated by selling corporate and financial assets such as the mortgage-style student loan book, along with 5 billion pounds of land and property. He pledged 300 billion pounds of capital spending by the end of the decade, highlighting the construction of the high-speed rail link from London to northern England.
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USD/JPY
The Bank of Japan is buying more than 7 trillion yen ($71 billion) of bonds a month with hopes of achieving an inflation rate of 2 percent, which yen bears point to as underpinning more weakness. The yen fell against all 16 of its major peers as Federal Reserve officials’ statements that the economic recovery isn’t strong enough to start tapering bond-buying boosted speculation that Japan’s currency will be more responsive to the country’s own stimulus efforts.
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USD/CAD
Canada’s dollar fell from almost a one-week high as better-than-forecast U.S. economic data highlighted the divergent growth prospects of the two nations. The currency declined versus the majority of its 16 most-traded peers as more Americans signed contracts in May to buy previously owned homes than at any time in more than six years and U.S. jobless claims dropped. Federal Reserve Governor Jerome Powell said the central bank’s asset purchases may be scaled back later this year if growth holds up. A report tomorrow may show Canada’s economic growth slowed in April.
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