Major Currency Pairs Analysis: June 11, 2013

Euro-area investor confidence rose in June on increased optimism that the economy will return to growth this year. Turbulence in the sovereign debt crisis has been overcome for now, the Sentix research institute said. On June 6, ECB President Mario Draghi said the 17-nation bloc’s economy, which is struggling to emerge from the longest-ever recession, will return to growth by the end of this year. Greece failed to secure any bids for the nation’s gas monopoly, marking the latest setback to a state-asset sales program that underpins 240 billion Euros ($317 billion) of foreign aid. In January, the IMF warned that the government needed to match “results with rhetoric.” Asset sales have been intermittent since international creditors pushed the government to pledge 50 billion euros rather than 7 billion by selling assets that include everything from island properties to airplanes.
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GBP/USD
U.K. government bonds fell, pushing 10-year yields to the highest level in three months before the nation sells 6 billion pounds ($9.32 billion) of the securities at auctions this week starting tomorrow. Benchmark gilts declined for the third day, underperforming their German and U.S. equivalents, as the prospect of additional supply reduced demand for existing securities. The pound was little changed against the dollar and euro. Economists are saying that a government report due for release tomorrow will show Britain’s manufacturing production contracted in April for the first time in three months. The yield on the benchmark 10-year gilt rose six basis points, or 0.06 percentage point to 2.13 percent. After climbing to 2.14 percent, the highest level since February 25, the U.K. will tomorrow auction 3.75 billion pounds of a new benchmark 2.25 percent bond maturing in September 2023. The pound traded at $1.5557 after strengthening 2.4 percent last week, the biggest gain since October 2009. The U.K. currency was little changed at 84.971 pence per euro.
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USD/JPY
Japan’s economy grew more than the government initially estimated in the first quarter, helping Prime Minister Abe to sustain confidence in his campaign to defeat deflation. The GDP expanded an annualized 4.1 percent, compared with a preliminary calculation of 3.5 percent, Consumer confidence climbed to the highest level since 2007 in May. The yen fell 1.1 percent to 98.64 per dollar, down more than 16 percent in the past six months. Weakness in the currency boosted the April current-account surplus by increasing income from company investment abroad.
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USD/CAD
The Canadian dollar rose against the majority of its most traded peers, as new-home construction increased at the fastest pace in over a year in May, adding to evidence the housing market is regaining momentum. The currency was little changed against its U.S. counterpart after its biggest gain in a year and a half versus its U.S. peer last week, as a surge of hiring in construction led to Canada posting its biggest jobs gain in a decade in May. Canadian housing starts were 200,178 units at a seasonally adjusted annual pace in May; Policy makers have taken steps the past year to head off a housing bubble. The loonie was little changed against its U.S. peer at C$1.0194 per U.S. dollar. One loonie buys 98.10 U.S. cents.
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