Major Currency Pairs Analysis: June 17, 2013

European leaders seeking a path to economic growth will focus on the benefits of a trade agreement with the U.S. The European Union said it hopes that Hassan Rohani’s election as Iran’s president will pave the way to a “swift diplomatic solution” to the standoff over the Iranian nuclear program. Italian government bonds fell for a sixth week, the longest losing streak in a year, amid concern the Federal Reserve will slow its asset-purchase program that has boosted higher-yielding securities around the world. Italy’s economy shrank 0.6 percent from the previous three months. The ECB’s as-yet-unused program to the buy the bonds of the region’s most indebted nations, known as Outright Monetary Transactions, will only target yields that are out of line with fundamentals. German and French bonds advanced this week.
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GBP/USD
The pound climbed for a third week versus the dollar, the longest run of gains since September. A report showed U.K. jobless claims fell more than economists forecast in May, adding to signs the economy is recovering. The sterling climbed to its highest level in over four months against the U.S. currency. Bank of England policy makers will refrain from expanding their asset-purchase plan. The pound advanced 0.8 percent in the week to $1.5684; it rose to $1.5738 on June 13, the strongest level since February 11. The sterling was little changed at 84.99 pence per euro.
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USD/JPY
The yen will strengthen further as Japanese investors, disappointed with the Bank of Japan’s monetary-easing efforts retreat from foreign investments, The BoJ hoped that buying government bonds in Japan would encourage Japanese investors to move money out of the yen into foreign markets, and that would push the yen down - but it’s not happening. The currency gained 0.7 percent to 94.37 per dollar in New York, as domestic investors trimmed holdings of overseas bonds and stocks for a fourth week.
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USD/CAD
The Canadian dollar rose to the strongest level in a month against its U.S. peer, as investors bet a strengthening economy will convince the Bank of Canada to raise its benchmark interest rate. The currency gained for a second week versus the greenback as volatility in global foreign-exchange markets reached the highest in a year amid speculation when the Federal Reserve will start tapering monetary stimulus. Canada posted its strongest job gains in more than a decade last month. Home construction rose the most in 13 months, driving expectations to the highest in more than a year the Bank of Canada will raise rates. The loonie rose 0.3 percent this week to C$1.0170 per U.S. dollar in Toronto after gaining 1.7 percent the previous week. One loonie buys 98.33 U.S. cents.
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