U.S. Dollar Trading (USD) the USD was under pressure the whole of Friday from the EU announcement in Asia that the ESM Bailout money will be directly able to support European banks. Also any of this fresh money lent to banks will not rank above other investors. On Top of this very positive move for European banks the ESM funds will also be able to invest directly in government debt markets. This could have the effect of lowering the Yields on Spanish and Italian Debt which has been a major global market issue. Looking ahead, June ISM Manufacturing forecast at 52 vs. 53.5 previously.
The Euro (EUR) the EUR/USD rallied from 1.2400 to 1.2700 in the biggest rally of the year so far as the market was shocked by the EU Summit agreements and the backing down of German opposition of using the ESM to bailout Spanish bonds and banks. The effect of the bailout could last longer than the attempts to stem the crisis but as always the devil will be in the detail as the market digests just exactly who will pay and how much.
The Japanese Yen (JPY) the USD/JPY had any interesting day initially unmoved by the EU announcement but then as EUR/JPY gains accelerated the major was lifted up near Y80 before resistance was found at the key level. The EUR/JPY moved 3 Yen higher from Y98.50 to Y101.40 before coming under consolidation. A big week of US data will keep the USD/JPY in play with the highlight Friday’s NonFarm Employment Report.
The Sterling (GBP) Cable moved to 1.5700 in line with the stock market moves but lagged behind the EUR/USD with the EUR/GBP recovering some of its recent losses. EUR/GBP moved from below 0.8000 to 0.8080 and could move even higher as the Bank of England is expected to expand their Asset Purchase program when they meet Thursday. Also ahead, June EU Manufacturing PMI forecast at 44.8. Also UK Manufacturing PMI forecast at 46.5 vs. 45.9 previously. Also released, May EU Unemployment Rate forecast at 11.1% vs. 11.0% previously.
Australian Dollar (AUD) the Aussie is a risk currency and so rallied dramatically on Friday up from parity to key resistance at 1.0240. The outlook is mixed with the recent interest rate cuts and Chinese slowdown leading many analyst to suggest a lower AUD but the stock market is the key driver so it will be watch for direction. A continued rally would see the medium term bull target of 1.0500 open up. UPDATE Q2 Japanese Tankan improves to -1 vs. -4 forecast and previously.
Oil & Gold (XAU) Gold was dramatic as always rallying to $1600 as the USD was sold across the board. The tempering of EU Debt fears may reduce demand going forward though for the precious metal. OIL/USD was strong surging $5 a barrel as the global outlook improved.