USD - With risk appetite still diminishing, U.S equity markets shed around 1.5% last Friday as strong US economic data in the form of Retail Sales, Industrial Production, and the University of Michigan confidence survey all added to the appeal of the Greenback. Together with the current flight to quality, the USD is also benefiting from the belief that the Fed will be the first major central bank to raise interest rates. Thus, markets will be closely watching the tone of the minutes of the last FOMC meeting, which is due on Wednesday. In terms of US data, numbers to watch include housing starts and permits for April, as well as the PPI and CPI reports for the same month. The prices data are expected to show that despite upward pressure on headline rates, core inflation remains well within the Fed's comfort zone. This morning data released showed that Manufacturing in the New York region expanded at a slower pace in May than forecast, as sales cooled. The Federal Reserve Bank of New York's general economic index (Empire State Index) fell to 19.1 from 31.9 in April, which was the second-highest level in four years. Thursday sees the release of the Philly Fed Index. If it too shows a tapering off, we may see a moderation of the Greenback's fortunes.
EUR - The euro slid to 4-year lows vs. the dollar as pessimism over the region continues. Overnight, the single currency slid to fresh year lows at 1.2237 despite European efforts to pull the currency up from its nose dive. The euro has fallen 7% this month and 14% this year as Greece's debt concerns have sparked worries over other European countries at risk, threatening the region's economic recovery. Markets largely overlooked positive news that Euro Zone GDP expanded at 0.2% in Q1 while Industrial Production expanded an above forecast 1.3% in March last week as euro selling continued unabated. Given this, pressure on the euro is likely to continue until markets are assured that a plan to assist at risk European countries is in place.
GBP - Several key UK economic data releases are scheduled this week: the April CPI and retail sales reports are due for release, along with the minutes of the last BoE policy meeting. The tone of the minutes could weigh on an already beleaguered Sterling with the Governor King indicating that the BoE stands ready to provide further support to the economy should it be needed. Also featuring over the week are the BRC retail survey and CBI industrial trends for May, as well as the PSNCR figure for April. The GBP continued to struggle during Friday's offshore session exchanging between 1.4500 and 1.4630 before finishing the week at 1.4535 against the mighty Greenback. With continued nervousness surrounding the outlook for Europe, the GBP is expected to remain volatile.
JPY - The Japanese yen is trading steady, waiting for further direction from Europe. Last week, the yen appreciated on worries that the Eurozone may be headed for disintegration. A lot of domestic data will be released this week, including Machine Orders, Consumer Confidence, Tokyo Department store sales, Industrial Production, Capacity Utilization, and Gross Domestic Product data. The yen is expected to remain supported by safe haven flows as risk aversion continues to dominate the market.
CAD - The Loonie is trading steady after oil prices rebounded and on optimism that North American stocks would hold up this week after last week's losses. The loonie was recently hurt by concerns Euro zone's austerity measures will cut prices of commodity prices including oil, Canada's biggest export. However, with the country's healthy fundamentals, fiscal positions, and a faster-than-expected recovery, the loonie is expected to test parity again. With no major Canadian data out today, look for the Loonie to hold within a tight range. Inflation and retail sales data will be released later this week.
MXN - The Mexican Peso appreciated 4.6% against the USD in the beginning of the week before giving up all gains during the last three trading days. The emerging market currency has been trading largely on risk perception, currently driven by news in the Euro zone, in which has been increasingly bearish for the past week. Continuing concern that Greece's fiscal deficit will strain economic growth and once again put the 16 member union in deep recession leaves investors fearful, therefore, dampening demand for higher-yielding currencies. Until investors see signs of stabilization in the markets, the peso may continue its volatile trends in the near term.
AUD - The Australian dollar fell vs. the US dollar as risk aversion related to Greece debt crisis continues. The Aussie fell to 1 week lows at $0.8725 as market participants unwound risky bets. Despite this, the currency is likely to remain supported by strong domestic conditions. The economy added an-above-forecast 33,700 jobs in April while unemployment was reported at 5.4% last week.