Euro Strengthened to a One-Month High - 6.6.2011

US stock markets were under pressure on Friday after the data showed US economy added far fewer jobs in May than economists expected, adding to concerns that the recovery is weakening. The negative tone continued to affect Asian stock today. The dollar remained under pressure against its major peers after the Labor Department said non-farm payrolls lowered to 54000 in May, compared with a projected 125000 gain, while the jobless rate rose to 9.1% from 9%. This week investors will see several speeches from US central bank top officials, but there won’t be a lot of important economic data from the US, so the market will be mainly focused on news from other regions, such as Australian and GB rate decision, Japanese growth data, Canadian labor market report and others.

The euro strengthened to a one-month high against the greenback today – 1.4656 on expectations Greece will receive a new financing package from the IMF and the EU. The latest rescue program was discussed at the meeting of the European finance ministers last week, and finally top officials signaled on Saturday that there was a tentative agreement to give Greece more financing – and that aid would likely come on condition that private-sector creditors bear some of the burden. It is supposed that Greece's creditors will be asked to exchange their soon-to-mature debt for debt with a longer maturity, and that could begin as early as July if finance ministers approve the new Greek aid package at the June meeting. Moreover among other fiscal reforms for Greece, the International Monetary Fund said Athens has made commitments to accelerate a privatization program to raise about 50 billion euros by 2015.

The single currency was also supported by estimations the European economy is showing signs of improvement. Producer prices in the euro region advanced at a 6.6% annual pace in April, after a 6.7% increase in March, according to expectations. Tomorrow retail sales data will be released and is also expected to show signs of recovery, GDP data will be published on Wednesday and German CPI – on Friday. One of the key events in the coming week will be the ECB meeting on Thursday. Economists expect the central bank will keep the rate unchanged, but will signal a 25 points hike for July, sending a relatively hawkish message.