Major Currency Pairs Analysis: June 21, 2013
ICM Brokers | Jun 21, 2013 06:46AM ET
EUR/USD
Euro-area services and factory output increased more than economists forecast in June, adding to signs the currency bloc may emerge from its record-long recession in the second quarter. Friday’s report “reinforces the view that the euro-zone recession is gradually petering out,” said Martin van Viet, senior euro-area economist at ING Bank NV in Amsterdam. “Please note, however, that any further recovery later in the year is likely to be very slow and bumpy. quarter contraction in the euro-area economy is forecast to end in the April-June period, when economists project gross domestic product will stagnant before growing 0.1 percent in the third quarter, according to a Bloomberg survey. Still, a slowdown in Chinese manufacturing is raising concerns that European exports may struggle to help the recovery at a time when budget cuts continue to damp consumer spending.
GBP/USD
Five U.K. banks must find 13.4 billion pounds ($21 billion) to plug a 27.1 billion-pound capital shortfall by the end of the year, the Bank of England said. The challenge for the banks is that they have got many projects going on in the capital space, Kevin Burrows, a partner at PricewaterhouseCoopers, said in an e-mailed statement. “Many of those projects compete and some are duplicative. Banks need to align their projects and look at their business as a whole rather than in parts to get to the right capital position.” The strength of Britain’s banking system is under scrutiny, as the government considers selling its stake in Lloyds, which is 39 percent-owned by the state, and splitting up RBS. Chancellor of the Exchequer George Osborne said in a speech in London yesterday that the U.K. government would proceed only “if we get value for the taxpayer.
USD/JPY
Prime Minister Shinzo Abe is rolling out fiscal and monetary stimulus to help pull the economy out of a more than decade-long deflationary malaise. The government is grappling with supporting growth while trying to slow the increase in Japan’s debt burden, the developed world’s largest. “If the government doesn’t announce a further fiscal package, we’re likely to see some payback” in growth from the boost in 2013 from government spending, said Masaaki Kanno, chief Japan economist at JPMorgan Chase & Co. in Tokyo.
USD/CAD
The Canadian dollar posted its biggest loss in almost a month versus its U.S. peer, after Federal Reserve Chairman Ben S. Bernanke said monetary stimulus that involves printing the U.S. currency could slow this year. Canada’s dollar rose against those of commodity exporting counterparts. The greenback gained against the majority of its 16 most-traded peers after Bernanke said the central bank will probably taper its $85 billion in monthly bond buying later in 2013 and halt purchases around mid-2014, as long as the economy performs in line with Fed projections.
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