Greece Talks & DSK Arrest Weigh on Euro, AUD down after Loan Data

Euro sustains fresh damage ahead of Ecofin, Australian home loans data undermines the AUD, Japanese consumer confidence remains low, while UK house prices slow.

The weekend news of the arrest of IMF chief Strauss-Kahn on sexual assault charges, while unlikely to affect Greece bail-out talks too much, throws an unneeded distraction and an unwanted element of uncertainty into the mix with respect to the IMFs role in bail-out talks at this weeks Ecofin meeting.

The euro had got a much needed boost early on Friday after much better than expected growth numbers from Germany and France had raised expectations of further rate increases in the short term from the ECB, after Germanys growth came in at 1.5%, well above expectations of 0.9%.

The gains werent to last, however as concerns about a plan to deal with Greeces problems continue to plague market sentiment and undermine risk appetite.

It is becoming increasingly apparent that higher interest rate expectations will not be enough to keep supporting the single currency through these testing times, especially if ministers are unable to convince the markets of a clear and coherent strategy with respect to Greece.

This mornings April euro zone CPI figures will still be monitored for any further rise in inflationary pressures. Expectations are for a month on month figure of 0.6% and year on year to remain at 2.8%.

The single currency having broken and closed below the 55 day MA at 1.4270 keeps the longer term outlook negative, and opens up the likelihood of a test of 1.4000 and the 200 week MA.

AUD slipped back recently on the back of lower commodity prices and this mornings home loans data could weigh further showing a surprise fall in March, dropping back 1.5% against expectations of a rise of 2%. This fall could stay the RBAs hand on interest rates in the short term as concerns linger about the already stretched housing market. The Australian dollar has support at 1.0500.

Economic data out of Japan showed is beginning to show an element of recovery after machine orders for March showed some recovery from Februarys earthquake affected numbers, rising 2.9% after Februarys 10% decline. Nonetheless consumer confidence remains fragile slipping back more than expected to 33.1 in April from 38.6. USDJPY has resistance at 81.30

The pound, despite concern about pressure on consumer finances due to the squeeze of austerity, is likely to remain sidelined ahead of the release of tomorrows CPI numbers which are expected to increase to 4.2% after the surprise fall to 4% in March. UK housing data continues to throw out mixed messages with Halifax house price showing some softness with a month on month rise of 1.3% for May, still positive, but slipping back from Aprils 1.7% rise.

Cable needs to get back above 1.6300 to relieve some of the downward pressure.

The US dollar index having closed above its 55 day MA for the first time since 12th January this year could well push even higher towards its 100 day MA at 76.83 if it is able to close above the 75.80 resistance area. Dovish comments last night from Atlanta Fed Lockhart, saying it was too early to talk about any type of exit from stimulus could well limit the upside initially in the short term but seeing as he is not a voting member and given the problems in Europe dips could well be fairly well supported.

May Empire manufacturing data is due out later and expected to fall back slightly.

By KM - AshrafLaidi.com Staff