Euro Soars on Bailout Report

A report suggesting EU officials have agreed on a fresh bailout for Greece boosted EUR/USD above 1.45. US economic data was once again on the soft side and the low-yielding USD, JPY and CHF lagged. The Asia-Pacific session will be quiet with no major releases scheduled.

The euro jumped on a Reuters report that EU officials have agreed in principal to a bailout for Greece. The story cites an anonymous source who is close to the discussions saying the plan will run until mid-2014 and replace the first scheme launched in May of last year. The bailout will include a fresh austerity plan that Greeces PM will present tomorrow.

The EU Commission official later denied the report but the market is not questioning Reuters reporting. If true, the mid-2014 term would be hugely helpful for Greece as it gives the country a great deal of time to bring its deficit under control before heading back to markets for funds.

The euro earlier gained when Trichet endorsed a unified European finance ministry and said he wants EZ countries to have the power to veto their neighbours budgets if they go harmfully astray.

Ashraf recommended long positions with EUR/USD trading at 1.4420 in Thursday's earlier Premium Piece and EUR/USD rallied as high as 1.4514 before pulling back just below 1.4500 at the NY close. For strategy on where EUR is headed next, see: http://www.ashraflaidi.com/products/sub01/access/?a=436

US economic data continued to disappoint. Initial jobless claims were at 422K exceeding the 417,000 median forecast. Claims have now been above the 400K level for the eight consecutive weeks. Factory orders fell 1.2% in April, the biggest decrease since May 2010. A 0.3% decline was expected.

The USD came under pressure when Moodys joined S&P in warning about the vulnerability of the United States top credit rating. They said failure to forge a credible agreement on substantial deficit reduction would prompt them to change their outlook to negative.

Aside from the large moves in EUR, however, it was a fairly straightforward pre-NFP trading day as market moves were small. Volatile trading for gold as it fell to $1519 from $1544 but then bounced back to $1536. Silver fell 4%. Oil, stocks and most commodities were flat.