Euro Holds Ground, Japan Tax Vote Next

Merkel shot down Eurobonds and eurobills ahead of the EU Summit while Cyprus requested a bailout. The carry trade struggled with JPY leading and AUD lagging on the day. The May Japanese corporate services price index highlights a quiet session. See Ashrafs thoughts on Japans tax bill and the yen implications below.

Hopes for a decisive EU Summit on Thursday/Friday are dwindling as scattered reports show leaders working on a roadmap to a banking union but nothing that could be considered game-changing. At the same time, Cyprus joined the list of eurozone nations on life-support as it formally requested aid.

The euro held 1.2470 through the European close and traded close to 1.25 through US and early Asian dealing. A rumored downgrade of Spanish banks came to fruition with 28 banks lowered 1-4 notches due to the sovereign cut on June 13.

A positive surprise came from the embattled US housing sector as May housing starts too place at a 369K pace compared to 347K expected. Other good news came from France and Portugal who affirmed budget targets.

Still, the S&P 500 was in a sour mood, falling 1.6% to 1313.

MORE ON JAPANs TAX VOTE AND THE YEN IMPLICATIONS

http://ashraflaidi.com/t/?h3383

The lone indicator on the Asia-Pacific schedule comes at 2350 GMT when Japans May CSPI is expected to rise 0.3%. Australia comes into focus later in the session as RBA assistant gov Debelle speaks at a mortgage finance panel in Adelaide.

-AB