Mixed Dollar Remains Choppy

The US dollar is mixed against the majors.  This makes talk of risk-on and risk-off a greater simplification than is often the case. The yen is stronger and the Swiss franc is flattish to softer.  Sterling and the Australian dollar are lower, but the euro and New Zealand dollar are stronger.  Commodities and equities are higher and are firmer. 

The euro traded at three-day highs near $1.4290.  I have thought gains this week could extend toward last Friday's high near $1.4340 before the new euro bears make a stand.  Initial support today is pegged near $1.4220. 

In terms of the on-going European debt saga, Juncker and a couple of others are talking about soft-restructuring for Greece, which would apparently be a voluntary extension of maturities and possibly lower rates (isn't that what the EU recently agreed to?) in exchange for more austerity and privatizations.   Some Finance Ministers--see France and Belgium for examples-- are opposed.  And the ECB. 

The ECB remains opposed.  At least every ECB official that has spoken has been opposed.  The ECB had to back down several times during the crisis--having the IMF participate, buying sovereign bonds, changing collateral rules. 

Sterling failed at $1.6300 yesterday and is below $1.6200 today.  While there is much talk that the BOE minutes were more hawkish than expected with a 6-3 vote for steady policy.  This is arch-hawk Sentance's last meeting and the other two hawks have suggested that it was a close call for them.  Key support in sterling is near $1.6150 and a break could be worth almost 1% in short order. 

Meanwhile, on one hand the labor market appears softening, with the jobless claims jumping and the unemployment rate ticking up, but the average weekly earnings (month lag) jumped more than expected and the Feb series was also revised up.  This earnings increase and larger than expected rise in consumer prices will discourage the market from completely ruling out a rate hike this year. 

Australian dollar weakness today may be blamed on soome weak wage growth figures and of course there is something to it as the expectations of an RBA rate hike next month ease, but don't miss that Moody's cut the long-term senior unsecured debt ratings of Australia's four major banks to Aa2 from Aa1.  Outlook stable. 
Mixed Dollar Remains Choppy Mixed Dollar Remains Choppy Reviewed by Marc Chandler on May 18, 2011 Rating: 5
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