The Dollar was trading in different directions in the period from June 18th to June 22nd, as the currency market participants digested a number of key events: the results of parliamentary elections in Greece, the summit of the “Big Twenty” in Mexico, the U.S. Federal Reserve meeting and the results of the audit of the banking sector in Spain.
The USDX Dollar Index lost about 0.9% at the beginning of the week, after it became known that the majority of the votes were given in favor of the “New Democracy”. However, difficult negotiations with its competitors about the possibility of forming the ruling coalition were awaiting it. Moreover, the yield on the ten-year bonds of the Government of Spain was again under pressure, and exceeded the mark of 7%, which was considered critical due to the fact that it was at that level that the governments of Greece, Portugal and Ireland asked for the financial assistance. Accordingly, the risky assets were again under pressure, and the Dollar began to strengthen its positions as a traditional defensive tool.
Starting from Tuesday, the summit of the “Big Twenty” was releasing the information that the leaders of the world’s leading economies were ready to provide assistance to the European Union, if necessary, and expressed their intention to double the IMF loan capacities for this purpose. The “New Democracy” and PASOK managed to agree on a formation of the ruling coalition, at the condition that the “Troika” would mitigate austerity measures for Greece. Accordingly, the Dollar began to weaken and again reached the lows of the week.
Mr. B. Bernanke’s press conference and the decision to extend the “Twist Operation” to the end of 2012 provoked a surge of volatility in the market, but could not tip the scales in one direction or another. However, the next day, on June 21st, the Dollar headed for a confident strengthening, which lasted until the end of the week. The strengthening started thanks to the news of the quantitative easing rejection.
Due to these events, closer to the end of the week, the EUR/USD pair was trading in the area of 1.2535.
The British Pound continued to correlate with the Euro. The last meeting’s protocols of the Bank of England could not have a significant influence on the Sterling’s quotes, although they convinced the investors that the regulator was on the verge of expanding the program of quantitative easing by 25-50 billion. In the late afternoon on June 22nd, the GBP/USD pair quoted at the closing level of the previous week.
The Australian and New Zealand Dollars continued their upward trend that began after the publication of a series of positive macroeconomic statistics from Australia. The U.S. dollar’s falling, which began on Tuesday, June 19th, provided some additional assistance. However, they reacted very strongly to the strengthening of the Dollar on Thursday and Friday. At the closing of the week, the AUD/USD was quoted not far from the parity in the area of 1.0035.
The Yen also lost some of its positions as the tension around Greece began to cease and the Japanese currency began to lose its appeal as a traditional defensive assets. The USD/JPY pair rose by 2.1%, having reached the 80.30 mark.