The Dollar fell during Thursday’s session as hopes revived of a Greek bailout and jobless data showed a less than expected drop in unemployment. GBPUSD gained after house prices were shown to have risen by 1% in April, and Sterling benefited from an abatement of Greek contagion. Tomorrow the big news will be US quarter on quarter GDP and most estimates are for a rise, which would be bullish for the Dollar.

   The Euro rose from the ashes on Thursday to post highs of 1.32787 against the Dollar. Hopes revived of a bailout package for Greece and economic data from Germany showed a greater than expected decrease in unemployment. Jean-Claude Trichet President of the European Central Bank (ECB) gave a rousing speech in defence of the Union’s “common destiny” implying a more interventionist policy by the ECB in the future. He also urged Germany to quickly approve a bailout deal for Greece but German Chancellor Angela Merkel is facing local elections soon and a bailout deal is seen by many voters as an unpopular move.

   The pound rose after favourable data from the Nationwide Building Society showed house prices rose1% in April. Renewed hopes of a bailout package for Greece also benefited Sterling given its close proximity to the crisis and fears of contagion. Early polls from the much watched Prime Ministerial debate on Thursday evening show viewers favoured David Cameron, the shadow leader of the Conservative party. Recent concerns that there will be a hung parliament in the coming General Election which will lack the authority to manage the huge budget deficit have kept the pound down, but despite a positive showing yesterday for the opposition no party yet has a clear enough lead yet to dispel these fears.

   A host of economic data will be published today and the Bank of Japan will announce its rate decision. Although a rate change is unlikely most economists and analysts are suggesting prices may have risen a little with the recent trend for positive retail sales figures, and early signs housing starts have improved. Japanese retailers have benefited from the emerging economic boom in China but with fiscal tightening expected there and equity markets down in Shanghai it is questionable how long this influence will last. The Yen is seen as a less risky alternative by investors and if Europe can take control of its debt problems in the coming days with a plausible bailout package for Greece, there may be some Yen selling in response as investor appetite for risk returns.

Analysis prepared by:

Joaquin Monfort
Forex4you analyst