Euro Under Pressure Ahead Of The EU Summit - 19.7.2011

US Dollar Asian stocks were mostly lower on Tuesday, following yesterday’s losses in US and European marketplaces, amid concerns US policymakers will fail to reach an agreement on elevating the country’s debt limit and amid woes European debt crisis will affect global economic outlook. The debt ceiling remains a key issue and could undermine the recovering US economy. The dollar index, which tracks the US unit against a basket of six currencies, rose to 75.47 today from 75.12 last Friday, reflecting risk aversion sentiment, while gold prices are surging to new records above 1605 dollars per ounce. As for macroeconomic data, today reports are expected to show US housing starts rose by 2.7% in June to an annual pace of 575000 homes, according to estimations, from 560000 in May. Tomorrow housing data is also expected to show a 1.9% increase in existing home sales in June after a 3.8% drop in May. Euro The euro stays under pressure before European government leaders plan to gather on July 21 in Brussels to discuss the financial stability in the region. Greece meanwhile is trying to avoid default, while investors remain concerned about possible debt crisis expansion to other euro-area nations, pushing bond Italian and Spanish yields to euro-area records. Greece’s 2-year bonds yield have already rocketed to 34.52% and 10-year bonds are at 17.69%. In comparison German yields are at 1.2% and 2.64% respectively. However authorities continue expressing optimism on the Greek debt issue. Germany officials said they are sure that European leaders will reach agreement on providing a second bailout for Greece on July 21. “We must master this challenge,” said a German official and added “The way the chancellor (Merkel) sees it, the specific meeting this Thursday is about agreeing precisely on the main points of a new program for Greece, with all relevant details.” The euro touched yesterday a record low against the Swiss franc (1.1404) and fell against the dollar on concern European leaders won’t take concrete steps to contain the region’s debt crisis at a summit in three days. Pair EUR/USD fell in Asian trading hours from 1.4135 to 1.4074. Australian Dollar Australian dollar remained under pressure against its US counterpart after minutes from the Reserve Bank’s last meeting dampened expectations that policymakers will raise borrowing costs to contain inflation. The Aussie still traded near its week low after a three-day decline as the central bank said there was “more time” to assess price pressures. “The flow of recent information suggested both that there was more time to assess the likely strength of inflationary pressures in Australia and that it would be prudent to use that time,” according to the minutes released today of the RBA’s July 5 meeting. At the same time minutes from the June meeting released last month showed that inflation acceleration, caused by a jump in commodities prices “suggested that further tightening in monetary policy would be necessary at some point.” Pair AUD/USD fell yesterday to a week low 1.0560, but recovered in Asian trading hours today to 1.0650, remaining under pressure however.