EUR/USD

The 17-nation currency advanced ahead of the interest rate decision that scheduled tomorrow. It gained 0.68% from 1.2558 to 1.2626 despite of the declined in PPI. Analysts surveyed anticipate the ECB to cut interest rates after its policy-making board meets. Most of those in the survey predicted that the interest rate would fall 0.25 percentage points to 0.75 percent, a new low. The forecast sounds great as Europe’s economy isn’t showing any signs of progress. The average unemployment rate in the euro area rose to a new high of 11.1 percent in May, according to figures released this week. With public debt already too high, the scope for fiscal stimulus in the worst-hit economies is zero. That leaves monetary policy. Last week’s summit of European Union leaders finally made progress in coordinating a joint response to the financial crisis. Markets greeted the new moves with enthusiasm and optimism. The cost of Spanish and Italian government borrowing retreated right away from unsustainable highs and the euro gained ground. The ECB will want to keep up the momentum by following political advances with new monetary action, as it has in the past.

GBP/USD

British construction output declined at the sharpest pace in two-an-a-half years in June, a survey by Markit Economics found.  The Markit/CIPS Construction Purchasing Managers' Index fell to 48.2 in June from 54.4 in May. A PMI reading above 50 indicates expansion of the sector, while a reading below 50 suggests contraction. The latest fall in the index was the sharpest since February 2009. Civil engineering and housing activity were the worst performing broad areas of the construction sector. Commercial activity increased marginally, but at the slowest pace for 28 months.

USD/JPY

The yen weakened most of its major counterparts as investors sought higher-yielding assets amid speculation central banks will step up efforts to spur growth, reducing demand for havens. Japan’s currency weakened 0.7 percent to 100.72 per euro. The yen slid 0.4 percent to 79.79 per dollar. Meanwhile, Japan's average monthly wage earnings in May logged it first decline in four months, data from the Ministry of Health, Labor and Welfare showed.  Cash earnings were down 0.8 percent annually following a 0.2 percent rise in April. The decline was largely driven by a 39.9 percent fall in special payments, predominantly summer bonuses. Regular pay gained 0.4 percent after falling 0.2 percent a month ago. Overtime pay grew at a pace of 6.4 percent, faster than the 5.7 percent increase seen in April.

USD/CAD

The Canadian dollar gained to a six-week high against its U.S. counterpart as oil, the nation’s largest export, climbed amid speculation central banks in Europe and China may add monetary stimulus indicating a pick-up in demand. It rallied versus most of its 16 major peers as the European Central Bank is forecast to cut interest rates this week. Further, a state-owned newspaper in China said the time is ripe for a reduction in banks’ reserve-requirement ratios which would indicate monetary stimulus. By adding these two factors, it leads to a better demand of oil in the next few months. Canada’s currency gained 0.5 percent C$1.0125 per U.S. dollar after touching the strongest level since 17^th of May. It soared along with other risk-sensitive currencies, tracking the 17-nation euro higher, as European Union President Herman Van Rompuy said leaders meeting in Brussels June 28-29 agreed to drop the condition that emergency loans to Spanish banks give creditor governments preferred status.

CL2Q

Oil surged to a one-month high on speculation that central banks from Europe to China will ease monetary policy to boost growth while sanctions against Iran may curtail supply. Prices gained 4.7 percent as the European Central Bank is forecast to cut interest rates this week. A state-owned newspaper in China said the time is right to increase liquidity in the banking sector. Iran fired several missiles during a three-day military exercise in response to EU sanctions started 1^st of July as the country threatened to block tanker traffic in the Strait of Hormuz. Oil for August delivery climbed $3.91 to settle at $87.66 a barrel on the New York Mercantile Exchange, the highest level since 30^th of May. Futures have increased 13 percent since closing at an eight-month low of $77.69 a barrel on 28^th of June. The Nymex trading floor will be early closing today for the U.S. Independence Day holiday.

GOLD

Gold climbed to the highest price in two weeks amid speculation that central banks will take more action to boost growth, pushing demand for the metal as an inflation hedge. Reports showed that euro-area manufacturing output contracted for an 11^th straight month in June and manufacturing in the U.S. unexpectedly contracted. European Central Bank officials are forecast to cut their main interest rate to an all-time low on 5^th of July, according to the median forecast. People are expecting some form of easing both in the U.S., Europe, and even China as far as growth is concern. Gold futures for August delivery rose 1.5 percent to settle at $1,621.80 an ounce after climbing to $1,625.70, the highest for a most-active contract since 19^th of June. The metal is up 3.5 percent this year. Prices surged 70 percent from the end of December 2008 to June 2011 as the Federal Reserve kept borrowing costs at a record low and bought $2.3 trillion of debt in two rounds of so-called quantitative easing. Comex floor trading will be early closing today for the U.S Independence Day holiday.

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