Debt Crisis Worries Pared Euro Gains - 30.5.2011

US Dollar The dollar strengthened against its major counterparts in Asian trading hours on Monday, recovering after a considerable drop on Friday, when the greenback’s benchmark index fell below 75 for the first time in more than two weeks amid disappointing economic data. The dollar index, which reflects the US currency dynamics against a set of six major currencies, fell to 74.91, from 75.59 on Thursday. As for important economic reports this week, the Labor Department will release a key labor market report on June 3, which may show that non-farm payrolls rose by 185000 in May after a 244000 gain in April. In other words companies probably hired fewer employees this month, while manufacturing cooled, pushing down the ISM manufacturing index to 57.5 from 60.4, according to expectations. The Labor Department employment report is also expected to show the jobless rate dropped to 8.9% in May after an unexpected surge to 9% in April from 8.8% in March. Euro The euro is still under pressure as investors are worried about the European debt crisis. The IMF and European authorities are expected to deliver their report on Greece’s progress on its austerity measures. The euro weakened today against its major peers after Greece's Prime Minister George Papandreou said the Parliament will continue taking new austerity measures despite the failed discussion with opposition parties. Meanwhile leaders of opposition parties rejected Papandreou’s plan, saying that they wouldn’t be blackmailed. Nethertheless European Union officials have called for consensus on the package, which includes an extra 6 billion euros of budget cuts and a plan to sell 50 billion euros of state-assets. However, according to Jean Claude Juncker, who leads the group of euro-area finance ministers, the country may not be able to draw on a fifth tranche of the IMF portion of its loan. “There are specific IMF rules and one of those rules says that IMF can only take action when the refinancing guarantee is given over 12 months,” Juncker said last week. Pair EUR/USD fell this morning from 1.4310 to 1.4256. Australian Dollar Natural disasters in Australia probably cut more than 1% from economic growth in the first quarter, which may contract by 0.3%, to 1.8% annual pace, Treasurer Swan said ahead of a government report this week on GDP. The June 1 report from the Bureau of Statistics is expected to show a “dramatic hit” from floods and a cyclone in Queensland state, and an earthquake and tsunami on March 11 in Japan, which is Australia’s second-biggest trading partner after China. However, according to estimations of the Organization for Economic Cooperation and Development, Australia’s economy will expand next year at a faster pace due to rebuilding and growing export revenue. The economy will rise by 2.9% in 2011 and accelerate in 2012 to 4.5% - its fastest pace since 2007.