EUR/usd

The single currency is appreciating this morning. The correction of extreme oversoldness in the single currency is running its course. EUR/USD has gone above 1.25 at trading in Asia. This long-awaited correction is contributed by a neutral news background. It was a quiet day yesterday and the markets closed it out flat. Today's correction can be explained by the expectations that the phone conference of G7 financial ministers scheduled for today will lead to some positive shifts towards resolving of the EU crisis. As G7 mainly consists of the countries which handle the slowdown by means of spending increase, Germany will turn out to be in the minority. As opposed to EU summits where Germany is the country with the largest economy, here its adherence to austerity will hardly meet any sympathy. Probably, Germany will announce its readiness to sacrifice the short-term drive for balance for the sake of a higher potential in the long term. There are certain grounds for that as Europe is now travelling the path of greater integration, which earlier was actively advocated by Germany. However, now it is not the only reason. Apart from the perspective to set more ordered budget rules, the markets need to be sure that the banking sectors of the troubled countries will get support from rich states, which in fact can be rather problematic. As usual, Europeans are very ingenious when it comes to long-term rules and plans, at all cost trying to put off the moment when they will have to part with their money. Yet the essence of the matter is not only in the greed of rich countries, but also in the fact that these countries' electorates regard the Greek bailout as their personal loss and a too generous present, forgetting about ‘penalty' interest rates imposed on Greece in accord with these rules. So, on the one hand the markets are pinning high hopes on the G7 leaders, but on the other hand demand immediate measures from the weak countries. A couple of weeks ago Spain carried out cash infusions into their banking system and yesterday it became known that Portugal is also infusing €6.6bln into its largest banks. Remember, the banks need cash infusions to meet the new budget requirements from EBA by the end of this month.

GBP/USD

The sterling is gradually catching up with the euro. Earlier today it was trading close to 1.54. However, we shouldn't expect any sharp movements in the pound today as Britain is still on holidays, celebrating the Queen's Brilliant Jubilee. Taking into account that the markets are set for a rather moderate course of trading it is very likely that the level of 1.54 will be broken today. But still it is difficult to say what levels the sterling will rest on by the end of the week as Thursday's agenda includes the BoE's meeting, which isn't expected to bring any difference to the situation. If the Bank manages to surprise the market participants by expanding the asset purchase programme, the sterling will have a hard time.

AUD/USD

The Australian CB cut its base interest rate by 25bp. This event was in line with the forecasts of market analysts, but still managed to generate volatility in the markets. On the news release the pair sank by half a point, but managed to keep above 0.97. After that investors started to purchase the aussie. After a sharp rate cut by 50bp a month earlier, the markets were building into the rates the probability of further decisive steps on the part of RBA. Currently the Aussie is striving to break through 0.98. And possibly it will do that today. However, the current trend can turn out to be just a correction after a drop from 1.05. This question is still open.

USD/CAD

Unlike the Australian CB, its Canadian counterpart doesn't have to cut its interest rate. The Governing Council of the Bank isn't expected to bring any changes in the monetary policy, so all attention will be riveted on the follow-up commentary and estimates of further economic perspectives. Since the previous meeting (April 17), the Loonie first dropped down to 0.98 from the stable corridor around the parity and then flew above 1.04. It's quite possible that before a further rise, the rate will correct down to 1.03.