US markets are closed for the Memorial Day holiday, but European and Asian trading markets are open.
As the week starts, the euro is down sharply against the dollar. This comes as Greek government officials are saying publicly that Greece will likely begin to default on debt obligations starting in June. To paraphrase the Greek Interior Minister, the money just ain’t there. Greece owes 300 million euros to the IMF in the first week of June, but the government has prioritized payment of salaries and benefits. Greece’s creditors show no signs of compromise, so it looks like the sovereign debt crisis is going to reach a peak. The EUR/USD is trading at $1.0977.
Along with euro weakness, the US dollar is up across the board – with the USD/JPY at 121.52, the GBP/USD at $1.5475, and the AUD/USD at $0.7830.
The dollar’s strength is having an effect on commodities. Oil, gold, and silver are all down slightly. Silver is trading at $17.01 and gold at $1,203.50. In oil, Brent crude, the global benchmark price, is at $64.93, while West Texas, the US price, is at $59.18. Commodities usually trade inversely to the dollar, as they are not interest bearing and investors will prefer dollar assets when the dollar is strong.
This week’s US holiday marks the official start of the summer driving season in the States, which usually pushes oil prices up, and next week Friday, the US Department of Labor will release the monthly Non-Farm Payroll report. It will be an interesting time to trade in the markets.
Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you.