Major Pairs Analysis: Euro Rises, Yen Weakens

EUR/USD
The euro rose versus the greenback before Giorgio Napolitano is sworn in to a second term as Italian president. In Italy, Napolitano could begin consultations on a new government as soon as tomorrow. The resignation of Democratic Party leader Pier Luigi Bersani increases the chances Napolitano can convince the remnants of Bersani’s Democrats to join a coalition with Silvio Berlusconi’s People of Liberty party and end a stalemate that’s left Italy without a new government eight weeks after elections. The 17-nation currency advanced 0.2 percent to $1.3077.

GBP/USD
Chancellor of the Exchequer George Osborne intends to unveil the second phase of a plan to increase loans to small companies and consumers because the British economy remains weak, Osborne may extend the Bank of England’s Funding for Lending Scheme as soon as this week, The International Monetary Fund, whose delegation visits London next month for an audit of the U.K., has called on him to do more to aid the economy. Osborne suggested a vote for Scottish independence next year would imperil the use of the British pound as the new state’s money because political union is needed to operate a single currency. The U.K. government on Tuesday, April 23, will publish a study on the implications for the currency of Scottish independence. The pound was little changed to 1.5230.

USD/JPY
The yen weakened, nearing the 100 per dollar level not seen for four years, as the Bank of Japan’s monetary stimulus policies were unopposed by the Group of 20. Japan’s currency slid against most major peers after BOJ Governor Haruhiko Kuroda, who oversees his second policy meeting this week, said he was emboldened to press ahead with a campaign to defeat deflation. Japan’s currency fell 0.3 percent to 99.81 per dollar, after touching 99.90, the weakest since it reached a four-year low of 99.95 on April 11.

USD/CAD
Bank of Canada Governor Mark Carney said the timing of interest-rate increases depends on growth accelerating to more than 2 percent, inflation picking up and households continuing to ease up on debt accumulation. Carney said that while the Bank of Canada hasn’t been explicit about how long the current pause will last, it has outlined the factors that will influence the timing of the next move. Canada’s central bank has kept its benchmark borrowing costs at 1 percent since September 2010, the longest unchanged period since the 1950s. The Canadian dollar was little changed at C$1.0254 per U.S. dollar.