Major Pairs Analysis: Italy Forms Government, JPY Strengthens Vs. USD

EUR/USD
The euro gained against the greenback after Italy finally formed a coalition ending its two-month political impasse. Enrico Letta was sworn in as Italy’s Prime Minister after forging an alliance with Silvio Berlusconi. As early as yesterday he promised to loosen up austerity, saying “Italy is dying from austerity alone. Growth policies cannot wait.” The 46 year old Premier looks likely to remove the unpopular Imu property tax imposed by his predecessor as part of the austerity measures. The greenback weakened against the euro after the fed signaled not to end QE soon, as growth rose less than analysts had anticipated. The euro rose to $1.3115, the first time this week.
GBP/USD
The British pound surged to 1.5545 against the dollar after housing prices rose, suggesting economic performance is gaining momentum. Average house prices in England and Wales increased by 0.3 percent, matching the gain in March that was the biggest in three years, Hometrack Ltd. said. Lloyds Banking Group Plc said a survey of U.K. businesses showed their confidence in the economy compared with three months earlier increased to 27 in April from 20 in March. It actually embarrassed investors who had been predicting a triple dip recession after its GDP rose to 0.3 in Q1 2013. The Sterling gained 1.5 percent over the past month, according to Bloomberg Correlation-Weighted Indexes.
USD/JPY
The JPY strengthened against the USD after America’s Q1 2013 GDP failed to impress most policy makers. Investors are betting that the Fed would take into consideration not to halt easing sooner. Despite a good forecast for the Non-farm payroll which would be released on Friday, the greenback failed to hold and slid against most of its trading peers as an aftermath for the slightly negative GDP last week.The dollar declined against the yen to 97.35, the lowest since April 18. Japanese household spending in March rose to 5.2 percent, relative to the same month last year after a 23 percent jump from housing expenditures. The actual number is well above a 1.8 percent gain expectation.

USD/CAD
The Loonie has surged the strongest since April 12 after oil gains, its biggest export product. The currency touched 1.0107 per dollar yesterday. Futures on crude oil gained 1.5 percent to $94.42 a barrel in New York after the Fed has no signal to halt its quantitative easing soon. The U.S., Canada’s biggest trading partner, grew 2.5 in the first quarter of this year below analyst expectation. Aside from federal spending cuts, analysts had noted Americans spent less relative to previous months. America’s households, which account for 70 percent of the total GDP rose 0.2 percent less than the 0.7 percent growth in recent months.