Major Pairs Analysis: Speculations High Of ECB Rate Cut Later This Week

EUR/USD
Rising unemployment and falling inflation are fueling speculation of an ECB rate cut later this week. Eurostat data indicated that the CPI tumbled to 1.2 percent in April, the lowest level since February 2010 and the biggest monthly drop in over than 4 years. Reducing the interest rate to a new record low of 0.50 percent would remind investors how concerned the ECB is with recession caused by poor performance and indebted nations. The central bank has been predicting growth will start on the second half of this year. However, recent headwinds suggested recession will prevail. Germany, the biggest economy in the periphery, took the spot light after its manufacturing and services contracted last month. About 19.2 million people are now out of work in the bloc, the highest level since the eurozone's inception in 1999. The euro area’s unemployment rate climbed to 12.1 percent from 12 percent.

GBP/USD
The pound has been rising for the last few trading days. Yesterday it extended its gains against the US dollar, the biggest monthly gain since October 2011 after a report showed British banks granted more loans for homes in March. It strengthened 0.3 percent to $1.5545 - the most since February 15. U.K. lenders granted 53,504 mortgages last month, compared with a revised 51,947 in February, the Bank of England said. Actual numbers were above forecast, an increase to 52,700 from an initially reported 51,653. This is a good sign after a 0.3 percent growth in GDP in Q1 in 2013 damped speculation the Bank of England would boost stimulus measures. It is indicating that banks are ready to loosen tight credit approvals.

USD/JPY
Japanese shares fell, with the Topix Index dropping after posting its best month since 1999. The yen strengthened, and earnings reports from Alps Electric Co. to Tokyo Electron Ltd. disappointed investors. Alps Electric, a car audio maker, dropped 5 percent and semiconductor manufacturer Tokyo Electron lost 4 after forecasting profit that missed analyst estimates. Canon Inc., the world’s biggest camera maker, declined 1.3 percent. Astellas Pharma Inc. slid 1.2 percent after U.S. regulators said its cancer drug produced with Aveo Pharmaceuticals Inc. may need another clinical trial. The Topix Index lost 0.6 percent to 1,158.20 as of 10:01 a.m. in Tokyo, with five stocks falling for every three that rose. The measure yesterday closed the month 13 percent higher, its best monthly gain since March 1999. The Nikkei 225 Stock Average slid 0.4 percent to 13,807.21 today.

USD/CAD
The Canadian dollar strengthened the most since February, after economy accelerated faster than anticipated, and US policy makers seem highly unlikely to remove monetary stimulus on the pot. It soared as much as 0.6 percent to C$ 1.0054 per greenback, the strongest since February 15. The nation's statistics agency said GDP soared 0.3 percent in February, the fastest quarterly growth since 2011. Mining, quarrying, and oil and gas extraction led the expansion with 2.2 percent increased in February, a fifth consecutive monthly increase. Manufacturing output was up 0.8 percent, durable goods grew 0.7 percent, and non-durable goods climbed 1.0 percent in February. Construction, finance and insurance sectors increased slightly by 0.2 percent. Meanwhile, speculations of retaining monetary stimulus are rising ahead from the FOMC statement due to be released today.