The Dollar strengthens before the G8 meeting

The greenback gained against the euro and the JPY before a Group of Eight meeting of finance ministers at which Treasury Secretary Timothy Geithner might say the U.S. favors a strong American currency. The U.S. currency pared a weekly decline after the Wall Street Journal reported the Federal Reserve will resist pressure to increase bond purchases, avoiding adding to the supply of dollars. The Sterling dropped against the euro, eroding the biggest weekly gain since the five days ending Jan. 30 as bank stocks plummeted for the first time in three days.
“There might be some comments about the dollar from Geithner and on the strength of the euro from European officials, that it’s not a great development for Europe,” said Henrik Gullberg, a foreign-exchange strategist at Deutsche Bank AG in London. “There’s also a bit of profit taking as the market isn’t willing to push euro-dollar much above current levels.” The EUR/USD is currently trading at 1.4046 as of 10:32am, London time.

The British pound dipped against the greenback and the euro on Friday as investors took profit on bullish gains over recent days and squared positions ahead of a meeting of Group of Eight finance ministers this weekend. The gains came on the belief that Britain is gradually recovering from the recession, fuelled by recent data suggesting economic activity is starting to pick up. UK finance minister Alistair Darling was quoted in the Financial Times on Friday striking a cautious note despite recent better signs on the economy, saying people "should not become complacent". Investors remain optimistic on the outlook for the UK economy, but analysts noted that people are starting to question the extent to which they can justify pushing sterling higher. "Sterling has had a good run and there is a greater willingness to take profit, particularly going into the G8 meeting," HSBC director of currency strategy Paul Mackel said. The GBP/USD is currently trading at $1.6440 as of 10:46am, London Time.

Confidence among U.S. consumers will probably rise for a fourth straight month in June, reflecting signs that the worst recession in a while may end this year, economists said before a private report. The Reuters/University of Michigan preliminary index of consumer sentiment increased to 69.5, the highest level in nine months, according to the median estimate of 62 economists in a Bloomberg News survey. The final reading for May was 68.7. Job losses are slowing, recent reports show housing and manufacturing -- the two worst parts of the economy -- are stabilizing, and the Obama administration’s fiscal stimulus may help shore up consumer demand. Still, a record loss of wealth is causing Americans to boost savings, and unemployment is forecast to keep rising, so a recovery will be slow to take hold.

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