By Omer Esiner of Travelex .
The U.S. dollar rose broadly on Monday as a weekend agreement on financial support for Greece was largely met by investor skepticism, weighing on the euro and overall risk sentiment.
Eurozone finance ministers along with the International Monetary Fund on Sunday agreed on a 110 billion euro (about $147 billion) aid package for Greece in exchange for fresh austerity measures to cut spending by Athens. The single currency initially rose in response to the record bailout for Greece. However, the common currency surrendered its gains on lingering doubts over whether Athens will be able to successfully implement its tough measures to stabilize the country's finances given strong public backlash. The austerity measures include fresh spending cuts and tax hikes over the next three years.
A London holiday on Monday contributed to generally subdued trading conditions. Sterling held on to its weaker bias ahead of Thursday's general election in the U.K. which many predict could result in a hung parliament for the incoming government.
The Canadian dollar firmed against the U.S. dollar early Monday, with oil above $86 a barrel helping to overshadow a pullback in investor sentiment.
The euro fell broadly on Monday, a day after the Greece rescue package. Under the plan, Greece's fellow eurozone neighbors would provide 80 billion of the total package with the remaining 30 billion coming from the IMF. The Greek rescue plan would provide the near-bankrupt nation with the rescue funds over the next three years.
Despite the bailout's hefty price tag, many investors question whether it would be enough to help fix credit concerns in the eurozone. Market participants also have their doubts over whether Greece will be able to stick to its harsh measures to improve its finances, given stiff public opposition to higher taxes and pay freezes. Each individual eurozone nation must now vote on Greek rescue which could come by Friday.
The British currency stayed largely on the defensive Monday, hurt by the decline in risk sentiment and by lingering uncertainty ahead of Thursday's general election. A close election campaign could pose a key challenge for the incoming government, if the winning candidate does not secure a decisive victory for the winner. The prospect of a hung parliament suggests the next government will have a hard time passing needed legislation to reduce the UK's ballooning fiscal deficits.
The Australian dollar firmed against its U.S. counterpart, supported by expectations the Reserve Bank of Australia will boost interest rates Tuesday. The RBA is widely expected to hike its cash rate by 25 basis points to 4.5% as its economy has emerged from the global downturn relatively unscathed.
U.S. personal income rose 0.3% as expected on the month in March, while the previous month's figure was upwardly revised to 0.1% from zero. A separate report showed that U.S. personal spending gained 0.6% on the month in March, which also met expectations. Furthermore, personal consumption the previous month, originally reported as 0.3% was revised to 0.5%.
The upbeat data on consumers, which account for the majority of U.S. economic activity, boded better for the outlook for the economy. The positive data bolstered the view that the U.S. recovery will be a sustainable one.
The dollar neared a recent one-month high against the Japanese yen on the news. Investor focus now turns to the 10 a.m. EDT time release of the Institute for Supply Management's manufacturing survey which is forecast to show a reading of 60.0 in April, a touch higher than March's 59.6.
Omer Esiner serves as the Senior Currency Market Analyst at Travelex, Inc. a global financial institution specializing in corporate foreign exchange services and international payment solutions. In this capacity, he monitors, analyzes and interprets the economic, financial, political and technical factors that drive the movements of more than 100 currencies for Travelex. Mr. Esiner explains the currency markets' reaction to market events to clients, employees and members of the media.
You can view his daily reports, recording briefings, and quarterly reviews posted
. As an expert in foreign exchange, Mr. Esiner is quoted regularly by the financial media including The Wall Street Journal, CNN, Dow Jones Newswires, Reuters, the Nightly Business Report, National Public Radio, among others. Based in Washington, D.C., Esiner joined Travelex in February 2000. Prior to his current position, Esiner was a currency trader for several years. Mr. Esiner holds a bachelor's degree in economics from the University of Maryland, College Park. He is fluent in Turkish and proficient in Spanish.