By Omer Esiner of Travelex The U.S. dollar was generally well-supported in overnight trade, benefiting from ongoing uncertainty over the outlook for Greece and its request for financial aid from the International Monetary Fund and European Union. The soaring cost of borrowing for Athens forced it to officially request assistance from the EU and IMF last week in what will likely be the largest sovereign bailout on record. However, uncertainty over how and when such assistance will be granted continues to keep investors wary of taking on too much risk in their portfolios. The weekend meeting of the G20 and IMF in Washington yielded little in the way breaking news. Officials discussed financial regulation and the need for continued caution amid signs that the global economic recovery is gaining traction. However, Greece's debt issues cast a shadow over the meetings and forced officials to focus much of their time discussing Athens' deteriorating fiscal backdrop. Sterling rose across the board after the latest polls showed the opposition Conservative Party in the U.K. gaining ground on the incumbent Labour Party. Still, projections suggest a very high likelihood of a hung parliament, an outlook that should keep the pound's upside limited. While Monday's calendar offers little economic news for traders, key events later in the week could keep major pairs in tight ranges. The Federal Open Market Committee's policy announcement on Wednesday and Friday's U.S. first-quarter gross domestic product will be critical in setting the tone for the greenback into the coming weeks. EUR: The euro remained under broad pressure overnight as uncertainty over the outlook for Greece continued to weigh. While Athens formally requested financial aid from the EU and IMF last week, its debt problems appear far from resolved. Greece's request for aid must be ratified by all 16 European Monetary Union states, a process that may result in bickering and finger-pointing and further widen the rift between richer and poorer member states. In particular, Germany, which is likely to shoulder the bulk of the financial burden and whose populous remains vehemently opposed to any bailout of Greece, could drag its feet in ratifying assistance. Already, Germany's finance minister said that aid should be available to Greece ahead of Athens' May 19 target, but that it should only be granted if Greece agrees to very strict fiscal reforms. Germany's opposition Social Democratic Party said it would not support any accelerated parliamentary process to approve German aid for Greece, a sign of potential political hurdles that may hinder the timely implementation of aid.
The cost of insuring Greek debt remains near record highs, exceeded only by Argentina and Venezuela, a clear sign that investors remain very nervous. The high level of uncertainty and potential for Germany to delay approval for aid should keep the euro very vulnerable to additional losses. GBP: Sterling rose across the board overnight after the latest poll showed the opposition Conservatives with a widening lead over the incumbent Labour Party ahead of next month's general election. Separate data from real estate firm Hometrack showed a 1.8% year-over-year rise in home prices in England and Wales in April. The data and poll results added to the pound's generally upbeat tone and helped it rise to a three-month peak against the beleaguered euro overnight. Still, sterling's upside may prove more limited than current price action might suggest, given that the most probable outcome of the election is still a hung parliament. Such a scenario could limit any government's ability to enact difficult fiscal reforms to bring the nation's soaring budget deficit down to more manageable levels. CAD: The Canadian dollar firmed back toward the upper end of its recent ranges against most of its rivals overnight. Firmer crude oil prices helped revive demand for the loonie, which had come under some selling pressure late last week in the wake of disappointing retail sales and cooler-than-forecast inflation data. Still, the health of Canada's domestic economy, improving U.S. demand for Canadian goods, elevated commodity prices and the relatively strong position of Ottawa's fiscal balance sheet should all keep the CAD's upside very much intact over the medium term.