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Euro Declines as Fears Grow

The euro extended its decline today amid mounting concerns about the sovereign-debt crisis in Europe and the ability of the eurozone to keep its integrity, caused by uncertainty about the June elections in Greece and signs that the crisis is spreading.

Spain is the second major worry, following Greece, for European investors, especially after its banks and regions lost access to capital markets. The government is continuously reassure that the country does not need a bailout, and the need to repeat that everything is good may be considered troublesome by itself. Even the powerhouse of the European economy, Germany, shows signs of weakness. Losses were limited, though, as polls showed that pro-bailout parties are gaining votes in Greece.

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Rupee Drops, Can Hurt India’s Economic Recovery

The Reserve Bank of India cut its key repurchase rate by 50 basis points to 8 percent in April and that move was followed by unexpected increase of inflation to 7.23 percent. Now the central bank is in a difficult position as without rate cuts the currency will continue to weaken, leading to growing inflation, but low borrowing costs may also boost inflation. Analysts estimated that gross domestic product increased 6.7 percent in March 2012 from a year ago, demonstrating the slowest rate of growth since March 2009.

USD/INR rose from 55.3750 to 55.1862 as of 18:49 GMT today.

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Canadian Dollar Sees Small Gains

Canadian dollar is seeing small gains today as oil prices rise a little, and as a bit of optimism returns to the markets. There are hopes that Greece will remain in the eurozone, as well as some expectation of a eurozone solution to the sovereign debt problem. All of this is providing a boost for the loonie.

Oil prices are slightly higher on the news that polls indicate that Greeks might put in pro-bailout politicians in after the new elections next month. Oil is helping the loonie against the greenback.

With oil prices inching higher, the Canadian dollar is finding some support. Oil is a major export for Canada, and as oil prices rise, the loonie finds a measure of support. However, the Canadian dollar is also receiving help from improvements in the global economy, and in a more optimistic outlook. Some of the trading is hampered, though, by the Memorial Day holiday in the United States.

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US Dollar Mixed in Forex Trading

US dollar is mixed in Forex trading, with markets somewhat choppy today. Greenback is once again higher than an embattled euro, but the US dollar is lower against commodity currencies. It looks to be an interesting day on the Forex market, even though US markets are closed for the Memorial Day holiday.

US dollar is turning in a mixed performance today, thanks to some of the unique situations at play right now. Greenback is higher against the euro, thanks to continued concerns about what is happening in the eurozone. Last week, Spain had to bailout banking giant Bankia, and there is still wrangling over the idea of eurobonds. No one seems to have a solution to the eurozone problem, and that is weighing on the euro.

However, US dollar is down against commodity currencies like the Canadian dollar and the Australian dollar. With gold and oil prices higher, commodity currencies are getting something of a boost right now. Even the Great Britain pound has turned higher against the US dollar, indicating that there might be some risk appetite in the markets after all. Dollar index is lower overall, in spite of the greenback’s strength against the euro.

At 14:39 GMT the dollar index is down to 82.241 from the open at 82.146. EUR/USD is down to 1.2535 from the open at 1.2578. GBP/USD is up to 1.5695 from the open at 1.5693. USD/CAD is down to 1.0258 from the open at 1.0266. AUD/USD is up to 0.9839 from the open at 0.9816.

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EURUSD Rallies to $1.24 as German Unemployment Rate Falls

The German economy looks unscathed. In fact, while some countries face an unemployment rate of 15 percent, 20 percent, or even 25 percent, the German economy just saw its unemployment rate hit a Euro-zone era all-time low, at 6.7 percent in May against a forecasted 6.8 percent rate, according to a Bloomberg News survey. When compared to all available data, the rate is not just the lowest since January 1999, but also as far back as our data goes, which is January 1991.

The unemployment rate was aided by a labor market that has proved resilient amid the decline of employment across the rest of Europe. Economists were predicting that the German economy had lost 7K jobs in May after gaining 19K jobs in April; however, no jobs were lost (or gained). When compared to other major economies, such as the United Kingdom or the United States, the German labor market looks relatively resilient; whose counterparts have unemployment rates of 8.2 percent and 8.1 percent, respectively. When compared to other Euro-zone countries, such as France, Italy, or Spain, the German labor market is that much more impressive; these countries have unemployment rates of 9.4 percent, 24.1 percent, and 8.8 percent, respectively.

The Euro gained across the board, most notably against the safe haven currencies, the Japanese Yen and the US Dollar. The EURJPY appreciated from 97.71 to as high as 97.94, while the EURUSD rallied from 1.2393 to as high as 1.2416

After setting a fresh 2012 low today at 1.2358, the pair has rebounded approximately 50-pips, setting up a Hammer candlestick on the daily chart. Typically, this price action indicates bulls closed out the session stronger than the bears, signaling a potential shift in momentum. Indeed, shorter-term charts suggest that rallies may advance as high as 1.2460/80, and it would take a significant fundamental catalyst to drive the pair back above 1.2500. As such, with two key US data releases today with quantitative easing expectations – the ADP employment report and the first quarter GDP revision – it’s very possible the EURUSD rallies up towards 1.2500 ahead of the US cash equity open.

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