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By FXCompass — Monday, 26 April 2010

The Greece government officially asked for aid last Friday in order to help pay €8.5 billion in maturing bonds due before May 19. Despite some opposition from Germany, it seems like EU leaders are unlikely to let Greece default on its debt payments. An official announcement of lending terms is likely to give a push to the euro in the short term.

However, sovereign risk remains the main barrier towards a sustained recovery of the euro. In the long to medium terms, the threat of further credit downgrades undermines any positive developments in the Greece saga.

On the other hand, The European economy has showed goods signs of improvement last week in the manufacturing and industrial sectors. Consumer sentiment in France and German has improved as well. However, the labor market is still very weak throughout Europe.

In the U.S., employment continues to stabilize but remains very far from pre-recession levels. Hence, the Federal Reserve stays cautious and maintains its willingness to keep low interest rates for an “extend period”.

U.S economical data such the GDP and Retail Sales have shown good signs of recovery. The housing market and commercial construction lag other industries, but their situation is slowly leaving recession levels.

We expect the dollar to remain well supported in the short to medium terms.

Commodity currencies rebound strongly when the Bank of Canada suggested the time has come to increase rates. The BOC is likely to raise the interest rate by 25bps or 50bps as soon as June.

We expect both the aussie and the loonie to stay well supported in the medium to long terms. Any dip is a good buying opportunity.

In the UK, investors are under the influence of the political campaigns for the May legislative elections. We expect the pound to trade with enhanced volatility and limited upside momentum until the election results.