The U.S. Dollar weakened against most of its counterparts as commodity and equity prices rose on news that key E.U. Finance Ministers agreed to augment the anti-debt crisis firewall. The greenback declined on Friday as reports showed that the E.U. summit concluded on a positive note while the aid fund was set between 800 and 940 bn Euros. The greenback was also weighed down by risk appetite despite stellar data showing that Consumer Confidence in the U.S. climbed the most in over a year. This was mostly due to that signs the employment sector was improving while Consumer Spending posted the biggest hike in seven months. On the data front, Commerce Department releases indicated that Personal Spending rose 0.8 percent during February; the University of Michigan Consumer Confidence’s announcement confirmed an increase to 76.2, however, Core Personal Consumption remained at 1.9 percent, as Personal Income did not rise as anticipated. Furthermore, Jobless Claims remained below the 400,000 level, confirming recovery in the labor market. Meanwhile, the Canadian Dollar traded slightly lower against its American counterpart as positive economic news out of the U.S. benefitted the greenback. The Loonie slipped as crude oil prices for May delivery settled at $102.97 a barrel.
The Euro strengthened after a positive summit of Finance Ministers buoyed risk appetite. Overall, market investors felt at ease on signs that the Euro region is revamping its “financial defense” mechanism in order to prevent another crisis. According to reports, the ESM and the EFSF will unite and the anti-debt crisis firewall will be expanded to a sum between 800 and 940 bn Euros. The shared currency’s gains were capped by remarks from Luxembourg’s President, Jean-Claude Juncker, who suggested that an additional 1 trillion Euro injection was certainly “out of the question.” Nonetheless, the aid fund is now impressive and large enough to boost investor confidence. And to everyone’s surprise, the British Pound gained against the U.S. Dollar despite a slew of negative economic metrics released throughout the week and lackluster predictions from the OECD. The Sterling rallied above the $1.6000 mark as risk appetite took over market sentiment.
The Yen declined the most since 1995 against currencies from developed nations after the Bank of Japan increased monetary stimulus. Japan’s monetary unit continued to dip on signs the E.U.’s debt crisis may now be under control, and as demand generated by end of year flows fizzled out. The Yen was further weighed down by news that the Current Account showed negative for the first time in four years.
In the South Pacific, the New Zealand Dollar gained as commodity and equity prices rose; however, the Australian Dollar finished lower versus the greenback but managed to erase losses on speculation that the Reserve Bank will leave interest rates at 4.25 percent when it meets on April 3rd.
EUR/USD- Bailout Fund Impresses Investors
The Euro rose against the U.S. Dollar after the region’s Finance Ministers agreed to expand the aid fund for those nations most in debt. Upon the summit’s conclusion, the Ministers agreed to expand the fund to 940 bn Euros in order to prevent contagion to other member nations such as Italy or Spain. The firewall will include 500 bn Euros from the European Stability Mechanism, 200 bn Euros already promised to Greece, Portugal and Ireland; and the remainder will come from E.U. funds. On the economic report front, German Retail Sales dipped 1.1 percent in February, disappointing investors; and Consumer Price Inflation spiked up to 2.6 percent. In the days ahead, market investors will be looking at the ECB’s policy meeting, and Friday’s Non-Farm Payroll reports out of the U.S.
GBP/USD- Sterling’s Surprise Gains
The British Pound rallied on Friday despite the less than stellar economic reports released in the past week. The Sterling was buoyed by market sentiment and optimism over the crisis in the Euro region. Risk sentiment was fueled by reports that key E.U. Finance Ministers agreed to expand the bailout fund, and by a positive assessment of the initial quarter of 2012, which turned out to be the strongest for equities in 10 years. On the data front, reports showed that Consumer Confidence dipped to -31 when economists anticipated it to fall to -29. But no matter how well the Sterling performed, and the fact that it rose above the $1.60 psychological level, it’s speculated that the Bank of England will implement further stimulus in May.
USD/JPY- Yen Dips Most Since 1995
The Yen declined the most since 1995 after the Bank of Japan implemented further stimulus. The currency was also weighed on by disappointing reports revealing that Current Account, the most important measure of trade, was negative in the month of January, as Japan had to spend 74 percent more in liquid natural gas. On the data front, Nomura Manufacturing PMI increased to 51.1; Household Spending climbed to 2.3 percent although economists expected a gain from -2.3 percent to -0.5 percent. The Unemployment Rate declined to 4.5 percent; CPI went up by 0.3 percent YoY, suggesting that the central bank is inching closer to its inflation mandate of 1 percent. On a negative side, Industrial Production for the month of February only advanced by 1.5 percent.
USD/CAD- GDP Up
The Canadian Dollar traded slightly lower against the greenback as positive data out of the U.S. supported the currency. On the data front, Canada’s GDP rose 0.1 percent in January, which is just what economists had predicted. The Loonie erased some of its losses as sentiment turned towards risk appetite on news the Euro region’s Finance Ministers agreed to boost the aid fund’s limit to somewhere between 800 and 940 bn Euros. In the coming days, investors and traders will focus on Canada’s reports regarding the country’s changes in employment as well as on the unemployment rate.
Today’s economic calendar shows that the E.U. will report on Manufacturing PMI and the region’s Unemployment Rate. Switzerland will issue figures on Retail Sales and SVME PMI. The U.S. will release data on ISM Manufacturing Index. Lastly, Australia will announce the Retail Sales.