The U.S. Dollar gained on Friday after the Federal Open Market Committee indicated that additional monetary easing may be warranted in order to fuel economic growth. The greenback was also supported by positive Durable Goods Orders, which showed an increase of 4.2 percent in July. But the dollar erased gains versus the shared currency as optimism improved in the market after the German Chancellor, Angela Merkel, indicated that her country is willing to take the necessary steps to ensure Greece stays within the Euro bloc. On the data front last week, the U.S. job sector added 163,000 workers, which was the biggest advance since the month of February; and American paychecks rose at the quickest pace in five years according to figures from the Commerce Department. This week, the Fed Chairman, Ben Bernanke, will hold a symposium in Jackson Hole Wyoming while investors look out for signs of further stimulus. The Canadian Dollar advanced versus its American peer, but weakened as risk appetite ebbed on concerns over Greece’s financial troubles. The greenback remained strong as the release of mixed data prompted investors to reduce speculation on fresh stimuli measures by the Federal Reserve. The Loonie declined while crude oil futures for October delivery settled at $96.09 a barrel.
The Euro sustained the biggest weekly hike against the U.S. Dollar in six months after the Federal Reserve suggested it may implement additional monetary easing to fuel the country’s economic growth. The shared currency advanced for a second consecutive week as German Chancellor Merkel reiterated her country’s commitment to help Greece (even as other coalition members want Greece to exit the Euro-zone). The German Chancellor warned members of the Christian Social Union to “weigh their words” since such comments could be detrimental to the future of the Euro bloc. The British Pound weakened against the U.S. Dollar on Friday after official data confirmed that the U.K.’s economy contracted during the second quarter. The British markets are closed today for a bank holiday.
The U.S. Dollar gained versus the Yen at the end of last week. However, the Yen came under pressure as the Bank of Japan’s Governor, Masaaki Shirakawa, suggested that the slowdown of China’s economy, together with an overvalued Yen, could hurt Japan’s economy. Analysts took this as a sign the BOJ may implement additional monetary easing at any time.
In the South Pacific, the New Zealand Dollar rose versus the greenback, but its gains were limited as concerns over Greece’s financial crisis weighed on risk appetite. The Australian Dollar traded at the lowest price in August and dipped versus 12 of its 16 counterparts after the central bank’s governor, Glenn Stevens, stated that the Aussie could depreciate if the mining boom comes to an end. He went on to say that in fact, the boom may finalize this or next year.
EUR/USD- Coalition Members Warned
The Euro gained the most in six months versus the U.S. Dollar on signs the Federal Reserve may increase stimulus to bolster economic growth. In the previous week, the ECB indicated that it plans to set yield limits as risk increases. However, the ECB’s President, Mario Draghi, confirmed that the ECB wouldn’t be purchasing government bonds until the German Constitutional Court delivers a decision on the legality of the bailout fund. Meanwhile, German Chancellor Merkel stated that she wants Greece to stay in the Euro bloc despite negative remarks by coalition partners. Germany has reiterated its commitment to help Greek Prime Minister Antonis Samaras as his government takes the necessary steps to resolving Greece’s financial troubles.
GBP/USD- Economy Contracts
The British Pound finished the week low against the U.S. Dollar following the release of data revealing that the economy shrank by 0.5 percent in the second quarter. The figures raised further expectations the Bank of England may implement more easing. In the days to come, market investors will follow reports on Home Price Inflation –a key indicator on consumer demand.
USD/CAD- Loonie Drops On Risk Aversion
The greenback pared some of its previous gains against the Canadian currency, though it remained supported as concerns over the crisis in Greece sapped demand for high risk assets. The Loonie dipped on Wednesday as economic reports confirmed that Canadian Retail Sales dropped 0.4 percent in June; and it finished the week low against the greenback after crude oil settled at $96.09 a barrel in the New York Mercantile Exchange.
USD/JPY- Shirakawa Signals Easing
The greenback trimmed previous losses against the Yen; however, the Japanese currency was weighed down by the possibility the BOJ may implement additional easing as suggested by the bank’s governor, Masaaki Shirakawa. Comments by the central bank’s governor came a day after official data showed that the country’s exports declined to the lowest level in six months. Figures also indicated that Japan sustained a 0.33 trillion Yen trade deficit in July. In the coming days, Japan will release metrics on Retail Sales and Inflation.
Today’s economic calendar shows that Australia will report on HIA New Home Sales. The Euro region will release the German Import Price Index, German IFO Business Climate and German Current Assessment.