The U.S. Dollar fell against the majority of its peers on speculation major central banks from around the world may still implement further stimuli in order to fuel economic growth. The greenback was also weighed down by an improvement in risk appetite brought on by news of German support for the ECB plan to buy government bonds. The Dollar Index, which reports on the performance of the greenback versus a basket of other majors, dropped to 82.23. The Canadian Dollar traded close to parity with its American counterpart as risk appetite was dampened by concerns over the ongoing crisis in the Euro region. New developments revealing that E.U. member nations are divided on offering assistance to Italy and Spain also affected the Canadian currency. No important U.S. or Canada economic reports were released yesterday.
The Euro gained against the U.S. Dollar after the German Chancellor, Angela Merkel, voiced her support for the European Central Bank’s proposal to purchase government bonds in order to help reduce borrowing costs in Italy and Spain. However, the currency’s gains were tempered as E.U. nations reached an impasse over assistance to the two debt-ridden nations. Comments by Italian Prime Minister Mario Monti suggesting the division could cause the Euro-zone’s breakup caused a decline in the value of the shared currency. Renewed worries that Spain may ask for a full-scale bailout kept10-year bond yields extremely close to the dangerous 7 percent level. The British Pound weakened against all of its peers after the Halifax reports revealed that Home Prices slipped 0.6 percent in July. Furthermore, Lloyd’s Banking Group PLc stated that Job Security dipped to a four-month low and Rightmove PLC suggested that sellers would have to reduce their property prices in order to attract buyers.
The Yen advanced against the U.S. Dollar on Monday after the markets consolidated following a risk rally which was prompted by better than expected U.S. job data. However, investors remained skeptic over ECB plans to purchase government bonds.
Trading in the South Pacific was light as the Australian markets were closed yesterday. The Aussie Dollar managed to rise close to a four-month high on speculation the central bank won’t change its stance and would likely leave the costs of borrowing money unchanged. The New Zealand Dollar also advanced after Asian stocks rallied, prompting a higher demand for risk assets.
EUR/USD- Greece Reaches Agreement
Greece seems to have reached an agreement with its creditors over the fact that the country needs to strengthen its policies in order to comply with the terms of the bailout. Representatives of the Troika met with the Greek Finance Minister, Yannis Stournaras as the Troika is set to render its decision on whether Greece will continue to receive aid. The Euro traded up and down throughout the day as market investors priced in the possibility the ECB will purchase bonds in order to reduce the borrowing costs of Italy and Spain’s bonds. Meanwhile, Spain indicated that the country isn’t ready to ask for a full-scale bailout.
GBP/USD- Housing Data Signals Trouble
The British Pound weakened against the U.S. Dollar, fell to a one-month low against the 17-nation currency and dipped versus its other counterparts following reports showing that Home Prices fell 0.6 percent in July. According to Rightmove, operator of one of Britain’s largest real estate websites, 49 percent of all buyers think the prices in their area are “above a fair and reasonable level.” This prompted Rightmove to suggest sellers reduce their prices if they wish to sell. According to analysts, weakness in the economy has prompted a drop in home purchases which in turn raised speculation that the Bank of England may augment is asset purchasing program.
AUD/USD- Investors Await For RBA Decision
The Australian Dollar traded 0.1 percent away from its highest price in over four months and its government bonds rose on the possibility the Reserve Bank of Australia won’t lower what are now the developed world’s highest borrowing costs. The Aussie slipped against most of its peers on signs the economy in the Euro region is weakening as policy makers grapple with ways to solve the debt crisis.
USD/CAD- Loonie Hovers Close To Parity
The Canadian Dollar hardly changed against the U.S. currency and came close to parity with its American counterpart as market investors remain worried by signs the Euro-region may break up due to a new impasse over aid to Italy and Spain. The Loonie traded somewhat higher versus the 17-nation currency and was not affected by the 0.2 percent decline in crude oil prices.
Today’s economic calendar shows that Australia will publish the Interest Rate Decision, data on Home Loans and the RBA’s Rate Statement. Switzerland will report on the Unemployment Rate and CPI. The U.K. will issue figures on Industrial Production (MoM and YoY), The NIESR GDP Estimate and Manufacturing Production. The E.U. will release German Factory Orders and Italian GDP. Canada will reveal data on the Ivey PMI and Building Permits. Japan will announce the Adjusted Current Account. And in the U.S., the Federal Reserve Chairman, Ben Bernanke, is scheduled to deliver a speech.