The U.S. Dollar traded high against the majority of its peers after Moody’s downgraded several E.U. countries and stated that it was considering the downgrade of three others, thereby increasing the demand for refuge. On the data front, reports showed that retails sales advanced, though at a slower pace than anticipated. According to figures, retail sales rose 3.9 percent following little change during the month of December. Other releases showed that core retail sales climbed 0.7 percent and the price of imported goods went up 0.3 percent in January, with automobiles and crude oil sustaining the highest increments. Meanwhile, the Canadian Dollar gained against most of the majors as its American counterpart benefitted from demand for refuge and crude oil reached $101.84 a barrel in New York, which was the highest level in three weeks.
The Euro declined as the regional Finance Ministers postponed a meeting scheduled for today in Brussels, indicating that they believe Greece hasn’t provided confidence-building political assurances; instead of meeting, they have decided to conduct a conference call. The 17-nation currency continued its decline against the U.S. Dollar after Moody’s downgraded Portugal, Italy, Slovenia, Slovakia, Malta and Spain. The ratings agency also mentioned that it would consider downgrading Austria, France and the U.K. citing the debt crisis as the main reason. This prompted the British Pound to plummet against the Euro for the first time in days. The Sterling dipped further versus the greenback as the rather disappointing retail sales data and worries over the debt crisis fueled appetite for safe havens. The U.S. currency erased gains against the Swiss Franc as stellar data out of the E.U. overshadowed Moody’s downgrades.
The Bank of Japan surprised the markets by announcing its decision to buy more assets in order to boost economic growth, thus causing the Yen to decline to a three-month low against the U.S. currency. The Japanese monetary unit fell against the majority of its peers after the central bank reported on plans to increase the asset purchase program to 30 trillion Yen and to set the inflation target at 1 percent.
Lastly, the Australian and New Zealand Dollars slumped against the greenback after the downgrade of several European nations dampened demand for high-risk assets. According to analysts, the downgrade also placed a dark cloud over the vote on austerity measures by the Greek Parliament. On the economic front, the index of business confidence in Australia showed an increase to 4.
EUR/USD- Stellar Data Boosts Euro
Despite Moody’s downgrades, which continued to weigh on the shared currency throughout the day, the Euro rallied to the upside after the release of German and Euro-region metrics. According to reports, German economic sentiment rose more than anticipated, and metrics were positive for the first time since May of 2011. The ZEW Center for Economic Research stated that the index of German sentiment went up to 5.4 in February. And in the Euro region, economic sentiment climbed to -8.1 from 32.5 in the month of January.
GBP/USD- Moody’s May Downgrade The U.K.
The Pound weakened the most in one month against the U.S. currency after Moody’s stated it may consider downgrading the U.K.’s AAA rating. The Sterling dipped against 12 of its counterparts as Moody’s went on to say that the downgrade would come as a result of the “weak macroeconomic environment.” Also, the positive ZEW out of the E.U. caused the Pound to decline against the shared currency for the first time in days. On the data front, reports indicated that inflation slowed down and the real estate sector remains sluggish. According to the Office for National Statistics consumer prices increased an annual 3.6 percent, the least in over a year.
USD/JPY- BOJ Increases Stimuli
The Yen dipped to a three-month low against the greenback after the Bank of Japan announced an increase in its asset purchase program, dampening demand for the Japanese currency. The Bank of Japan added $128 billion to the program and set the inflation target at 1 percent in an effort to boost economic growth. Japan’s lawmakers had urged the bank to implement the necessary measures to counteract deflation, especially after the Federal Reserve set a 2 percent inflation target and the ECB expanded the balance sheet.
USD/CAD- Loonie Advances As Oil Gains
The Canadian Dollar advanced against the majority of its peers as the U.S. currency climbed and the price of oil rose above $100 a barrel. The Loonie gained the most since November against the Yen, after the Bank of Japan surprised the markets by increasing the stimulus program by adding 10 trillion Yen to the asset purchase plan. The Canadian Dollar slipped against the Euro earlier in the day as German investor confidence rose to a 10-month high in the month of February.
Today’s economic calendar shows that Japan will publish the BOJ’s monthly report. The E.U. will release data on GDP and Trade Balance. The U.K. will announce Claimant Count Change and will reveal the Average Earnings Index as well as the BOE’s Inflation report. The U.S. will release the New York Empire State Manufacturing Index, Industrial Production and the FOMC’s Meeting Minutes. Australia will issue the Unemployment Rates and Changes in Unemployment. The Bank of England’s Governor is scheduled to speak, and E.U. Finance Ministers will hold a teleconference with Greek leaders.