The U.S. Dollar dipped against the majority of its peers as risk appetite dominated sentiment following reports that Greek officials and private creditors may be working on the final draft of an agreement to implement budget and structural measures that will ensure the next aid package. In a statement to the Senate Budget Committee, Federal Reserve Chairman Ben Bernanke emphasized that the job sector is still struggling and called for a reduction in the long-term budget deficit. Furthermore, Mr. Bernanke reiterated his belief that benchmark interest rate will more than likely remain close to zero until 2014, while suggesting the U.S. economy is “vulnerable to shocks.” The Canadian dollar traded mixed versus the U.S. currency as news about the Greek negotiations buoyed optimism; however, the positive mood was somewhat dampened by a statement from German Chancellor Angela Merkel suggesting the Euro-zone’s debt crisis “won’t be solved overnight.” The Loonie continued to depreciate as the Euro gained against its counterparts; this took place as equities erased losses following news that Greece may be close to finalizing an agreement.
The Euro rose versus the U.S. Dollar as the Euro-group’s President, Jean-Claude Juncker, said he was positive that Greece would remain part of the Euro-zone if it follows through in fulfilling its obligations toward the other member nations. The Euro rallied to an eight-week high versus the greenback on reports indicating Greek officials and creditors are meeting to work on the final draft of the agreement. Also, Greek Prime Minister Lucas Papademos confirmed that he had scheduled a meeting with the International Monetary Fund, the European Central Bank and the European Commission. The shared currency capped its gains after an announcement that the meeting had been postponed until this morning. The Euro was weighed down by forecasts issued by the IMF stating that China’s economic expansion may be reduced to one half as a result of the Euro region’s debt crisis. According to analysts, a Chinese crisis would warrant implementation of stimulus. The British Pound trimmed losses against the U.S. monetary unit as investors embraced risk in light of a breakthrough in the Greek negotiations. The greenback traded high against the Swiss Franc in anticipation of a consensus that would ensure Greece receives the second aid payment. The Swiss National Bank announced that its reserves dropped to 227.2 billion Francs in January.
In Japan, a release showed that the nation conducted a serious intervention in the early part of November of last year, when the currency traded at post-World War II highs versus the American Dollar. After publication of the intervention, Finance Minister Jun Azumi said they won’t rule out the possibility of another intervention to stem the appreciation of the Yen.
And to investors’ surprise, the Reserve Bank of Australia left the interest rates unchanged at 4.25 percent, thereby causing the Aussie Dollar to rally to a six-month high versus the greenback. The Australian currency rallied further against the majority of its peers after the bank’s Governor, Glenn Stevens, commented that market sentiment has improved since the end of 2011. The New Zealand Dollar gained against the Yen on news that Greece was working on the final draft of an agreement with its creditors.
EUR/USD- Final Draft In The Works
The Euro extended gains against the U.S. currency on the back of renewed optimism that an agreement for a second bailout package for Greece may become a reality. The shared currency was weighed on by economic data revealing that German Industrial output fell by 2.9 percent in the last month of 2011, which was disappointing news for investors.
GBP/USD- Pound Trims Losses
The British Pound trimmed losses versus the U.S. Dollar as investors turned toward risk assets on hopes that Greece will reach an agreement that will guarantee it receives the second aid package. The Sterling rallied further on news that officials were finalizing a draft for a bailout agreement before a meeting between Greek Prime Minister Papademos and the coalition leaders. The meeting was canceled later on and postponed for this morning. On the data front, the British Retail Consortium revealed that Retail Sales dropped 0.3 percent in January as shoppers limited their spending following heavy buying in December.
USD/CAD- New Hopes Boost Loonie
The U.S. Dollar erased gains against the Canadian currency as risk appetite was boosted by renewed hopes Greek officials will work to finalize the draft on a consensus for a second bailout payment. On the data front, Statistics Canada reported that Building Permits rose 11.1 percent, indicating the largest jump since 2007. The currency fluctuated as leaders grappled over the terms of the bailout and Prime Minister, Lucas Papademos changed the time of the meeting with leaders of the IMF, ECB and the European Commission.
AUD/USD- RBA Leaves Rates At 4.25%
The Reserve Bank of Australia announced it would leave the benchmark interest rate at 4.25 percent and suggested that the global economies will strengthen. This prompted the Aussie Dollar to increase in value and trade at the highest in six months versus the greenback. But it’s important to note that the bank left the door open to the possibility of further monetary easing if the domestic economy slows down. The Aussie Dollar also traded higher than the Euro as news of a possible Geek accord buoyed risk sentiment.
Today’s economic calendar shows that Switzerland will report on the Unemployment Rate. Canada will issue data on Housing Starts. New Zealand will release the Unemployment Rate and Changes in Employment. The E.U. will publish German Trade Balance. The U.S. will hold a ten-year Note auction. And lastly, China will deliver news on PPI and CPI.