The U.S. Dollar weakened against the majority of its peers on speculation that the Greek Prime Minister, Lucas Papademos, may not reach an agreement with party leaders to implement the austerity measures required by international creditors to obtain the 130 bn Euro aid package. The greenback recovered later in the day on rumors that the agreement may get pushed through after all. On the data front, MBA Mortgage Applications increased by 7.5 percent. A key member of the Federal Reserve commented on the unsustainability of the U.S. debt and suggested selling assets as opposed to introducing further quantitative easing. The Canadian Dollar declined against its American counterpart after investor optimism ebbed on the likelihood that Greek officials would not reach a consensus needed to guarantee the next bailout package. The Loonie erased some of those losses as Greece released a draft reflecting drastic budget cuts.
The Euro gained versus the U.S. currency on hopes that Greece will conclude debt-swap talks on a positive note –a belief that dampened risk appetite in the markets. The shared currency pared most of its gains versus the greenback after reports indicated there was no accord on the austerity measures; in addition, the European Central Bank announced that it was still undecided on whether or not it would contribute to the Greek bailout package. The Sterling traded weak despite an optimistic sentiment which helped drive risk appetite. But high-risk assets took a hit during the American session as it became clear that Greek officials had failed to agree on the necessary measures required to secure the next bailout package of 130 bn Euros. The Pound also traded lower than the Euro in anticipation of today’s announcement by the Bank of England. Investors are anxiously waiting to see if the central bank will increase its asset purchases and inject more currency into the market.
The Yen declined against most of its counterparts while risk appetite remained high on hopes that a resolution to the debt crisis may finally be reached. However, the Japanese currency gained as the day advanced, and risk aversion begun to take over market sentiment. The currency was later weighed on by reports that the Current Account Surplus declined to a 15-year low.
EUR/USD- Greek Debt Crisis Far From Over
The Euro fluctuated against the greenback on forecasts that Greek Prime Minister Papademos and party leaders won’t agree on the terms set by international creditors as a requirement to receiving the next bailout package. The Euro rose on optimism that the renewed debt-swap talks would produce positive results. On the economic front, Germany’s Trade Balance declined to 12.9 bn Euros and German Current Account came in with a surplus of 19.3 bns Euros. German exports dropped -4.3 percent and imports fell by -3.9 percent.
GBP/USD- Investors Sell Off Sterling
The Sterling declined against the U.S. currency after risk appetite tapered off on signs Greek leaders had failed to reach an accord on the stringent austerity measures required to obtain the next aid package. According to market reports, investors sold the Pound in anticipation of today’s Bank of England’s decision regarding quantitative easing. A majority of economists believe the central bank may implement further stimuli despite the recent positive data and growth prospects.
USD/JPY- Current Account Surplus Down
The Yen advanced against most of its peers after investors embraced safe havens following reports suggesting Greek officials encountered further obstacles for reaching a deal. However, economic data weighed on the currency as metrics revealed Trade Balance dipped to -145.8 bn Yen, and Current Account Surplus contracted 44 percent, reaching the lowest level in 15 years. According to economists, this is a troubling figure, since the decline in exports and higher energy bills are managing to erode the Current Account Surplus, lessening the refuge appeal of the Japanese currency.
USD/CAD- Loonie Pares Early Losses
The Canadian Dollar declined versus the greenback while investors awaited an announcement from Greek officials on an agreement needed to secure the second bailout package of 130 bn Euros. The currency trimmed earlier losses as Greece presented an outline for stringent spending cuts, and it pared losses after crude oil, its biggest export rose to $99.02 a barrel. The Loonie dropped to the lowest level since 1997 against the Aussie Dollar following a hike in commodity prices prompted by optimism Greek leaders will reach an accord on the measures required by creditors.
Today’s calendar shows that the E.U. will report on Interest Rates, while the ECB is scheduled to hold a press conference. The U.K. will publish the Interest Rate decision, Trade Balance, Manufacturing and Industrial Production. The U.S. will announce Initial and Continuing Jobless Claims. Australia will release the RBA’s Monetary Policy Statement. China may issue Trade Balance data.