The U.S. Dollar maintained its downward trend after a Euro-region’s bond auction produced better than expected results. Spain sold more than its maximum target, thereby fueling optimism over the possibility that the debt crisis may be coming under control. France also sold bonds which demonstrated that demand increased while yields dropped. In addition, Greece went into a second day of negotiations with private bankers in hopes of reaching an agreement to restructure its debt. The U.S. currency dropped against the majority of its peers as the outlook for interest rates prompted investors to choose high yield assets. On the data front, U.S. Consumer Price Index saw little change; fewer Americans than predicted filed Unemployment Claims last week, and Housing Starts fell 4.1 percent to a 657,000 annual rate in December. The New Jobless Claims dropped to 325,000, causing economists to believe that if they continue to decline, the unemployment rate will also fall. The main CPI slipped more than forecast to 3.0 percent. Meanwhile, the Canadian Dollar remained almost at the same price versus the U.S. currency, as a drop in the price of crude oil offset a hike in equities. The Loonie weakened against the Euro on speculation the currency may have become overvalued.
The Euro continued to rally against the U.S. Dollar subsequent to reports indicating that France sold 7.49 bn in bonds maturing in 2014, 2015 and 2016. According to analysts, this outcome suggests investors were not affected by France’s credit downgrade. Spain also recorded excellent results from its bond auction selling 6.61 bn of 2016, 2019 and 2022 bills. The British Pound strengthened as risk appetite took over market sentiment after better than forecast bond auctions in the Euro region. The new investor sentiment was also the result of renewed optimism that the Greek government may reach an accord with creditors to help the country repay its debts. But the recent negative unemployment data out of the U.K. offset some of those hopes, and capped gains for the Sterling. Because of the lackluster data, including lower than forecast Industrial Production, analysts are speculating that the Bank of England will implement further stimuli in order to boost economic growth. The Swiss Franc gained against the Euro on predictions the Swiss National Bank will not raise the ceiling imposed by former President Philipp Hildebrand.
The Japanese Yen dropped rather quickly after risk sentiment dominated again on a brighter prospectus for the European debt crisis. Better than predicted Jobless Claims data out of the U.S. also helped improve global risk sentiment.
Lastly, the Australian Dollar slumped against all of its counterparts except for the Yen and the New Zealand Dollar after reports from the Statistics Bureau indicated that the unemployment figures rose; this took place because 29,300 workers lost their jobs in December. The New Zealand Dollar declined after Consumer Prices dipped in the fourth quarter.
EUR/USD- Euro Trades At Highest Level In 2 Weeks
The Euro traded at a two-week high against the greenback and the Yen as Spain reported having sold more than its target in bills at a recent debt auction. The Euro continued to rally to the upside as Greece entered into its second day of talks with private creditors. On the data front, the Current Account deficit for the region contracted to -1.8 billion Euros in November.
GBP/USD- Pound Climbs On Global Risk Appetite
The Sterling rose as risk appetite increased due to the stellar bond auction news out of the Euro region and better than anticipated U.S. economic releases. Meanwhile, investors anticipate the Bank of England may introduce further quantitative easing because of the dramatic climb in the unemployment rate which reached a 17-year high, and the latest Industrial Production figures. However, this remains to be seen as the 4th quarter GDP is scheduled to be announced at the end of January; according to analysts, this may determine the bank’s next moves. The British Pound remained strong versus the greenback after a string of positive economic data.
USD/JPY- Yen Declines On Euro-Zone News
The Japanese Yen declined on renewed hopes the Euro region’s debt crisis may be under control after Spain and France reported excellent bond auction sales. Strategists believe that the Yen may have also been weighed on by the possibility of another intervention as the Finance Minister, Jun Azumi, mentioned they were keeping an eye on the currency in the event it appreciated beyond its current value. On the data front, Condominium Sales rose to 8.4 percent. It had risen 31.0 percent in the previous month.
USD/CAD- U.S. Dollar Close To One-Month Low
The U.S. Dollar inched close to a one-month low versus the Loonie as a drop in U.S. Jobless claims and positive bond sales out of the Euro-zone fueled risk appetite. The U.S. Dollar’s weakness also prompted crude oil prices to advance to $101.53 a barrel, causing Canada’s Dollar to find its support level.
Today’s economic calendar indicates that the Euro region will report on German PPI. The U.S. will announce Existing Homes Sales. The U.K. will issue data on Retail Sales. And Canada will publish metrics on CPI and Core CPI as well as Wholesale Sales.