The U.S. Dollar declined as risk appetite continued to dominate market sentiment, especially after the French Finance Minister, Francois Baroin, indicated that negotiations between Greek officials and private creditors were progressing. Furthermore, reports out of Germany revealed that 2.54 billion Euros worth of 12-month bills were sold at auction and yields dropped to an average of 0.07 percent. Investors await the first FOMC meeting of the year this Wednesday during which the Federal Reserve will announce its outlook for 2012. In the meantime, Canada’s Dollar rose versus the U.S. currency as crude oil, its biggest export, went up in price. The Loonie climbed further as the E.U. agreed to ban the import of crude oil from Iran.
The Euro came close to a three-week high against the U.S. Dollar amid optimism that Greek debt talks will produce positive results. The currency strengthened against the majority of its peers as the European Union’s Finance Ministers gathered in Brussels to address a number of topics including the new budget rules, building a firewall for the nations in debt and the Greek debt talks. The shared currency gained further on news that the German bond auction was a success. The British Pound declined against the U.S. Dollar as a release showed that company profit alerts climbed in the last quarter, suggesting that momentum in the U.K.’s economy has died down. The Sterling fell against most of its counterparts on speculation that the Bank of England’s Minutes, which are scheduled to be published this week, will reveal an agreement among key policy makers towards further quantitative easing. The Pound erased earlier gains attained while optimism buoyed risk appetite on rumors that Greek officials were close to an agreement on the debt crisis.
The Japanese currency traded mixed as the government assumed that Greek talks had broken down, while investors believed that they were close to an accord. The Yen traded higher than the U.S. Dollar; however, some analysts believe the market is waiting to see if the meeting of Finance Ministers will help stem the debt crisis and whether the new austerity plans will set investors at ease.
Lastly, the South Pacific monetary units rallied versus the greenback on optimism that the meeting of key E.U. Finance Ministers will help control the debt crisis. The Australian and New Zealand Dollars continued to increase in anticipation of a U.S. report which is expected to reveal that the country’s economy is growing at an accelerated pace.
EUR/USD- Greek Debt Optimism Reigns
The Euro strengthened beyond the $1.3000 level against the greenback as the market felt optimistic over the Greek debt negotiations. If an accord is reached, the private sector will shoulder between a 65% and 70% haircut in order to help restructure the debt. E.U. Finance Ministers will also discuss the terms for another bailout for the Greek nation. On the economic front, reports indicated that Consumer Confidence rose slightly; however, Business Confidence in France declined from 96 to 91 and the French Production outlook indicator dipped to -37.
GBP/USD- Corporate Profit Warnings Rose
The British Pound slipped versus the U.S. Dollar after an Industry Survey revealed that Corporate Profit Alerts increased by more than 70 percent in the last quarter. The Sterling fell against the majority of its peers on rumors the Bank of England will go ahead with further asset purchasing. The British currency also weakened versus the Euro as French Finance Minister Baroin stated that the Greek debt talks were showing “tangible progress.” According to analysts, the Profit Alerts may continue to rise if the E.U. doesn’t come up with a solution for the debt crisis and if China’s growth slows down.
USD/CAD- Crude Oil Makes Gains
Canada’s Dollar rose versus the U.S. currency as crude oil for March delivery climbed to $99.89 a barrel. The E.U. agreed to ban oil imports from Iran, prompting speculations the Islamic Republic may retaliate by interrupting supplies from the Middle East. The Loonie continued to rally as the Leading Economic Indicators advanced to 0.8 percent in December.
AUD/USD- Currency Reaches 12-Wk High
The Australian Dollar traded at a 12-week high versus the greenback prior to the release of reports out of the U.S. expected to show that economic growth has improved; this of course prompted higher demand for high yield assets. The currency benefitted further from optimism over the meeting between E.U. Finance Ministers. And on the data front, the Producer Price Index climbed 0.3 percent suggesting that cheaper agricultural costs helped offset the hike in industrial machinery prices.
Today’s economic calendar shows that the Bank of Japan will hold a press conference. The E.U. will report on Manufacturing PMI, Services PMI and Industrial New Orders. Canada will release data on Retail Sales and Core Retail Sales. The Governor of the Bank of England will deliver a speech. Japan will issue Trade Balance figures. And lastly, Australia will publish the Trimmed Mean CPI and CPI.