The U.S. Dollar rallied against the majority of its counterparts on renewed concerns over the Greek debt situation as negotiations between officials and bondholders reached an impasse. Reports from the E.U. revealed that key E.U. finance ministers who met earlier in Brussels wanted creditors to take a smaller percentage of interest on their investments. This disagreement is what apparently brought the talks to a halt. The U.S. currency also benefitted from news that the Standard & Poor’s was considering placing Greece on a “selective default” status even if they manage to obtain an agreement. The greenback slipped for a brief period throughout the trading day as the Euro-zone issued positive data for its manufacturing and service sectors. Meanwhile, the Canadian Dollar weakened against the U.S. currency on growing uncertainty over the restructuring of the Greek debt. The Loonie came under pressure as crude oil, its biggest export, slumped 1.06 percent to $98.61 a barrel on the New York Mercantile Exchange. Canada’s Dollar depreciated further on data indicating that Retail Sales slowed in the month of November, bringing to light the dangers the economy faces as a vast number of consumers are heavily in debt.
The Euro fell against the U.S. Dollar despite the release of better than expected PMI data as Greek debt negotiations stalled out and failed to produce an accord. The currency was weighed down by news that the Standard & Poor’s cut the credit ratings of France’s second and third largest banks: Societe Generale and Credit Agricole SA. In the U.K., figures showed that the budget deficit contracted more than anticipated, thereby causing the Pound Sterling to rise against the majority of its peers while boosting its status as another safe haven currency. Furthermore, the 30-year Gilts outperformed German Bonds following a statement by the Bank of England’s policy maker, Adam Posen, suggesting they’re ready to implement further quantitative easing should inflation and growth data support the need for such action. The Sterling came close to advancing against the U.S. Dollar but gains were dampened by the lack of progress in the Greek debt talks. The Swiss Franc erased some of its prior gains versus the greenback as investor confidence declined due to the weak Euro region industrial data and concerns about the Greek debt.
The Yen declined against the U.S. currency as overnight talks of a possible intervention caused investors to panic and sell off their Yen. The greenback was also benefitted by a high demand for refuge as Greek debt talks reached an impasse. The Bank of Japan issued its forecast for the country’s economy predicting it will contract in the current year, though it opted to keep the current monetary policy unchanged on optimism that the economy will rebound.
Lastly, the Australian Dollar fell from the highest price it’s traded at in 12 weeks in anticipation of today’s economic report which is expected to show that gains in Consumer Prices have cooled off, offering the central bank a reason to cut interest rates. The New Zealand Dollar also declined amid speculations the Reserve Bank of New Zealand will leave the costs of borrowing money at a record low when policy makers meet this week.
EUR/USD- Greek Debt Talks Stall Out
The Euro plummeted versus the U.S. Dollar after the region’s Finance Ministers indicated they would push investors to take bigger losses, and as the talks reached an impasse. The 17-nation currency was also weighed down by reports that the International Monetary Fund predicted the global economies would slow down given the fact that the E.U. is very close to entering into a recession. The Euro’s fall was tempered by economic data revealing that Industrial New Orders dropped, though at a slower pace than expected.
GBP/USD- Budget Deficit Contracts
The British Pound strengthened against the majority of its peers after an economic release revealed that the U.K.’s budget deficit contracted more than expected. Other data showed that the Public Sector Finances fared better; and this too boosted the Pound’s relative “safety status.” Metrics indicated that Net Borrowing excluding any support for financial institutions dropped to 13.7 billion Pounds in December from 15.9 billion Pounds the year before. In light of such positive data, George Osborne, the Chancellor of the Exchequer, affirmed that he would maintain the current spending plan since the nations struggling with debt are having their credit ratings trimmed.
USD/CAD- Loonie Declines
Canada’s Dollar slipped against the U.S. Dollar as equities dropped on reports the Greek debt relief talks stalled out. The Loonie continued to drop as economic data showed that Retail Sales climbed 0.3 percent in November, suggesting slower growth. In addition, Household Debt will be setting new highs according to forecasts by the Canadian Central Bank.
USD/JPY- BOJ Cuts Outlook
Japan’s currency dropped against the majority of its peers after the Bank of Japan reduced its growth forecast for fiscal 2012, indicating the economy may grow at a slower pace. The Yen traded remarkably lower versus the Euro after reports showed that the Euro-region’s manufacturing and service sectors expanded in the first month of the year. Talks of a possible intervention caused the Yen to dip lower against the U.S. currency. Meanwhile, the Bank of Japan left the benchmark interest rate within the range of zero and 0.1 percent.
Today will be busy according to the economic calendar. Out of the E.U. the ECB President is scheduled to deliver an important speech. Furthermore, Spain will report on PPI, Germany will issue Business Expectations, and IFO Business Climate. The U.K. will announce data on GDP, BBA Mortgage Approvals, and will publish the MPC meeting minutes, as well as report on CBI Industrial Trend Orders. The U.S. will issue Pending Home Sales, the FOMC Statement and Interest Rate Decision. Lastly, New Zealand will also delver the Interest Rate Decision.