The U.S. Dollar advanced against the majority of its peers as demand for safe havens intensified on concerns over the outlook of global growth following the release of data revealing a drop in China’s exports. The Dollar Index, which tracks how well the U.S. Dollar is doing against a basket of major currencies, rose 0.33%. The greenback was also supported by comments from St. Louis Fed President James Bullard who stated that growth in the U.S. would gain momentum in the second part of this year despite what recent reports have shown. Yesterday’s calendar was light but releases confirmed that NFIB Small Business Confidence dropped to 91.4, which was more than forecast, while IBD/TIPP Business Optimism went up in July. The Canadian Dollar declined against the greenback after stocks erased prior day gains. But the Loonie rose versus the 17-nation currency as an agreement recently hammered out by E.U. Finance Ministers designed to help Spain’s troubled banks failed to dispel worries that the Euro-zone’s crisis is dampening growth.

The Euro plummeted once again to a two-year low versus the U.S. Dollar and fell against the rest of its counterparts as market investors sold off the Euro to fund the purchase of higher-yielding assets. The shared currency fell dramatically despite the agreement reached between E.U. Finance Ministers during the Brussels meeting. According to reports, they agreed to make 30 billion Euros available to Spanish banks through the region’s bailout fund rather than involve the governments while creating more debt. The Euro remained under pressure even though peripheral bond yield spreads declined. The currency dipped even lower as Portugal indicated that further measures are needed to meet fiscal goals. For now, the markets await a German Court decision on whether the E.U. bailout fund is compatible with national law. The British Pound traded at the highest level in 3 ½ years versus the Euro following a release showing a remarkable surge in U.K. Manufacturing activity. But the Sterling weakened against the U.S. Dollar after BOE Governor Mervyn King stated the country hasn’t yet shown signs that it’s coming out of a recession.

The Yen climbed versus the U.S. Dollar and the Euro on economic data revealing China’s Trade growth has slowed down. According to the Customs Bureau, shipments abroad fell in the month of June, sparking concerns over global growth and the management of the Euro-zone’s crisis. Investors are anxiously awaiting the Bank of Japan’s decision on whether they’ll implement further monetary easing.

Lastly, in the South Pacific, Australia’s Dollar slipped to a one-week low after China reported its imports increased less than expected. The New Zealand Dollar fell against 15 of its most traded peers following a drop in Asian stocks.

EUR/USD- Euro Slides Despite Consensus

The Euro declined even as the regional leaders laid the groundwork for possible purchases in secondary bond markets while agreeing on measures to aid Spain’s troubled banks. According to the latest reports, the Euro-zone’s Finance Ministers came to a consensus on how the Euro Bailout Fund will intervene in the bond markets, and agreed to make the first 30 billion Euros available for Spain’s banks at the end of July. The Euro region’s Ministers warned Spain’s Prime Minister, Mariano Rajoy, that his government has until 2014 to bring down the budget deficit below 3 percent of GDP. On the data front, French Industrial Production and Manufacturing took center stage. France’s Industrial Production fell -3.5% in May, while Italy’s Industrial Production slipped, though at a slower rate of -6.7%, suggesting the country is recovering from the recession. In addition, French metrics showed that Manufacturing slowed down by -4.3% rather than the anticipated -2.3%. The shared currency dipped to the lowest price on record against the Australian Dollar five days after the ECB cut the costs of borrowing money. The Euro traded once again at a two-year low versus the greenback as investors sold off Euros in order to buy high-yield assets.

GBP/USD- Manufacturing Surged In May

The British Pound declined against the U.S. Dollar after Central Bank Governor Mervyn King issued a statement indicating that the U.K. hasn’t shown any signs of economic recovery. However, the Sterling traded at the highest price in over 3 years versus the Euro as the Office For National Statistics reported that Manufacturing Production climbed 1.2 % in May surpassing the expected 0.1% hike. The report also revealed that Industrial Production advanced 1.0 % after economists anticipated a drop. In another release, data confirmed that the Trade deficit contracted more than forecast in May, given the increase in exports. Figures revealed the deficit narrowed to -8363 m instead of the predicted 9100 m.

USD/JPY- Chinese Data Affects Yen

The Yen advanced after an economic report showed that China’s exports declined from 15.23% to 11.6%, thereby fueling fears that the country’s economy has slowed down. Despite the fact that bond markets steadied in the Euro region, sentiment remained fragile. This benefitted refuge currencies like the Yen which also gained as data revealed an increase in the Money Supply, a factor that suggests the Bank of Japan may hold off from implementing further quantitative easing. Another release indicated that the Money Stock M3 gained one basis point to 2.0% and Consumer Confidence fell slightly to 40.4 in June.

USD/CAD- Stocks Erased Gains

The Canadian Dollar weakened against the U.S. currency after stocks reversed gains; this took place despite reports which showed the country’s Housing Starts increased in June. According to official data, Housing Starts posted at a seasonally adjusted 222,700 even though analysts predicted a reading of 205,000. Economists believe that all the changes in mortgage rules implemented by Finance Minister Jim Flaherty are a threat to the six-year economic expansion the country has experienced.

Today’s Outlook

Today’s economic calendar shows that the E.U. will report on German CPI. The U.S. will release the FOMC Meeting Minutes and data on Trade Balance. Canada will issue the Trade Balance. Australia will publish the Unemployment Rate as well as Changes in Employment. And Japan may release the Interest Rate Decision though this hasn’t been confirmed.

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