The U.S. Dollar gained against the Euro and the Yen after Federal Reserve Chairman, Ben Bernanke, commented on the state of the economy, thereby reducing speculation that the central bank will implement additional monetary stimulus. Chairman Bernanke stated that despite the positive signs of recovery from the labor sector, there is still a long road ahead to healing the economy. He also suggested that future data would help decide whether the country is truly on a path to recovery while the central bank is poised to adjust the balance sheet in order to ensure the country receives the assistance it may require. The U.S. currency rallied higher as reports showed the European Central Bank loaned a record-high amount of money in the form of three-year loans; these funds awarded to 800 of the region’s banks are aimed at improving liquidity in the financial system. The Canadian Dollar traded at the highest level in over five months versus the greenback after the European Central Bank awarded a record 529.5 Billion Euros to regional banks in order to avert a credit crunch. The Loonie rose against all of its peers after portfolio managers sold off the U.S. Dollar in order to balance their holdings. The Swiss Franc slipped against the U.S. Dollar despite positive data showing that the country’s economic barometer improved during the second month of 2012. The British Pound advanced against the U.S. Dollar on metrics showing consumer confidence reached the highest level since June while mortgage approvals increased. The Sterling touched the highest price in four months versus the Euro following news that the European Central Bank loaned a record amount of money to European banks, thereby fueling speculation that earnings in the financial sector will benefit the U.K.’s economy.
The U.S. Dollar traded higher against the Yen as preliminary releases indicated that industrial production climbed more than anticipated. And in the South Pacific, Australian retail sales rose 0.3 percent in January, falling in line with expectations, but construction work fell more than forecast in the fourth quarter. In New Zealand, business confidence and building consents rose more than predicted.
EUR/USD- ECB Makes Record Loans
The Euro weakened against the U.S. Dollar as the European Central Bank awarded 529.5 Billion Euros in three-year loans to help boost liquidity. The currency remained weak despite news that Finland gave its approval for the Greek bailout package one day after Germany endorsed it. On the data front metrics revealed that consumer price inflation eased somewhat in the Euro region and rose by a seasonally adjusted 2.6 percent rather than the predicted 2.7 percent. The 17-nation currency remained at the same price even after the U.S. announced its economy grew at a faster pace than estimated in the last quarter of 2011.
GBP/USD- U.K. Confidence On The Rise
The British Pound continued on a second day rally versus the U.S. Dollar following reports indicating that confidence in the U.K. remained at the highest level since June. The index of consumer sentiment stayed at -29. Other economic data showed that mortgage approvals rose to a two-year high in the first month of 2012, with lenders granting 58,728 loans to people buying homes. Government bonds declined after the Bank of England’s Deputy Director, Paul Tucker, indicated that the bank’s officials ought to withdraw stimulus efforts once the country’s economy gets stronger.
USD/CAD- Loonie Climbs To 5-Month High
The Canadian Dollar rose to a five-month high against the greenback after demand for high-risk assets increased in the market as a result of the ECB loan operation. The Loonie was also supported by reports from the U.S. Commerce Department which indicated that GDP increased at a seasonally adjusted rate of 3.0 during the last quarter of 2011.The report revealed that the upward correction came about mainly because of consumer spending and construction data. Canada’s Dollar also strengthened against the Euro, and traded at a six-month high versus the Yen on reports that the ECB had loaned 529.5 Billion Euros to regional banks.
AUD/USD- Aussie Gains On ECB Operation
The Australian Dollar rose against the U.S. currency early in the day in anticipation of the ECB loan operation which improved risk appetite in the market. The Aussie rallied higher as reports showed that retail sales increased 0.3 percent in January. However, other news indicated that construction declined 4.6 percent when economists had expected a 0.8 drop; and credit in the private sector increased less than forecast. These metrics were issued after the Housing Industry Association announced that new home sales dropped 7.3 percent in the first month of 2012.
Today’s calendar shows that Switzerland will report on GDP and SVME PMI. The U.K. will announce the Nationwide HPI and Manufacturing PMI. The Euro region will release data on Manufacturing PMI, CPI and the Unemployment Rate. The U.S. will issue Initial and Continuing Jobless Claims, as well as Personal Spending and the ISM Manufacturing Index. Canada will publish the Current Account. Lastly, Japan will report on its Unemployment Rate and Tokyo Core CPI.