The U.S. Dollar declined against most of its peers following economic reports indicating that global manufacturing improved. Some investors see this as a sign that world economies are on the mend. Data showed that the U.S. manufacturing sector expanded at a moderate pace and according to the Institute for Supply Management, the Factory Index dropped to 52.4 from 54.1 during the month of February. Other news revealed that applications for unemployment benefits went down to 351,000 during the week that concluded on February 25th. And separate releases suggested that the core personal consumption expenditure index climbed as anticipated, while personal spending and income rose less than forecast. The Canadian Dollar strengthened as crude oil for April delivery rose to $107.90 a barrel. The Canadian currency traded at the highest price in five months versus the greenback on speculation that demand for raw materials will go up as global economies expand. The Loonie continued to rally to the upside after data from the U.S. indicated that jobless claims dipped to the lowest levels since 2008. Further data revealed that Canada’s current account deficit contracted during the fourth quarter of last year.
In the Euro-zone, sentiment towards the 17-nation currency remained fragile as investors continue to speculate on whether the ECB’s liquidity injection plan would actually help stem the credit crunch. The outlook for the Euro region dimmed as data showed that unemployment reached the highest level since the creation of the Euro and as the annualized rate of inflation increased. The Swiss Franc dipped slightly against the U.S. Dollar after a release indicated that the Swiss economy expanded at annualized rate of 1.3 percent in the last portion of 2011, and as the manufacturing sector improved in February despite the fact that the numbers stayed within the range of contraction for the fifth month in a row. The British Pound rose against the U.S. Dollar following news that the manufacturing sector grew in February, albeit at a lower rate than economists had predicted. Nevertheless, it fueled hopes that the U.K.’s economy will grow during the first quarter of this year.
The Yen traded higher against the U.S. currency on fears that the credit crunch will persevere despite the ECB initiative. This in turn caused market investors to seek refuge. Early day reports revealed that capital spending for the fourth quarter increased the most in five years, signaling a recovery of the Japanese economy.
Lastly, the South Pacific currencies advanced against most of their counterparts after China reported growth in the nation’s manufacturing sector, thereby boosting the outlook for Australian and New Zealand exports. The rise of the Aussie Dollar was dampened by news that national building approvals increased less than expected while business investments slipped during the fourth quarter. In New Zealand, the trade index, which accounts for the relationship between export and import prices, fell 1.4 percent thereby dampening demand for the Kiwi.
EUR/USD- Unemployment Higher Than Ever
The Euro declined against the U.S. Dollar after economic data showed that jobless claims in the U.S. dipped to the lowest level in four years. The Euro continued to weaken versus the greenback after the International Swaps and Derivatives Association announced that “no credit event” resulted from Greece’s efforts to restructure its debt. Other reports showed that manufacturing in the Euro region contracted again for a seventh consecutive month. The Euro also dipped against the Pound and the Yen. The Euro erased some of its losses and inched higher against the U.S. currency after the ISDA indicated that the restructuring of the Greek debt wouldn’t prompt payouts of derivative assets.
GBP/USD- Manufacturing Expanded In The U.K.
The British Pound rose against the U.S. Dollar after a slew of positive economic reports out of the U.S. fueled risk appetite; especially after Fed chairman Ben Bernanke reduced expectations for additional quantitative easing. The Sterling was also supported by data confirming that manufacturing expanded in the U.K. and home prices rose more than expected. Meanwhile, Bank of England’s official, Martin Weale, issued a statement indicating that the country’s inflation may persist despite the fact that it slowed to 3.6 percent in February. This lessened the possibility for further stimulus once the current program of bond purchases comes to a conclusion.
USD/CAD- Global Expansion Benefits Loonie
Canada’s Dollar extended gains against the U.S. currency on optimism the expansion of the global economies will fuel demand for raw materials. The Loonie pared gains for a brief span as an index of U.S. Manufacturing showed an unexpected drop last month. Meanwhile, crude oil climbed to a 10-month high as the U.S. pressured Iran to discontinue work on its nuclear program or face an attack, raising speculations supplies may decline. The Loonie remained strong on reports showing that the current account deficit dropped to $10.5 billion, according to Statistics Canada. The Canadian monetary unit gained against the Euro after the E.U.’s Finance Ministers agreed to authorize a bailout fund to raise money for Greece’s bond swap.
AUD/USD- China Fuels Optimism in South Pacific
News that China’s manufacturing sector had expanded in February prompted gains for the currencies of the South Pacific including the Australian Dollar. China’s purchasing manager’s index climbed to from 50.5 to 51.0 and since China is Australia’s main trade partner, it boosted the appeal of the currency. But the Aussie Dollar pared gains against the Yen and the greenback on reports showing that the permits issued to build or renovate homes, buildings and apartments only rose 0.9 percent in the month of January.
Today’s economic calendar shows that the U.K. will report on the Halifax House Price Index and Construction PMI. Canada will issue data on its GDP. And the E.U. will announce PPI (MoM).