The U.S. Dollar weakened towards the end of last week, giving back early gains following extremely disappointing data on New Home Sales revealing a decline of 1.6 percent. The figures suggest that the U.S. economy has not yet fully recovered. The lackluster metrics for the month of February are consistent with other signs of a modest softening of the country’s housing market. The greenback gained on the back of Chinese growth concerns, but greater than anticipated initial Jobless Claims dampened the currency’s appreciation. And while worries of another QE have died down, it’s likely that this week’s focus will be on risk sentiment. Meanwhile, the markets remained concerned after China and the Euro region reported declines in their manufacturing sectors; this renewed fears over a slow down in global growth. The Canadian Dollar sustained and extended a string of losses as demand for high-risk assets fell, raising appeal for refuge. The Loonie traded at the lowest level this month versus the U.S. monetary unit, suggesting that investors aren’t as confident about the country’s economy.
The Euro gained at the end of last week even though the economic environment in Spain tempered its advance. Data showed that Business Confidence rose in France, while Retail Sales went up in Italy. And despite figures showing a drop in the manufacturing sector, the Euro managed to gain versus the greenback. According to economists, renewed worries over the area’s debt crisis, together with the poor PMI numbers issued last week, will continue to hold investors’ attention. Hope remains over the Euro-zone’s ability to stem the crisis, which analysts believe to be the main reason behind the rally of the Euro versus the greenback. The shared currency received support after Greek Prime Minister, Lucas Papademos, announced that he obtained parliamentary approval for the 130 bn Euro bailout package. The British Pound also strengthened versus the U.S. Dollar after the U.S. Department of Commerce issued worse than expected New Home Sales data. However, the possibility of further quantitative easing by the Bank of England continued to weigh on the Sterling. The Pound gained against most of its peers as data revealed inflation slowed less than expected.
The Yen gained the most this year against all of its counterparts as growth fears boosted demand for safe havens. Japan’s currency advanced against commodity-linked monetary units following private reports revealing that China’s manufacturing sector may contract for a fifth month. The Yen also reached the highest level since August against the greenback as news showed that the country experienced a trade surplus for the month, signaling that the economy is rebounding.
The South Pacific currencies climbed versus the U.S. Dollar as stocks and commodity prices also went up. The Aussie Dollar trimmed some of its losses against the greenback as worries over a slowdown in China eased briefly.
EUR/USD- Euro Gains Despite PMI
The Euro rallied versus the U.S. Dollar on hopes the region may be able to control the debt crisis. This took place despite the troublesome PMI data issued on Thursday. This week market investors will focus on the meeting of Finance Ministers who’ll be addressing the lending capabilities of the permanent bailout fund. Investors also await for German IFO and labor sector news to assess whether the region’s largest economy is also experiencing a slowdown.
GBP/USD- Sterling Stronger On Inflation
It’s likely that news relating to the Euro region’s debt crisis will drive price action this week. However, the British Pound remains weighed down by the likelihood of additional monetary easing. And with the Greek situation under control, it seems that the next crisis may come out of the Iberian Peninsula, especially as the economic environment in Spain has begun to trouble investors and as rumors have it, Portugal may be ready for a bailout. Still, the U.K.’s currency remains an alternate for the Euro should appetite turn towards risk. Meanwhile, the Pound gained against the majority of its peers after reports indicated that inflation slowed less than anticipated in February. In addition, Consumer Prices climbed 3.4 percent from the previous year. The Sterling advanced 0.2 percent.
USD/JPY- Yen Gain Most In 2012
The Yen gained the most this year as concerns over global growth spurred demand for safe havens. The currency traded at the highest since August versus the U.S. Dollar as reports indicated the country experienced a surprising trade surplus. According to Japan’s Finance Ministry, exports surpassed imports by 32.9 billion Yen in the last month.
USD/CAD- Growth Stalls, Loonie Falls
Canada’s currency slipped for a third consecutive week as market participants worry economic growth has slowed down. The Loonie dipped to the lowest price this month versus its American counterpart as confidence waned following releases on Retails Sales and Consumer Confidence Prices which trailed median predictions. On the data front, Canada’s Consumer Price Index climbed 2.6 percent in February; the core rate went up 2.3 percent, the fastest since the end of 2008. Retail Sales advanced 0.5 percent in January.
Today’s economic calendar shows that the Euro region will report on German IFO Business Climate Index, German Current Assessment and Business Expectations. And although there aren’t other economic releases scheduled, the markets will pay close attention as the ECB’s President, Mario Draghi is scheduled to speak; the Federal Reserve Chairman, Ben Bernanke, will deliver as speech and the Bank of Canada’s Governor, Mark Carney will also speak.