The U.S. Dollar weakened against the majority of its counterparts as investors remained concerned over the restructuring of the Greek debt and as important data out of the U.S will be released this week. The greenback rose versus the Euro as Greek officials stated that private creditors would have to accept the conditions of the debt-swap deal, as they are the “best they can offer.” Later in the trading day, economic reports revealed that the Institute for Supply Management’s Non-Manufacturing Index climbed to 57.3, which was the highest level in a year, thereby fueling speculation that the Federal Reserve won’t need to implement additional quantitative easing in order to stimulate the economy. Other reports showed that factory orders dropped, though at a slower rate than expected. Figures showed that factory orders slipped by a seasonally adjusted rate of 1.0 percent. The Canadian Dollar declined against the U.S. currency and slipped versus most of its peers after China announced that it had lowered this year’s growth forecast from 8 to 7.5 percent, thereby dampening demand for high-yield assets.
The Euro appreciated as reports revealed an increase in retail sales for the first time in five months; however, the positive news was overshadowed by another release showing that the services sector contracted at a quick rate, and that investor confidence recouped, though not as quickly as expected. In Switzerland, metrics indicated that retail sales rose more than forecast by economists. The British Pound erased gains against the U.S. Dollar following better than anticipated metrics out of the U.S., thereby reducing the likelihood of another bout of stimulus. The Sterling remained low as the markets await March 8th –the date by which private creditors must come to an agreement on the debt-swaps or Greece will face a sovereign debt default. The Pound also traded weak against the Yen after the British Chambers of Commerce reduced the country’s growth forecast and predicted that the Bank of England won’t increase its asset purchase program.
And while the Bank of Japan has struggled to maintain the value of the currency low, the Yen rose against all of its peers on news that China had reduced its growth goals for 2012, spurring demand for safety.
Lastly, the Australian and New Zealand Dollars were also affected by news out of China, and slumped against the U.S. currency. The Aussie Dollar continued to drop versus the greenback in anticipation of the Greece debt-swaps resolution. Data showed the country’s service’s index dipped to 46.7 in February also affected the currency.
EUR/USD- Investors Await March 8th
The Euro slipped to a two-week low against the greenback as market investors worry that Greece may still default if private creditors don’t agree to the terms of the debt-swaps by March 8th. In the meantime, retail sales rose to a seasonally adjusted 0.3 percent, beating previous expectations. But sentiment gravitated towards risk aversion after other news indicated that the services sector contracted for the fifth time in six months.
GBP/USD- Gilts Decline On U.S. Data
U.K. Gilts dropped as U.S. economic reports showed an expansion in the non-manufacturing orders for the month of February, signaling that the economy is recovering and therefore tempering demand for safe havens. Furthermore, the Sterling was weighed down as a business lobby lowered growth projections for 2012 from 0.8 to 0.6 percent; it was also predicted that the Bank of England won’t consider raising interest rates until the end of 2013. Other reports showed that the U.K.’s services index dropped from 56, an 11-month high, to 53.8 in February, thus reducing the demand for the British Pound.
USD/CAD- China Dampens Investor Outlook
The Canadian Dollar declined against most of its most traded counterparts after China reduced its growth forecast for 2012. According to analysts, this will hurt the value of commodities and in turn, the commodity-related currencies such as Canada’s Dollar. Now, investors will focus on this week’s releases as the Bank of Canada will announce its decision on interest rates.
AUD/USD- Weak Data Hurts Aussie Dollar
While investors anticipate the Reserve Bank of Australia will maintain the interest rates unchanged when it meets today, the Aussie Dollar declined as everyone waits for the private creditors to sign off on the terms of the Greek debt swaps. On the data front, an Australian Industry Group revealed that the services index dipped below 50, showing a contraction in the sector. Another release indicated that company operating profits in the country dropped unexpectedly in the last quarter of 2011. And industry figures showed that advertisements for jobs rose 3.3 percent.
Today’s calendar shows that the U.K. will release the Halifax House Price Index. The E.U. will report on GDP. Canada will issue data on the Ivey PMI. And Australia will publish its GDP.