The U.S. Dollar declined as the markets expressed optimism over the fact that more banks agreed to the terms of the Greek debt swap. Until now, those in favor of the deal accounted for almost 60 percent of the value of the debt, which is the minimum needed for the agreement to go through. Risk appetite favored currencies like the Euro, especially after the markets showed relief over the fact that the European Central Bank left interest rates unchanged and the region overcame another hurdle in the bailout saga. On the economic front, U.S. Jobless Claims increased to 362,000. And in the month of February, the RBC Consumer Outlook went up to 47.5. Other data revealed that household wealth climbed during the final months of 2011 on higher equity values; and Household Confidence reached the highest level in four years as more Americans believe the country’s economy is on the mend. Meanwhile, Canada joined the ECB and the BOE in their decision to leave the rates unchanged, indicating that the risks “are edging towards inflation” and away from recession. The Canadian Dollar advanced soon after the announcement despite statements from bank officials indicating that current inflation rates would be higher than predicted.
The Euro strengthened the most in two weeks against the U.S. Dollar on speculation that Greece will gather enough support to succeed in its debt restructuring. The shared currency remained strong on optimism that the debt-swap will help stem the crisis in the region. The Euro continued in its upward trend as the ECB announced that it kept the benchmark rate unchanged. Also, President of the ECB, Mario Draghi, issued a statement suggesting that recent data reflects the fact that the Euro-zone’s economy is stabilizing. Nevertheless, the ECB revised the growth forecast yet again. The British Pound also benefitted from risk appetite and rose in tandem with the shared currency against the greenback. However, it slipped against the Euro as investors believe Greece will secure enough support to make the debt-swap a reality. This dampened demand for the Sterling as an alternative to the Euro. Furthermore, the Bank of England left interest rates unchanged and gave no indications of a change in monetary policy.
The Yen was hit hard by a decline in demand for safe havens and by lackluster data which showed that Japan sustained a record deficit in the Current Account.
Lastly, the New Zealand and Australian Dollar gained as stocks rose and as market participants sought high risk assets.
EUR/USD- Greece May Have Enough Support
So far, private creditors holding 60 percent of Greek bonds who are eligible for the country’s debt swap have pledged their support in favor of what’s been called the biggest debt restructuring in history. Key participants include the largest Greek banks and pension funds as well as over 30 European banks including BNP Paribas SA. This helped return risk appetite to the market and boosted the value of the Euro. In addition, Mario Draghi delivered a press conference indicating that the “risk environment has improved,” thereby boosting the Euro. The European Central Bank also announced it would not cut the interest rates or make changes in monetary policy, which in turn fueled risk appetite.
GBP/USD- BOE Leaves Rates Unchanged
The Sterling rose against the U.S. Dollar after it became evident that the Greek debt-swap deal would probably go through. And while the markets paid close attention to what was happening in the Euro-zone, they overlooked the Bank of England’s meeting. However, the BOE gave no indications of changes in monetary policy and left interest rates at 0.5 percent, as most analysts had anticipated. And as risk appetite increased, so did the value of the Pound.
USD/JPY- Current Account At Record Deficit
The Yen plummeted against all of its counterparts after the country reported a deficit in the Current Account. The currency declined to a nine-month low versus the U.S. Dollar after the Ministry of Finance announced that Japan had a Current Account deficit of 437.3 billion Yen ($5.4 billion), making this the largest shortfall since 1985. Other data showed that GDP was revised down to -0.7 percent and Nominal GDP QoQ was revised to -0.5 percent, causing investors to speculate the Bank of Japan may be forced to employ further easing, and this too caused the Yen to dip further down.
USD/CAD- Rates Remain Unchanged Since 1950s
The Bank of Canada announced it’s leaving the costs of borrowing money at 1 percent. Bank officials indicated that easing of global tensions led them to the decision, which in turn caused the Canadian Dollar to rise against its American counterpart. However, bank officials also suggested that the rise in crude oil prices could temper the improvement in the world’s economies, but gave no indications of further changes in the rates.
Today’s economic calendar shows that the E.U. will report on German CPI, German Trade Balance, and French Industrial Production. The U.K. will release data on PPI Output MoM, PPI Input MoM, Manufacturing Production, and Inflation Expectations. Canada will issue the Trade Balance, Employment Changes and the Unemployment Rate. Lastly, the U.S. will announce the Unemployment Rate, Private Nonfarm Payrolls, Non-Farm Payrolls, Average Hourly Earnings, Average Weekly Hours and the Trade Balance. China may report on its Trade Balance.