The U.S. Dollar weakened as investors sought riskier assets. However, the greenback advanced versus the Euro on speculation that E.U. leaders will fail to expand a rescue fund to 1 trillion Euros. On the data front, the Conference Board’s Index of U.S. Consumer Confidence showed an increase from 40.9 t0 56, which was the biggest hike in eight years. Other metrics revealed that residential property prices in 20 U.S. cities dropped more than expected, suggesting that the real estate market continues to struggle. According to bank analysts, property values are forecast to fall even lower through the middle of 2012 as a result of the overabundance of distressed transactions and the oversupply of existing homes. The U.S. monetary unit came under threat when the Fitch Ratings agency announced that it would reduce the U.S. credit outlook to negative if a budget agreement has not been confirmed by 2013. Meanwhile, the Canadian Dollar climbed for a fourth day as risk appetite reigned in the market. The Loonie rose versus its American counterpart on news that American Consumer Confidence had risen the most since 2003.
The Euro was weighed down by speculation that E.U. leaders will fall short of accomplishing the expansion of the rescue fund. In addition, French newspapers reported that the Standard & Poor’s may lower the long-term credit outlook for France, which could happen as early as this Friday. Further speculation indicated that Moody’s Ratings Agency had placed close to 90 European banks on credit alert –a factor that caused a slowdown in market momentum. The Pound Sterling sustained a brief spike soon after the release of U.S. statistics, thereby boosting risk appeal. Analysts expect the Pound to continue trading to the downside after Bank of England Governor, Mervyn King, said that the U.K.’s economy is being “increasingly threatened” by the Euro-zone’s debt turmoil. Governor King went on to advise lawmakers to prepare for shocks that may be spurred by the E.U.
The Dollar dipped against the Yen as market participants continued to ponder about the Euro region’s crisis and the possibility of another intervention by Japan’s officials. The Yen reached higher prices after the release of U.S. data on Consumer Confidence.
Lastly, the Australian and New Zealand Dollars both rose to their highest levels in one week against the greenback, as a hike in U.S. Consumer Confidence gave way to demand for high-yield assets. The Aussie traded above parity with the U.S. Dollar following a rally in global stocks. The currency dipped after the government announced its intentions to cut spending by $6.8 billion in order to create a surplus, thereby adding pressure on the Reserve Bank to lower the costs of borrowing money.
EUR/USD- Debt Crisis Enters Final Stage
According to economic observers, the Euro region’s debt crisis may be entering the endgame. Speculation that E.U. leaders will fall short in trying to expand the rescue fund caused the Euro to fall versus the U.S. currency. The currency managed to pare earlier advances versus the greenback following reports that the ECB failed in its attempt to offset additional liquidity resulting from the bond-purchasing program. In the meantime, regional Finance Ministers met yesterday as investors await an update; especially since Italy’s unsustainable borrowing costs were a high priority topic for the meeting.
GBP/USD- Pound Rises Versus Dollar
Britain’s Pound traded high against the U.S. currency following the release of U.S. Consumer Confidence. Despite comments by Chancellor of the Exchequer, George Osborne, indicating that the country’s growth will be slower this and next year, the Sterling continued to strengthen. He went on to say that the U.K. may require that the government will borrow more and adhere to stricter austerity measures to extend the spending cuts. However, Bank of England Governor, Mervyn King, warned lawmakers of the backlash effects the E.U. crisis may cause. The British Pound also rallied versus the Euro as the ECB failed to offset the liquidity created by their bond purchases.
USD/CAD- Loonie Advances On Confidence
The Canadian Dollar increased as the U.S. Consumer Confidence rose the most since 2003, thereby fueling demand for high-yield assets. The Loonie trimmed its monthly losses versus the greenback on reports indicating the nation’s third quarter current account shrank as exports rebounded. According to analysts, Canada saw an improvement in its measure of trade, thereby indicating that the currency still depends on capital inflows.
AUD/USD- The Most Traded Currency
The Australian Dollar traded at the highest price as data on American Consumer Confidence fueled demand for high-yield assets. According to market analysts, the Aussie was the most traded of the major currencies and the best performer versus the greenback during yesterday’s trading session. In addition, it climbed 2 percent as equities rose worldwide.
Today’s calendar shows that the Euro region will report on Unemployment. The U.S. will release data on MBA Mortgage Applications, Chicago PMI, Pending Home Sales, the Beige Book and ADP Nonfarm Employment Changes. Canada will issue IPPI and GDP figures. Lastly, Australia will release metrics on Retail Sales and Building Approvals.