Daily Report: EUR/USD, GBP/USD, USD/CAD and AUD/CAD
iFOREX | Jan 05, 2012 07:39AM ET
The U.S. Dollar strengthened against the majority of its peers as the Euro-zone debt crisis caused investors to seek safe havens. The greenback rose against the Euro
The U.S. Dollar strengthened against the majority of its peers as the Euro-zone debt crisis caused investors to seek safe havens. The greenback rose against the Euro after regional banks made record high deposits into the ECB, indicating that they’d rather lose money than profit from loaning to each other. On the data front, official reports showed that U.S. Factory Orders increased for the first time in three months. Other news revealed that Americans took advantage of holiday sales and spent 4.5 percent more during the month of December. The Canadian Dollar dropped from the highest price it’s traded at in close to a month against the greenback as concerns over the European banking sector dampened demand for high-risk assets. The Loonie continued to drop as crude oil declined; and it rose versus the Euro as a German auction resulted in low demand for 10-year bonds.
The Euro fell against the U.S. currency as market traders continue to worry about the state of the E.U.’s banking sector. This occurred after Italy’s largest bank UniCredit (UCG) announced a 43 percent discount on the sale of its shares in order to strengthen its financial standing. This and the fact that the region’s banks made record overnight deposits into the ECB caused a bearish sentiment to prevail throughout the trading day. Furthermore, speculation that the Spanish Prime Minister, Mariano Rajoy, may apply for loans from the ECB and the IMF weighed on the 17-nation currency as well. The British Pound climbed to a 15-month high versus the Euro as the costs of insuring Spanish bonds in the event of a default went up, thereby suggesting the debt crisis is worsening. However, the Sterling weakened against the U.S. Dollar as a cluster of negative Euro region news affected price action in the markets and diminished demand for high-yield assets. The U.S. Dollar gained versus the Swiss Franc after a German auction of government debt revealed a decline in demand. The auction took place after a release showed that activity in the European service sector contracted for the fourth month in a row.
The Yen rose against the greenback on jitters over the Euro-zone’s financial troubles which boosted demand for refuge. The currency will continue to remain under pressure for as long as the crisis in the Euro-zone remains unchanged, thereby increasing the possibility of another intervention.
Lastly, the Australian Dollar traded at a record high versus the Euro on concerns the debt crisis has taken a turn for the worst. The Aussie and New Zealand currencies advanced versus the greenback as analysts forecast that a slowdown in the E.U.’s economy will dampen growth in the global economy.
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EUR/USD- Euro Down On Outlook For Spain
Adding to concerns over the Euro region’s crisis, Italy’s biggest bank announced that it needed more capital, and the ECB registered record overnight deposits of 453 billion Euros. In addition, economists are predicting that Spain may become the “problem child” in the coming months. The Euro dipped to its lowest price in 11 years versus the Yen on concerns that Euro region banks may struggle to obtain further capital; and it dipped against the majority of its most traded counterparts after El Pais, a Spanish newspaper, reported that the government had to assist the region of Valencia in making an overdue payment to Deutsche Bank AG. On the data front, E.U. inflation fell to 2.8 percent in December and Services and Manufacturing remained below the 50 level for a fourth consecutive month. The drop in inflation has led to speculation that the European Central Bank may lower the interest rates in order to spur growth.
GBP/USD- Construction Sector Improves
On the economic front, the construction sector in the U.K. expanded unexpectedly in the month of December, extending gains to 12 months. The Sterling slipped versus the greenback on concerns over the ongoing debt crisis which is weighing on demand for high yield assets. It did however advance for the first time in three days against the Euro as the credit default swaps on Spain climbed to 425 after El Pais released a report indicating that the government had to assist the province of Valencia with a 123 million Euro payment to the Deutsche Bank. The Sterling was further benefitted by news that investors placed more money into their Gilt holdings.
USD/CAD- Banking Concerns Weigh On Loonie
The Canadian currency dropped against the U.S. Dollar as the ongoing E.U. debt crisis made stocks and high-yield assets unattractive. The Loonie fell as crude oil, its biggest export declined to $102.73 a barrel in New York. The currency was weighed on by a departure from risk appetite and analysts believe this was brought on by the weak demand for German bonds at the recent auction.
AUD/USD- Aussie Attracting Investors
The Australian Dollar snapped a four-day advance versus the greenback on predictions that the slowdown in the Euro region will cause a decline in growth throughout the world. According to analysts, the Aussie Dollar will not continue to be negatively affected by the drop in demand for risk assets, as investors are considering the currency as an alternative to Euro assets.
Today’s Outlook
Today’s economic calendar shows that the U.K. will report on Services PMI. The E.U. will release data on Industrial New Orders and PPI. The U.S. will issue metrics on ADP Non-Farm Employment Changes, Initial and Continuing Jobless Claims. Lastly, Canada will issue Ivey PMI.
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