The U.S. dollar rallied across the board as falling global equities and a warning from Moody’s Investor Services over European debt, caused the safe-haven greenback to rally. Indeed, DOW futures show American shares will open nearly 1.0% lower and European stocks have fallen over 2.0%. The greenback enjoyed safe-haven flows after Moody’s Investors Service said it will review the ratings of European Union nations after last week’s summit failed to produce decisive steps to end the debt crisis. The U.S. dollar gained the most versus the commodity-based currencies such as the New Zealand dollar and the South African rand as the price of oil, gold and other commodities tumbled. The U.S. dollar has gained 2.6% over the past month, the best performer, according to the Bloomberg Correlation-Weighted Index. The yen has advanced 1.8%. There is no major economic data slated for release today in the United States. Tomorrow will see Retail sales in the morning, followed by the Federal Reserve’s interest rate decision in the afternoon. It is widely expected that the FOMC will leave interest rates unchanged at record lows. Existing home sales are set for Wednesday, followed by Gross Domestic product, weekly jobless claims and consumer sentiment on Thursday. Durable goods orders, personal income and new home sales will round out the week’s data on Friday.
The Euro fell versus the U.S. dollar and is currently 100 basis points from its weakest level since January. European leaders unveiled a blueprint after meetings last week for a closer fiscal accord to save the euro, adding 200 billion euros to their bailout fund and tightening rules to curb future debts. They also said they would start a 500 billion euro rescue fund next year. The agreement offered few new measures and doesn’t diminish the risk of credit-ranking revisions, Moody’s said in its Weekly Credit Outlook. “Our intention as announced in November is to revisit the level and dispersion of ratings during the first quarter of 2012.” Standard & Poor’s put the EU’s AAA rating on “creditwatch negative” earlier this month.
The British pound fell modestly against the U.S. dollar as stocks from London to Tokyo fell. The sterling has also come under pressure amid mounting political uncertainty for the nation. U.K. Prime Minister David Cameron will today defend his refusal to back a European Union accord aimed at saving the euro when he addresses lawmakers, seeking to temper both the delight within is Conservative, anti-EU party and the anger of his Liberal Democrat, pro-EU coalition partners. Nick Clegg, leader of the Liberal Democrats party told BBC television yesterday he was “bitterly disappointed” by Cameron’s decision to veto a pact tightening budget rules agreed to by the other 26 EU leaders at a summit in Brussels. Cameron has defended his position after failing to gain assurances that would safeguard London’s financial industry.
