The U.S. dollar rallied across the board overnight, pushing to a fresh 15-month high against the Euro, as French borrowing cost rose at a bond sale today. The greenback also surged against the Australian and New Zealand dollars as global equities sold off. Indeed, the Stoxx Europe 600 Index of shares fell 1.0%, while the MSCI Asia Pacific Index lost nearly 1.0%. The greenback found added support against the Aussie after a report showed the nation’s trade surplus unexpectedly narrowed in November as shipments abroad of resources slowed. The U.S. dollar also rebounded from modest losses from earlier this week against the Japanese yen, but the pair remains in overall tight ranges. Meanwhile, the U.S. economic docket painted a rosier picture of the American labor market. Companies added more workers than forecast in December, according to a private report based on payrolls. The 325K increase exceeded the highest projection in a Bloomberg News survey and followed a revision of a 204K gain in the prior month, ADP Employment Services reported today. The number may foreshadow a better than expected Non-farm payroll number on Friday. In addition, fewer Americans filed claims for unemployment benefits last week. Applications for jobless insurance decreased 15K, Labor Department figures showed today. Despite the positive data, U.S. equity futures foreshadow a lower open for American shares, boosting demand for the greenback as a safe-haven.
The Euro fell to its lowest level in over a year against the U.S. dollar after the first French bond auction of the year failed to impress as credit-rating companies threaten to cut the nations top AAA ranking. Fitch Ratings lowered the nation’s credit outlook in December on the “heightened risk of contingent liabilities” from the escalating euro-region crisis. In addition, Standard & Poor’s is reviewing the top ratings of both France and Germany. The Euro also weakened after Greek Prime Minister Lucas Padademos said his country may face economic collapse as soon as March. Papademos said deeper cuts in incomes are the only way Greece can remain in the euro area and receive more financing from international creditors. At the same time, Italy’s Prime Minister Mario Monti said today that the size of the European Financial Stability Facility bailout fund “remains insufficient.”
The British pound slipped versus the U.S. dollar as global equities ticked lower. However, the currency jumped to a 15-month high against the Euro as debt-crisis concern deepened. The British pound has risen 3.0% against a basket of nine-developed market peers in the past six months, making it the third best performer after the Japanese yen and the U.S. dollar. The economic docket showed that U.K. service activity based on a survey of purchasing managers rose to 54 from 52.1 in November, Markit Economics said today in London.
