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US$ Falls As Revised 4th Quarter GDP Surprises

USD	The U.S. dollar traded in a mixed direction overnight, gaining against the Euro but falling versus the majority of its counterparts ahead of today’s economic docket. Data released this morning showed that the U.S. economy expanded more than forecast in the fourth quarter.  Gross domestic product climbed at a revised 3.0% annual rate, the most since the second quarter of 2010.  Growth was previously reported at a 2.8% gain.  In addition, the Mortgage Banker’s Association’s index decreased 0.3%, the third straight week of declines.  The greenback has also been under pressure before Federal Reserve Chairman Ben Bernanke testifies in Congress today.  Bernanke said after last month’s Fed meeting that the central bank is considering buying more bonds after policy makers extended their pledge to keep interest rates at “exceptionally low levels” at least through 2014.
EUR  ­	The Euro fell against the majority of its rivals even after the European Central Bank awarded a second round of three-year loans to banks.  The ECB said it will lend financial institutions 529.5 billion euros for three years, surpassing the 470 billion euros forecast by economists. The Frankfurt-based ECB said it will lend the funds to 800 financial institutions.  The ECB’s first three-year refinancing operation in December, 523 banks borrowed 489 billion euros.  The ECB announcement buoyed general risk sentiment and most higher-yielding currencies, but weighed on the Euro as the central bank’s move increases the supply of the currency.
GBP  ­	The British pound traded to a three-month high against the U.S. dollar following the release of positive economic data.  GfK NOP Ltd said U.K consumer confidence held at the most since June last month amid slowing inflation.  In addition, a separate report showed that U.K. mortgage approvals rose to a two-year high in January.
JPY ­	The yen continued its push back from its recent lows versus the U.S. dollar.  Japan refrained from selling yen in the foreign exchange market this month, the Ministry of Finance said on its website today.  The yen tumbled to near a nine-month low against the dollar after the Bank of Japan on February 14 unexpectedly added 10 trillion yen to an asset-purchase program.
Others	The Australian dollar rose to its highest level since August versus the U.S. dollar after government data showed retail sales rose in January, adding to speculation the Reserve Bank will keep the highest interest rates among developed countries.

 

US$ Falls to Near Three-Month Low V. Euro

USD	The U.S. dollar fell as risk appetite improved as the European Central Bank prepares to allot three-year loans tomorrow to improve the liquidity of the region’s banks.  Indeed, European equities gained and U.S. equity futures look to share the momentum and open today’s trading session higher. The greenback has been under pressure on steadily improving data released in the United States.  However, this morning’s docket showed that orders for U.S. durable goods fell in January by the most in three years.  Bookings for goods meant to last at least three years slumped 4.0%, more than forecast, after a revised 3.2% gain in the prior month. Later this morning, the Conference Board’s U.S. consumer confidence index is expected to climb to 63.0 in January from 61.1 in December.  The data follows yesterday’s pending home sales that surprised economists to the upside.
EUR  ­	The euro continued to challenge three-month highs against the dollar following the German approval of the second Greek bailout package yesterday. Prior to the vote, Angela Merkel publicly stated that denial of the package would cause “incalculable damage”. Tomorrow, the ECB will offer the second long term refinancing option (LTRO). In this program, the ECB offers loans to banks at very low rates, which allows the banks to reinvest in higher yielding assets. This increased liquidity for Euro-zone banks, if extensively used, should prove to be euro-positive in the short-term.  Estimates for the size of Wednesday’s LTRO lie between EUR250-600B. Euro-zone economic confidence rose in February to 94.4 from 93.4 the previous month. German CPI rose more than forecasted at 0.7%, from –0.4% in January.
GBP  ­	The British pound strengthened against the dollar after retail sales proved to be the highest in eight months. The Confederation of British Industry (CBI) reported sales at   -2, up from –22 in January. The U.K. is beginning to see positive economic data more frequently, hinting that the strict austerity policy U.K. Chancellor of Exchequer George Osbourne has chosen to abide by may ultimately fend of a recession that once seemed certain.
Others	The higher-yielding Canadian and Australian dollars both rose to a one-week high before the European Central Bank beings longer-term refinancing operations to shore up the region’s banks.

 

U.S. Dollar Gains V. Majors; Falls Against JPY

USD  ­	The U.S. dollar rose against all of its major counterparts, while falling nearly 1.0% versus the Japanese yen, as declining global equities boosted demand for the two safe-haven currencies.  The Stoxx Europe 600 Index slipped as much as 1.0%, the biggest drop in more than 10 days.  The MSCI Asia Pacific Index and Standard & Poor’s futures both weakened over 0.5%.  The greenback has been under pressure amid indications the U.S. economy is improving, increasing overall risk sentiment.  This morning’s economic docket is expected to show the number of Americans signing contracts to buy previously owned homes rose 1.0% from the previous month.  Tuesday sees the release of durable goods orders, the S&P Cash Shiller Home Price Index and consumer confidence while Gross Domestic Product will hit the wires Wednesday morning.  With no major data slated for Friday, weekly jobless claims and personal spending will round out the week on Friday.
EUR  ¯	The Euro depreciated against the dollar over the weekend following a G-20 meeting in Mexico City. IMF chief Christine Lagarde left the G-20 meeting with intentions of raising the firewall an additional $500B by the end of March. Germany lawmakers will vote on the approval of a second Greek bailout today. Only 32% of Germans want to see the bailout approved, however it is expected to be passed by the more powerful, lower house of parliament. The euro will likely track any news coming out of Greece as they attempt to satisfy the extensive list of requirements to secure the bailout package by Friday’s EU summit in Brussels.
GBP  ¯	The British pound was largely unchanged versus the euro, and fell against the U.S. dollar over the weekend. U.K. Chancellor of the Exchequer George Osbourne has reaffirmed his intentions to stay the course on his austerity program, despite the rising pressures to increase spending and/or cut taxes in the lagging economy. His recent comments suggest any change in this policy could lead to a reduction in the credit ratings of the U.K.
JPY  ­	The Japanese yen gained over 1.0% versus the Euro and nearly a percent against the U.S. dollar as global equities fell and on speculation the yen’s recent decline had been too rapid.  The yen has plunged since the Bank of Japan, which has struggled for more than a decade against deflation, said earlier this month that it would add 10 trillion yen to the economy.  The Japanese yen has fallen 6.4% over the past month, prompting traders to buy the currency and take profits.

 

US$ Continues Dovish Momentum

USD	The U.S. dollar continued its dovish momentum overnight, falling against the majority of its major counterparts as global risk sentiment has improved.  Indeed, stocks from Germany to Japan rose and U.S. equity futures show the Dow Industrial Average will open near 13,000.  Later this morning, the economic docket is expected to show the University of Michigan consumer confidence reading is expected to register at 73.0, up from 72.5 the month prior.  Also, New home sales are expected to rise 2.6% in January, from a –2.2% reading in December.  The dollar was also under pressure ahead of speeches later today by Federal Reserve policy makers including New York Fed President William Dudley, St. Louis Fed President James Bullard and Philly Fed President Charles Plosser.
EUR  ­	The Euro continued to strengthen against its major counterparts, reaching new two-month highs against the sterling, loonie, and U.S. dollar. German GDP met expectations, showing growth of 1.5% in the fourth quarter. Private consumption slipped lower, at –0.2%, and capital and construction investment both increased to 1.1% and 1.9% respectively. European Union Ministers have given Greece seven days to complete a checklist of reforms ranging from cutting public pensions by 300 million euros, to changing the way drugs are prescribed. If these reforms are not met Greece will not receive the second bailout package, forcing them into a disorderly default.
GBP  ­	The British pound gained against the U.S. dollar overnight, erasing nearly all of losses incurred following the Bank of England minutes released earlier this week. U.K. GDP was on par with expectations, contracting –0.2% in the fourth quarter. However, private consumption rose more than the forecasted to 0.5% easing concerns that a recession is inevitable.
JPY  ¯	The Japanese yen fell against all of its counterparts and touched a fresh 7-month low against the U.S. dollar.  The yen has fallen nearly 4.0% against the greenback since the Bank of Japan unexpectedly expanded its asset-purchase program on February 14th.  Indeed, the BoJ said it would expand its asset-purchase program to 30 trillion yen from 20 trillion.  Japan’s currency has tumbled 6.1% in the past month, the biggest loser among 10 developed-nation currencies tracked by Bloomberg Correlation Weigthed Indexes.

 

US$ Falls to 2-Month Low Versus Euro

USD  ¯	The U.S. dollar fell across the board, including to a 2-month low versus the Euro, as strong economic data released abroad dampened demand for the greenback as a safe-haven.  The greenback remains under pressure versus the commodity-backed currencies as the price of oil continues to creep higher as tensions in the Middle East mount. This morning’s economic docket showed that number of Americans filing first-time jobless claims last week held at a four-year low, more evidence the labor market is improving.  Later this morning, the house price index is expected to show that prices on a month over month basis climbed 0.1% in December, down from 1.0% in the month prior.  The data is likely to reinforce the view that the housing market continues to drag on the overall health of the U.S. economy.
EUR  ­	The Euro strengthened to a new two-month high versus the dollar as German consumer confidence beat estimates. The IFO business climate in Germany rose to the highest level since July, at 109.6. The European Commission is forecasting the European economy to shrink in 2012. The forecast is also calling for inflation above the 2.0% threshold, at 2.1%. Strict austerity measures across southern Europe are expected to slow business growth and raise unemployment; further proving the recovery will be an arduous road.
GBP  ­	The British pound rose against the dollar and fell to a 10-week low against the euro, as the business climate in Germany proved better than expected. U.K. CBI trends total orders, a measure of manufacturing output rose to a six-month high in February to –3, up from –16 in January. This number helped the sterling pare yesterday’s losses against the dollar following the release of the BOE minutes. Tomorrow, a report is expected to show the U.K. economy contracted in the fourth quarter.
JPY  ­	The Japanese yen gained modestly versus the U.S. dollar as traders sold the currency to take profit as the pair reached recent highs.  Indeed, the Japanese yen remains close to a 7-month low versus its American counterpart.

 

US$ Rises to 7-Month High V. Yen

USD  ­	The U.S. dollar pushed higher against the majority of its rivals as European equities fell and U.S. equity futures show the Dow Industrial Average will pull back from recent highs on the open.  The DJIA rose to 13,000 yesterday, the highest level since May of 2008. This morning’s economic docket showed that mortgage applications in the U.S. fell for the second week, led by decline in refinancing.  The index decreased 4.5%, according to the Mortgage Banker’s Association.  The data has not affected the U.S. dollar in early trading.  The Dollar Index rose before a report that is expected to show existing home sales in the U.S. increased.  Indeed, sales of previously owned homes is forecast to rise 1.1% in January, after gaining 5.0% in December.
EUR	The Euro remained largely unchanged versus the dollar as PMI was reported to be worse than expected. Euro-zone PMI composite, composed of manufacturing and services PMI dipped below the tipping point of 50.0 at 49.7, signaling contraction in February. French and German PMI showed growth, however they were unable to offset the anchoring PIIGS poor economic data. Despite the recent upswing surrounding the Greek bailout, risk remains present as strict austerity measures threaten to strangle economic growth across the euro-zone.
GBP	The British pound weakened against the dollar after the Bank of England released the minutes from the February 9th policy meeting. The results showed a growing divide amongst its board members. Of the nine voting members, only Adam Posen and David Miles voted to raise the BOE quantitative easing program by 75B pounds. The remaining seven members voted to raise QE 50B pounds. This lack of monetary policy unanimity raises concern about the direction of the U.K. economy. Fourth quarter GDP will be released on Friday, expected to be unchanged at –0.3%.
JPY	The Japanese yen fell to a 7-month low against the U.S. dollar as increasingly positive U.S. data has softened demand for the nation’s currency.  The yen has come under pressure as the extra yield offered by two-year Treasuries over similar-maturity Japanese bonds increased to a six month high. The yen has depreciated 6.6% in the past three months, the biggest decline among 10 developed nations peers tracked by Bloomberg Correlation Weighted Indexes.  The yen was the best performing currency in 2011.
OTHER	The Norwegian Krone jumped as a strong labor market report fueled speculation the central bank may refrain from cutting interest rates.

 

US$ Hits 7-Month High v. JPY

USD  ­	The U.S. dollar pushed higher against the majority of its rivals as European equities fell and U.S. equity futures show the Dow Industrial Average will pull back from recent highs on the open.  The DJIA rose to 13,000 yesterday, the highest level since May of 2008. This morning’s economic docket showed that mortgage applications in the U.S. fell for the second week, led by decline in refinancing.  The index decreased 4.5%, according to the Mortgage Banker’s Association.  The data has not affected the U.S. dollar in early trading.  The Dollar Index rose before a report that is expected to show existing home sales in the U.S. increased.  Indeed, sales of previously owned homes is forecast to rise 1.1% in January, after gaining 5.0% in December.
EUR	The Euro remained largely unchanged versus the dollar as PMI was reported to be worse than expected. Euro-zone PMI composite, composed of manufacturing and services PMI dipped below the tipping point of 50.0 at 49.7, signaling contraction in February. French and German PMI showed growth, however they were unable to offset the anchoring PIIGS poor economic data. Despite the recent upswing surrounding the Greek bailout, risk remains present as strict austerity measures threaten to strangle economic growth across the euro-zone.
GBP	The British pound weakened against the dollar after the Bank of England released the minutes from the February 9th policy meeting. The results showed a growing divide amongst its board members. Of the nine voting members, only Adam Posen and David Miles voted to raise the BOE quantitative easing program by 75B pounds. The remaining seven members voted to raise QE 50B pounds. This lack of monetary policy unanimity raises concern about the direction of the U.K. economy. Fourth quarter GDP will be released on Friday, expected to be unchanged at –0.3%.
JPY	The Japanese yen fell to a 7-month low against the U.S. dollar as increasingly positive U.S. data has softened demand for the nation’s currency.  The yen has come under pressure as the extra yield offered by two-year Treasuries over similar-maturity Japanese bonds increased to a six month high. The yen has depreciated 6.6% in the past three months, the biggest decline among 10 developed nations peers tracked by Bloomberg Correlation Weighted Indexes.  The yen was the best performing currency in 2011.
OTHER NOK gains	The Norwegian Krone jumped as a strong labor market report fueled speculation the central bank may refrain from cutting interest rates.

 

 

US$ Gains Despite Greek Debt Deal

The U.S. dollar traded in a volatile range over the President’s Day holiday as European finance ministers met to hash out a bailout plan to ensure Greece would not default on its sovereign debt.  Ultimately, the dollar rose against all of its major counterparts as European stocks declined even after Greece won a second international bailout as fears persist that the European debt crisis is far from over.  The Canadian dollar declined modestly after a report showed retail sales declined in December.  However, a steady string of favorable data has led the Canadian dollar above parity versus its American counterpart.  Australia’s dollar was also under pressure after the nation’s Reserve Bank said in minutes of its policy meeting this month there is scope for easing should demand “weaken materially.”  There is no major economic data slated for release in the U.S. today so expect headlines regarding the Greek bailout to dominate trading ranges today.  Tomorrow, existing home sales are expected to expand by 0.9%, after gaining 5.0% the month prior.  Weekly jobless claims are set for Thursday, while consumer sentiment and new home sales will round out the week on Friday. 

The Euro quickly strengthened 1.0% against the dollar over the weekend after financial ministers finally awarded Greece the 130B euros needed to prevent bankruptcy. This second bailout was finalized after Greek lawmakers yielded on strict austerity measures that will drastically cut spending on the minimum wage, health-care, and defense. The euro came off of its highest levels against the dollar overnight as concern was raised that the austerity measures could suffocate the Greek economy into a depression. In response to growing contagion concerns across Europe, the Troika are said to be open to the idea of raising the firewall an additional 250B, from the already planned 500B euros. Manufacturing numbers across Europe are expected to improve tomorrow, and Euro-zone consumer confidence will be released today, expected to improve slightly from January.

The Japanese yen has fallen modestly against the dollar since Friday’s close after Japan posted a record trade deficit in January as the yen’s strength and weaker global demand eroded manufacturers’ profits and slowed the nation’s recovery from last year’s earthquake and tsunami.  The gap widened 1.48 trillion yen and shipments dropped 9.3% from a year earlier.  At the same time, Standard & Poors affirmed Japan’s AA- sovereign debt rating and negative outlook. 

The British pound weakened versus the dollar as harsh Greek spending cuts and their effect on Europe moved sentiment back towards the safer greenback. U.K. public sector net borrowing showed a surplus of –10.7B pounds, versus –9.1B in January, as revenue exceeded spending by 7.75B pounds last month.

US$ Rises on Greek Concerns, Moody's Warnings

The U.S. dollar rose across the board overnight as a slew of “risk off” events weighed on stocks and boosted the relative safety of the greenback.  Indeed, Greece continues to struggle to finalize an agreement to secure a deal for a second bailout, causing European equities to fall over 1.0%.  The safe-haven currency also found support after Moody’s Investor Services said its reviewing 17 major banks for possible downgrades.  The credit ratings of UBS AG, Credit Suisse AG and Morgan Stanley may be cut by as many as three levels.  Goldman Sachs Group, Deutsche Bank AG and JP Morgan Chase were among companies that may be cut by two grades.  The Australian dollar pared earlier gains and opened today’s trading lower against the U.S. dollar even after the island nation reported it added the most jobs in 14 months in January.  Other higher-yielding currencies, such as the New Zealand dollar and South African rand, also fell with the global risk sentiment.  This morning’s economic docket showed that housing starts in the U.S. increased more than forecast in January.  Starts rose to a 699K annual rate from December’s 698K pace.  Also, claims for jobless benefits dropped last week to the lowest level in four years, another sign the U.S. labor market is on the mend.  Wholesale prices in the U.S. rose less than forecast in January as food and energy costs dropped, a sign inflation pressures may remain subdued.  The producer price index rose only 0.1% following a 0.1% decrease in the month prior.  The Philadelphia Fed will be released at 10 a.m. this morning. 

The Euro continued its downward slide overnight, losing 1.0% in the past week according to the Bloomberg correlation-weighted indexes. These losses were extended on news that the release of 130B euros to Greece will be delayed as Europe seeks more extensive spending reductions out of the troubled nation. Tension amongst European leaders is rising as German finance minister Wolfgang Schaeuble hinted that Greek officials were stalling the austerity reforms for political leverage. Greece is now seeking to push austerity implementation back past the April elections. The next Greek payment is due in March.

The British pound fell against the dollar and strengthened versus the euro as the risk of Greek default again dominated yesterday’s trading session. U.K. consumer confidence increased yesterday despite the risk brought on earlier this week by Moody’s Investors Service, who reported credit rating cut could be on the horizon if economic conditions remain bleak.

 

 

US$ Holds Yesterday's Gains Overnight; Trades to 3 Week High v. Yen

The U.S. dollar held a largely tight range against the majors overnight as overall risk sentiment ebbed and flowed as trader’s await today’s U.S. economic data.  Indeed, European stocks and U.S. equity futures seesawed between positive and negative territory and opened this morning flat from yesterday.  The economic docket showed that sales at U.S. retailers climbed in January.  The 0.4% gain followed little change in December that was initially reported as a 0.1% increase, Commerce Department figures showed.  The print failed to meet expectations of a 0.88% increase.  However, retail sales excluding cars, demand climbed 0.7%, more than expected.  In addition, prices of goods imported into the U.S. rose in January for the second time in six months, reflecting higher costs of petroleum.  The 0.3% increase follows a 0.1% decrease in December Labor Department figures showed.  The data has surprisingly had little effect on the direction of the U.S. dollar thus far this morning.

The euro remained largely unchanged versus the dollar overnight after a mixed bag of data was released. Successful bond auctions in Spain and Italy were certainly euro-positive. Italian three-year borrowing costs are the lowest since March, and Spanish 12-month bills are the lowest since October 2010. Also, German consumer confidence reached its highest level in ten months. . However, euro zone industrial production fell to –2.0% in January, down from the –0.3% figure in December. Additionally, Greece saw its GDP drop to –7.0% last quarter, while Moody’s slashed the credit ratings of six euro zone members, including Italy, Spain, and Portugal. Tomorrow, finance ministers will meet in Brussels to determine if newly formed Greek austerity measures warrant a second bailout.

The Japanese yen fell to its weakest level in three weeks after the Bank of Japan said it would increase the size of its asset-purchase fund.  The central bank will increase its fun by 10 trillion yen to 65 trillion yen, expanding economic stimulus measures for the first time since October.  The Bank of Japan also said it will target 1.0% inflation “for the time being.” 

The British pound weakened against its major counterparts after Moody’s Investor Service threatened to reduce its credit rating if the U.K. economy continues to falter. The combination of exposure to the ongoing euro zone crisis and the sluggish economic conditions at home are proving difficult to overcome. The consumer price index was on par with forecasts as retail price indices were slightly off expectations, worse than the previous month. The Bank of England will release their inflation report tomorrow, as well as unemployment data.