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.
