The U.S. dollar rallied against the majority of its counterparts overnight on concern Greece’s political leaders will fail to reach an agreement allowing the nation to receive a second bailout from international creditors and on speculation that the Federal Reserve will refrain from partaking in further monetary easing. “I need to see significant deterioration in the economy and some threat of deflation or inflation moving significantly below our inflation target” before backing more bond buying by the Fed, St. Louis Federal Reserve President James Bullard said late last week. He is due to speak about inflation targeting today in Chicago. The Australian dollar came under pressure after the Australian Bureau of Statistics said the country’s retail sales fell 0.1% in December from a month earlier. The Reserve bank of Australia is expected to lower interest rates to 4.0% from 4.25% at the conclusion of their meeting tomorrow. There is no major economic data slated for release in the U.S. over the next three days. Weekly jobless claims and the Bloomberg Consumer confidence print will be released Thursday morning, while International trade and consumer sentiment will round out the week on Friday. With limited risk events scheduled in the U.S., look for the greenback’s direction to be largely dictated by headlines surrounding talks in Greece.
The euro continued to decline against the dollar and yen as risk revolving around the Greek debt crisis lingers. Following last week’s inability to solidify a debt-swap deal with private creditors, Fitch Ratings released a statement warning that “a disorderly default, which may include an exit from the euro zone, cannot be wholly discounted.” The ECB will announce its interest rate decision Thursday, as it is widely expected to remain at 1.00%. German factory orders were better than expected this month at 1.7%, up from –4.8% last month.
The Japanese yen rose against most of its major peers and held within striking distance of its post-war high against the U.S. dollar even after Bank of Japan Governor Masaaki Shirakawa said the nation’s economic condition is “severe” because of deflation and the strong currency. The central bank is implementing monetary easing measures and will take appropriate steps as needed, he said in parliament in Tokyo today. Due to the yen’s strength, Sony Corp more than doubled its annual loss forecast for the year ending March 31st, while Panasonic Corp and Sharp Corp. predicted the worst losses in their histories.
The British pound fell against the dollar over the weekend as the U.K. considers taking additional measures to prevent economic contraction this year. Bank of England policy maker Adam Posen announced the possibility of a February 9th increase in the BOE bond-purchasing program, increasing the quantitative easing 75B pounds to a total of 275B. Halifax house prices increased this month to 0.6% from the previous –0.9%. Thursday look for the BOE rate decision, expected to remain at 0.50%.
