• Dollar Ends Monday with a Loss as Greek Uncertainties Curbs Investor Expectations
• Euro Hesitates in Establishing its Course as Greece Rescue Stalled Yet Again
• British Pound Finds Mild Encouragement from Housing Data, Election a Week Away
• Australian Dollar Traders Prepare to Absorb Critical Inflation Data
• Canadian Dollar Little Impressed by BoC Carney’s Comments that Canada is Different
Dollar Ends Monday with a Loss as Greek Uncertainties Curbs Investor Expectations
A quiet economic docket does not necessarily relegate the US dollar to a quiet corner; but a light day for fundamentals along with a mixed bearing on market-wide sentiment can anchor the currency. Monday’s session would prove sedate; which would have been unexpected last Friday. Heading into the weekend, currency traders were processing the news that Greece was attempting to activate the emergency aid offered to it by the European Union (EU) and International Monetary Fund (IMF). What’s more, this bid for assistance would in the midst of a G-7, G-20, IMF and World Bank summit in Washington DC. The gathering of so many policy makers raised the chance that a bailout would be fast tracked under the encouragement of officials outside the circle that has remained so consistently mired in its efforts to stabilize this financial burden. Alas, no progress would be made on Greece; and commentary in reference to this particular threat as well as the outlook for the global economy in general would ring somewhat hollow as officials kept their forecasts unrealistically optimistic. For the dollar, this general lack would encourage the dollar to a meek advance in the London session before steadily falling to a second consecutive daily loss before the close. As a reflection of uncertainty in medium-term direction and volatility, the 14-day average true range (a measure of activity) on the Dollar Index fell to its lowest level since August of 2008 through the day.
Turning the focus back on the United States’ own financial health, momentum behind the financial overhaul bill aimed at preventing another crisis hit a wall in the Senate. Though the Treasury’s assistant secretary for financial institutions would remark earlier in the day that reform was essential and the market more vulnerable to catastrophe now than any time in the past, the debate was halted as a vote of 57-41 would fall short of the 60 votes needed to carry the legislation in debate. Proponents of the bill say it would help prevent the “too big to fail” phenomena by limiting the size of major financial institutions and protecting customer deposits from highly speculative and leveraged fields of business like swaps. However, those voting against the measure say they are doing so in an effort to prevent spurious law from being pushed through and hurting the nation’s banking system. One of the most prominent arguments is over the overhaul of derivatives which many believe are at the root of the 2007-2009 crisis. Republicans (along with the Federal Reserve and Treasury Department) argue that spinning off banks’ derivatives trading desk would take away firms’ ability to hedge themselves and prevent the institutions from accessing essential Fed facilities. Considering the importance leveraged on this policy point globally, it is not likely to simply disappear.
On the data, front, the docket was relatively light Monday. The only indicator of note on the calendar was the Dallas Fed’s manufacturing activity index for April. The state-specific report grew faster than expected with a net 21.1 percent of respondents reporting an increase in activity – the highest reading since February of 2007. The trend this series has seen over the years is relatively close to the nation-wide ISM reading; but skepticism should be maintained. Looking ahead to tomorrow’s listings, fundamental activity will pick up. The Conference Board’s consumer confidence survey for April is top billing. Measuring the optimism (and the propensity for spending) among the largest economic component is an important event. An improvement in sentiment along with an expected uptick in the S&P/Case-Shiller home indicator sets the bar high.
Related: Discuss the US Dollar in the DailyFX Forum, US Dollar’s Advance Threatened by Greek Bailout Relief
Euro Hesitates in Establishing its Course as Greece Rescue Stalled Yet Again
Yet another significant development was established with the ongoing drama that is the Greek financial struggle. Last week, Prime Minister George Papandreou sought to activate the emergency financial assistance that the EU and IMF had promised them only a week before. Given the long weekend and the discussions going on in Washington DC, hopes were high that an answer would be fast tracked. However, the same doubts and hesitancy that colored the nation’s bid for help in the past months proved just as prominent after the avowed aid. At the center of the issue is Germany, which has demanded a three-year plan to be drafted and accepted by the IMF along with the assurance that Greece would further rein in the fiscal excesses. German Chancellor Angela Merkel has said an agreement make take “a few days.” In the meantime, the market has interpreted this tentativeness as a sign that the collective is trying to avoid offering up financial assistance in the hope that market sentiment will merely recovery. Considering the yield premium on the 10-year Greek bond is more than 600 bps above its German counterpart and Portuguese credit default swaps are feeling the sting at a record high, this disorder seem only to be hurting the issue.
British Pound Finds Mild Encouragement from Housing Data, Election a Week Away
While traders wouldn’t have a top tier UK indicator to work with Monday, the sterling would at least have something to sink its teeth into. The Hometrack Housing Survey for April advanced at its slowest pace in three months (0.2 percent) while the annual reading would coast to a 27-month high pace of 1.8 percent. A balance in this data is found through the supply of unsold homes rose 3.7 percent while the measure of new buyers cooled from a 3.3 percent gain in March to 1.0 percent. This is yet another disappointing data point to factor in for next week’s election. Before that day of reckoning, however, Tuesday will bring both the BBA home loans and CBI Distributive Trades indicators.
Australian Dollar Traders Prepare to Absorb Critical Inflation Data
Interest rate forecasts for the Australian dollar have dropped remarkably since RBA Governor Glenn Steven’s suggested the nation’s benchmark lending rate was “pretty close” to normal last week. However, he also said that future hikes would heavily depend on inflation trend. We will get our first taste of price growth Tuesday morning with the 1Q factory-level reading and read the truly important CPI data the next day.
Canadian Dollar Little Impressed by BoC Carney’s Comments that Canada is Different
It has been a common theme with Canadian policy officials that Canada is different from most other advanced nations. However, traders only believe this to a point. Today, the central banker reiterated the nation does not have the “politics” of other nations in reference to the global financial reform under discussion. Growth and yield forecasts bear this out; but can they survive another global financial pinch?
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Written by: John Kicklighter, Currency Strategist for DailyFX.com
E-mail: jkicklighter@dailyfx.com
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