By: Andrei Tratseuski
A sway of negative economic releases assaulted on risk appetite, pushing the bet currencies to the downside. Pressures about a potential peaking economies in the Euro-zone escalated sell-offs in the 17 nation currency. The Euro slipped below 1.2700, while the British Pound actually managed to gain to 1.5450 in the European session, the Japanese Yen continues to hang around 83 to 84 thresholds.
Greek sovereign debt situation took turn for the worse, further pressuring the Euro. National Bank of Greece prompted up its balance sheets by incurring additional €2.8Billion capital increase. In the meantime, Greeks government bonds differential above stable German Bunds rose to 1000 basis points or 10.00%. The further the differential between the German Bunds and Greek government bonds the more risky the investors interpret the situation in the Euro-zone. As rates differential continues to grow, more funds are leaving the Euro-zone and jumping into safe havens as risk aversion magnifies. Stating the following, the United States Dollar tends to rise in value while the Euro loses its steam. The evidence of investments leaving the Euro-zone is a drop in EUR/CHF which has reached another record low. As funds leave the Euro-zone due to problematic sovereign debt woes, the funds flow to Switzerland which has been performing spectacular in recent month. Keeping in mind the woes in sovereign debt within the Euro-zone a new obstacle arises which is represented in a way of a new issuance of debt which is expected to be nearly €80 Billion. The following will have a tremendous impact on the EUR/USD, if the debt does not see a tremendous amount of demand expect the Euro to be pressured.
German Trade Balance failed to make any noticeable headlines. However, the picture to keep in mind is the fact that exports weakened only for the second time this year. The problem consists of the fact that the crucial export sector might be peaking in Germany. The export sector was a crucial link that managed to bring the economy out of the recession. Therefore, if the German exports continue to slip, an ill affect could take hand down pressuring the Euro. It is prudent to keep in mind that German economic data tends to closely correlate the whole European economic picture. In turn, whenever a sway of negative economic events hit German, the following translates to the whole Euro-zone. Keep in mind that Germany is the largest economy in the Euro-zone.
Critical Housing figures in U.K. prompted a saddle rally in the Pound. Housing sector has for a while been the Achilles Heel of the United Kingdom. Therefore, a positive reading in any type of housing figures will relate relatively positive for the Pound. Halifax Housing figures rose unexpectedly for the second month in the row. Further appreciation in the Pound was prompted by the Manufacturing Sector. Manufacturing activity rose to 0.3% despite negative reading in Manufacturing PMI last week.
Canadian Dollar rallied on a raise of interest rates. Bank of Canada raised the interest rates for the third consecutive time by 25 basis points. The current interest rates are pinned at 1%. The BOC warned even thought the interest rates are rising, a possible downturn in the US economy could possibly put a downward pressure on the Canadian economy. Later in the day, Canada will wait for influential IVEY PMI figures which are due for a release at 10:00AM EST. US will await Beige Book release at 2:00PM EST.