This morning the Euro is slightly lower despite a successful Greek auction of short-term debt. The over-subscribed auction saw more debt offered than was expected, and the interest to be paid on said debt was also higher than Greece would have liked. However, the EU bailout announced yesterday has given some investors confidence and only time will tell how this situation plays out. But for now, Greece survives another day.
The Pound is higher this morning despite the fact that the RICS survey is showing lower home prices. The good news is that that the UK trade balance came in better than expected showing signs that economic recovery may be progressing.
The Dollar is lower as the US trade balance figures were slightly worse than expected but showing signs that a rebounding consumer may be feeling more confident in the economy.
In the forex market:
Aussie (AUD): The Aussie is higher this morning as mild risk-taking is taking place, though it looks as though that could reverse by the end of the day. Business confidence figures came in slightly lower than expected but well within an acceptable range and near its highest level in 8 years.
Loonie (CAD): The Loonie is slightly lower this morning on oil prices which are back to the 83.50 range as world demand is beginning to slow, despite the mild risk-taking. Overnight swap rates are showing that there is an increased probability that the BOC will raise interest rates at the June 1 meeting. The Loonie is just above parity with USD.
Kiwi (NZD): The Kiwi is trading mostly higher against all but the Yen as NZ Credit Card spending levels rose the most in almost 2 years. This bodes well for consumer spending which had been lagging and shows that economic growth may accelerate throughout the year.
Euro (EUR): The Euro is still mostly lower, though sitting right near the 1.36 level vs. USD. CPI figures from Germany showed that inflation is largely in-line with expectations, and the ECB commitment to keep rates low is adding pressure to the single currency. As mentioned above, the Greek debt auction could be considered a success, though if the market keeps demanding higher rates than this could pose a problem down the road.
Pound (GBP): The Pound is mostly higher as the British Retail Consortium showed that consumer spending rose 6.6% in March in a sign that confidence over the UK’s economic prospects may be rising as consumers “vote with their Sterling”. In addition, the UK trade deficit narrowed as exports increased, no doubt buoyed by the weaker Pound.
Dollar (USD): The Dollar is lower this morning as the US trade deficit widened more than expected. Alcoa kicked off stock market earnings season last night with a less-than exciting report that has left the market slightly disappointed. In addition, President Obama’s meeting with the Chinese President Hu did not go as well as expected and while the door is still open for China’s removal of its USD peg, China will continue to do what it wants.
Yen (JPY): The yen is higher this morning as Japanese stocks are down for the first time in 3 days as producer prices fell at the slowest pace in over a year, showing signs that deflation may be slowing and that inflation may be right around the corner. Chinese demand for raw materials and commodities may cause Japanese profits to erode going forward.
Part of today’s forex action will be determined by how the US equity markets fare today. While the futures are lower going into the open on disappointing earnings out of Alcoa (AA), this is but one stock and one stock does not a market make.
The forex market seems content to sell dollars today so this could set up nicely for either a stock market reversal higher, or some risk aversion commodity currency selling. I think today will be the former as news from around the globe is positive enough today to out-weigh negative earnings from one stock. But you never know!
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