The U.S. Dollar rose on Monday against the majority of its Forex counterparts subsequent to the announcement of stellar economic news which showed that U.S. Retail Sales went up 1.1 percent last month, instead of the predicted 0.8 percent. In addition, the numbers issued in February were revised to show that sales actually climbed 0.7 percent. Core Retail Sales which exclude such items like automobiles surged 0.7 percent, surpassing the anticipated 0.5 percent hike, after posting a 0.3 percent rally in February. Safe havens were supported due to the intensification of the situation between Moscow and Kiev, as pro-Moscow separatists ignored the deadline to leave the government buildings. The U.S. reacted by issuing warnings that it may impose further sanctions on Russia, while the Ambassador to the U.N., Sandra Power spoke to the Security Council on Sunday and indicated that the U.S. backs the Ukraine. Demand for safety was also supported by the fact that the Chinese Yuan reached an eight-month low on worries that the second largest economy in the world has sustained a major slowdown.
The Euro continued to trade to the downside, not as a result of the release of economic data, but as President of the European Central Bank, Mario Draghi, suggested that the currency’s hike may cause the central bank to implement an expansion of stimulus. The Euro failed to respond to regional data indicating that production in the Industrial sector jumped in February. The British Pound remained more or less unchanged during light market trading against the U.S. Dollar, but rallied versus the Euro as Rightmove Plc stated that British House Prices have risen to an all-time high. This report came out a week after the International Monetary Fund boosted its growth outlook for the U.K. and as analysts anticipate that Wednesday’s announcements could show that the level of Joblessness went down.
The Yen traded mixed and received support due to the growing tensions in the Eastern section of the Ukraine. In Japan, Prime Minister, Shinzo Abe’s economic plan for helping the country emerge from 15 years of deflation lost favor with the public. Economists believe this is due to the fact that a number of companies have boosted the prices of many key products following the sales tax hike. Mr. Abe reiterated that it’s important to stay focused on the long-term effects of the program and ignore the temporary impact of the tax hike.
Lastly, in the South Pacific, Australia’s Dollar declined versus its U.S. peer as worries over the Chinese economy weighed on sentiment, and as investors await key economic fundamentals to be released out of China, which will reveal the status on Industrial Production as well as on Growth and Retail Sales. Economists fear that additional signs of weakness could have a negative impact on market sentiment, especially since the Chinese government is not keen on adding stimulus. The Kiwi gave up gains versus its U.S. counterpart as geopolitical tensions stressed the money markets. But its losses were limited as speculators anticipate the Reserve Bank could boost the benchmark interest rate at the upcoming policy meeting.
EUR/USD - Leaders Concerned About High Euro
The EUR/USD rallied but lost some of its gains after ECB President Draghi stated that the Euro’s appreciation could lead to the injection of added stimulus by the central bank. Officials are hoping that talk about added easing may impact the Euro, which in fact does seems to be the case. During the International Monetary Fund meeting held this past weekend, Mr. Draghi received warnings that a further increase for the Euro could pose a problem for the Euro-zone’s economy as a whole. The EUR/USD was also affected by a drop in risk appetite as the Ukraine took the spotlight once again when the Ukrainian government issued an ultimatum to pro-Russian separatists.
GBP/USD - U.K. Sees Major House Boom
Trading in the foreign currency exchange was light on Monday, and the GBP/USD remained more or less unchanged despite the announcement of solid economic data out of the U.S. denoting a hike in Retail Sales. In the U.K., speculators anticipate that the Bank of England could boost the key cash rate sooner than planned, as recent releases by Rightmove Plc have shown that House Prices surged to a historic high. The release indicated that a hike in salaries and improvements in the Real Estate market could push the BOE could to consider a higher benchmark interest rate. Investors predict that the Office for National Statistics could show that the Unemployment level fell to 7.1 percent.
EUR/JPY - Euro Eases In Asian Session
The EUR/JPY dipped during the Tokyo market hours as the crisis between the Ukraine and Russia intensified. Traders sold off risk assets and moved into harbor currencies as the holiday week began. A vast number of traders are taking off for the spring holiday, causing the market’s volume to decline. The EUR/JPY fell further after ECB President Draghi and a number of officials spoke about the need for more stimulus should the Euro rate increase further. And it remained to the downside despite news showing that Industrial Output climbed 0.1 percent in February. The pair was weighed on by the likelihood that the Asian stock market could see more losses.
AUD/USD - Aussie Pensions Go Abroad
The AUD/USD weakened as speculators captured profits prior to the holiday week, and as market traders look ahead to this week’s economic releases out of China. The pair’s weakness was supported by the publication of the Federal Reserve’s minutes which indicated that monetary authorities could keep the interest rate close to zero for some time to come. Meanwhile, in the South Pacific nation, Pension Managers reported that a majority of equity investments in 2013 were made abroad. Aussie pensions have placed their money into assets offshore, such as in the U.S., the Euro region and the emerging markets.
Today’s Outlook
Today’s economic calendar shows that the U.K. will report on PPI, Core PPI, CPI and RPI. The Euro region will issue Trade Balance figures. The U.S. will publish CPI and Core CPI as well as NY Empire State Manufacturing. The Chairwoman of the Federal Reserve. Janet Yellen is scheduled to deliver a speech on policy. New Zealand will announce CPI. And China will release GDP, Retail Sales and Industrial Production.