EUR/USD, GBP/USD, USD/JPY And AUD/USD Daily Report: October 12, 2012

The U.S. dollar rose slightly above the majority of its counterparts following the release of better than expected Retails Sales data. According to the Commerce Department, Core Retail Sales climbed 1.1 percent last month, which was an indication that household spending bolstered growth in the second quarter. But not all releases were as positive. The gauge for Manufacturing in the New York region posted at -6.2.

Despite the improvement, the Federal Reserve Index read at -10.4 for the prior month, thereby affirming that Manufacturing remained in contraction territory for the third consecutive month. Other news revealed that U.S. Business Inventories advanced 0.6 percent. The Canadian dollar rose versus most of its peers following an increase in stocks prompted by better than anticipated U.S. Retail Sales.

The loonie erased some of its earnings against the greenback as crude oil, the country’s biggest export, dipped below $90.00 a barrel. The Canadian dollar rebounded when the Canadian Real Estate Association stated that Existing Home Sales went up.

The euro traded mixed against the U.S. dollar, though it remained mostly flat on signs that Spain may not request a bailout before the October 21st regional elections. Spain’s Minister of Economy, Luis de Guindos, issued a statement over the weekend suggesting that the country was in a “comfortable” position. He reiterated his belief that Spain will be able to fund itself through end of year.

Uncertainty over whether Spain will ask for a full bailout continued to weigh on sentiment, thereby causing the British Pound to slip against the U.S. dollar. The sterling also traded weak in anticipation of a slew of U.K. economic releases due out this week. Investors worry that if the data on Retail Sales, Inflation and Jobs is less than positive, it will undermine the chances of recovery.

The yen declined against all of its most traded counterparts subsequent to the announcement of U.S. Retail Sales. The U.S. dollar advanced versus the yen on news that China’s Trade Surplus expanded due to an increase in exports. This helped ease concerns that the world’s second biggest economy has slowed down.

And in the South Pacific, the Australian dollar traded mixed as positive data out of Australia benefitted the currency. However, uncertainty over Spain fueled demand for safe havens like the U.S. monetary unit. Appetite for refuge also pushed the New Zealand dollar down to the lowest level in one month versus the greenback.

EUR/USD- De Guindos Gives No Indications
The euro failed to benefit from a hike in U.S. stocks and remained more or less unchanged against the U.S. dollar as no major economic releases were announced. However, the fact that Spain’s Economy Minister did not offer any indications that the country will request a bailout continued to weigh on the currency. 10-year Spanish bond yields rose to 5.77 percent and analysts don’t expect Spain to ask for a bailout prior to the regional elections of October 21st.

On the flipside, Greece’s bond yields declined the most since March, as Germany clearly indicated that it supports Greece in its efforts to stay within the euro bloc. Greek Prime Minister Antonis Samaras said that his country would receive the next installment for the bailout soon, which lessened the possibility that Greece will exit the euro monetary region.
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GBP/USD- Markets Anticipate U.K. Data
The British pound weakened against the U.S. dollar as uncertainty over whether Spain will request a bailout continued to dominate headlines. But this is a busy week in the U.K. and market investors will keep a close eye on the flurry of economic data, which will include CPI. This particular report is important since the Bank of England is expected to increase monetary easing should the data prove to be less than stellar. However, if CPI stays the same, analysts say it’s likely the BOE won’t change its monetary policy. On the data front, Rightmove showed an increase of 3.5 percent in house prices for the month of October.
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USD/JPY- Yen Falls Versus Majors
Japan’s currency traded low against the U.S. dollar on the heels of lackluster economic data and news that U.S. Retail Sales rose more than predicted. In addition, the mobile operator Softbank has announced it will acquire Sprint/Next, U.S. based companies. According to Forex analysts, this is a big deal since a lot of yen will have to be turned into U.S. dollars. However, Japan’s economy showed signs that it continues to struggle after economic reports indicated that Industrial Production dipped from -1.3 to -1.6 percent. Furthermore, exports have been seriously affected due to the overvalued currency.
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AUD/USD- Aussie Rallies On Chinese Data
The Australian dollar gained against the greenback after China reported the expansion of its Trade Surplus. Furthermore, official releases indicated that Australia’s Home Loans increased 1.8 percent, which was more than expected. Also, Motor Vehicle Sales climbed 4.7 percent last month. But the currency’s gains were limited as investors remain jittery since Madrid failed to request for bailout over the weekend.
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Today’s Outlook
Today’s economic calendar shows that the U.K. will report on CPI, PPI, Core CPI and the House Price Index. The E.U. will issue CPI and Core CPI, Trade Balance and data on the ZEW Economic Sentiment. Canada will announce Manufacturing Sales and Foreign Securities Purchases. Lastly, the U.S. will issue figures on Industrial Production and the TIC Net Long-Term Transactions.