Ahead Of The U.S. Open

The U.S. Dollar rallied against the majority of its peers after the Washington-based World Bank lowered its global-growth forecast for 2013, citing low business confidence and high unemployment as the main reasons.

The World Bank announced that global economies would only expand 2.4 percent after having stated last June that they would grow by 3%. The bank also suggested that developing nations were likely to face a tough economic year -- a statement that prompted speculators to seek out safe havens. The multilateral institution added that the Euro region will contract 0.1% in 2013, which was below the recent prediction for 0.7% growth. The greenback remained strong amid concerns over the euro zone and despite comments by ECB governing council member Ewald Nowotny who stated that the region’s economy is now stable. On the data front, reports out of the U.S. revealed that the Consumer Price Index did not change since December and posted at zero. The monthly core CPI rose 0.1% while analysts predicted it would rise 0.2%. Lastly, Industrial Production increased 0.3% last month, just as anticipated. Canada’s Dollar slipped against the majority of its counterparts after officials from the Japanese and Russian governments issued stern criticism toward the monetary policies, which have contributed to debasing major monetary units to bolster growth. The Loonie fell the most in one week versus its American peer after the Russian central bank insinuated that the world is close to a currency war.

EUR
The Euro declined against the U.S. Dollar subsequent to news that the World Bank trimmed its growth forecast for this year. This bolstered flight from risk assets and increased demand for refuge currencies like the greenback. The Euro remained under pressure as Germany’s government also reduced its growth forecast for the year, but it erased some of its losses on comments by ECB governing council member Nowotny who suggested that the Euro exchange rate was no longer a concern, thereby setting investors at ease. However, Jean Claude Juncker offset those remarks by saying that the shared currency’s value is “dangerously high” and threatens the recovery of the Euro region. The British Pound fell to a seven-week low against the U.S. Dollar subsequent to an announcement by the World Bank in which it lowered the global growth forecast. The Sterling traded low against the Euro as Prime Minister David Cameron prepares a plan to repatriate powers from the E.U.

JPY
To everyone’s surprise, the Yen rallied versus the U.S. Dollar for a second consecutive day following criticism from the world’s leaders, who’ve suggested that the latest moves to devaluate the currency have been outrageous. The Yen gained further as the country’s policy makers voted to raise the inflation target to bolster growth.

AUD
Lastly, the Australian Dollar slipped for a second day versus the Yen on data which confirmed that Consumer Confidence remained close to a two-month low, underlining the fact that the economy in the South Pacific nation is becoming weak. The Aussie also dropped versus the majority of its counterparts following news that the World Bank reduced the global growth forecast for 2013. The New Zealand Dollar dipped after Asian stocks went down.

EUR/USD: Juncker Reignites Worries
The Euro traded lower against the U.S. Dollar after the head of the Euro Finance Ministers, Jean-Claude Juncker, issued a statement wherein he indicated that the 17-nation-currency is currently “dangerously high” and could pose threats to the region’s stabilization. Despite positive comments by the ECB governing council member Nowotny, risk aversion increased in the market as investors grew concerned. The Euro remained weak as doubts surrounding the debt ceiling talks persisted, another factor that buoyed appetite for safety. Other news showed that the German government lowered the growth forecast from 1% to 0.4% Furthermore, data revealed that the euro-zone’s CPI posted at 2.2% and increased somewhat MoM. The slight gain helped the Euro pare previous losses although the trend continued to the downside.
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GBP/USD: Sterling Hits Seven-Week Low
The British Pound fell to a seven-week low against the U.S. Dollar as worries over slow growth and concerns the U.K. may exit the Euro region affected demand. The currency remained under pressure as news from the euro zone bolstered risk aversion, especially as Germany, the region’s biggest economy lowered its economic growth forecast for 2013. Risk appetite took another hit after the World Bank announced it was lowering its global growth forecast to 2.4% for this year.
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USD/JPY: Yen Continues To Gain
The Yen extended gains against the U.S. Dollar as risk aversion increased in the market following lackluster forecasts from the World Bank, which lowered its predictions for global growth from 3% to 2.4%. The Yen rebounded on the likelihood that the Bank of Japan may not implement aggressive easing measures, since the Economy Minister stated that debasing the currency further could hurt import costs as well as households. Analysts predict that any reductions have already been factored in, and it’s possible the Yen won’t decline any more. On the economic front, reports showed that Machine Orders only declined 0.3% in November, when they were forecast to drop by -7.3% YoY. In addition, figures revealed that these climbed by 3.9% MoM. Other releases indicated that the Domestic Corporate Goods Price Index increased by 0.3% last month and Consumer Confidence posted at 39.2.
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AUD/USD: Economy Weakens
The Australian Dollar declined against the U.S. currency after the World Bank lowered the global growth forecast, boosting demand for refuge. On the data front, the Westpac Banking Corporation showed that Consumer Confidence increased 0.6%, which means it was little changed and remained close to a two-month low, suggesting that the country’s economy is weakening. Separate releases confirmed that sales of motor vehicles rose 2.2% in December.
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Today’s Outlook
Today’s economic calendar shows that the European Central Bank will issue its monthly report. Canada will publish the Foreign Security Purchases. The U.S. will release data on Building Permits, Initial and Continuing Jobless Claims, and the Philadelphia Fed Manufacturing Index. New Zealand will issue the Consumer Price Index. Japan will report on Industrial Production. And China will announce Industrial Production, GDP and Retail Sales.