Daily Report: Dollar Rallied Against Most Of Its Peers

The U.S. Dollar rallied against the majority of its peers as market investors await the outcome of the G-20 meeting set to take place in Moscow this Friday. Talks about weakening currencies were dampened by the release of solid U.S. economic data. According to the Commerce Department, Retail Sales rose 0.1 percent in the first month of 2013. Though analysts had expected a higher increase, a hike in Payroll Tax went into effect, which may have reduced demand for goods and services.

Core Retail Sales, which exclude the sale of vehicles, climbed by 0.2 percent. Other reports indicated that Business Inventories for the month of November were revised to reflect a 0.2 percent hike instead of the previously announced 0.3 percent gain. The Canadian Dollar remained more or less unchanged against its American peer as comments by the central bank’s governor, Mark Carney, continued to weigh on the currency. The bank reiterated that an increase in interest rates would be less likely at this time.

The Euro gained early in the session when an announcement revealed that Industrial Production increased. However, the shared currency declined against the majority of its peers after Portugal reported a major rise in its Unemployment rate and as many investors believe Gross Domestic Product will show a contraction in the region’s economy during the last quarter. The British Pound didn’t fare well either and tumbled for a third consecutive day versus the Euro after the Bank of England’s Governor, Mervyn King, stated that the country’s economic recovery is still facing risks. The bank’s officials also suggested that the outlook for Consumer Prices is much higher than was previously predicted in November due to the fact that the Sterling has since dropped in value while production output dipped. The greenback also edged higher versus the Swiss Franc, as investors await the G-20 summit.

The Yen traded mixed against the greenback and the Euro after Bank of England Governor King intimated that currencies should be allowed to rise and fall based on monetary easing measures. His comments raised further concerns that the G-20 may criticize Japan for its devaluation of the Yen. The U.S. Dollar slumped versus the Yen, as investors remain jittery over comments made by the G-7 suggesting that the Japanese currency sustained “excessive moves.”

Lastly, in the South Pacific, the Australian Dollar advanced against most of the majors as data revealed that Consumer Confidence reached a two-year high, thereby reducing speculation the central bank will cut the benchmark interest rates. The New Zealand Dollar also gained versus the greenback, but its advance was limited as risk appetite ebbed in anticipation of the upcoming G-20 meeting. Furthermore, data confirmed that Home Prices in the small nation rose 7.2 percent from a year earlier, suggesting that New Zealand’s economy remains strong.

EUR/USD- Euro Dips On Jobless Rate
The Euro weakened against the U.S. Dollar after speculators looked beyond the release of Industrial Production and grew increasingly concerned following the announcement of Portugal’s Unemployment figures. According to the National Statistics Institute in Lisbon, the jobless rate went from 15.8 to 16.9 percent, the highest in the Euro monetary bloc’s history. The shared currency had gained early in the day when data showed that Industrial Production advanced 0.7 percent, and in Germany, Industrial Production climbed 0.8 percent. The Euro-zone is expected to report on the 4th quarter growth rate today; economists have predicted that the figures will confirm a contraction of the economy, another factor that weighed on the Euro.
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GBP/USD- BOE Issues Bearish Report
The British Pound declined against the U.S. Dollar after the Bank of England indicated that economic growth may be slow in the months to come. In its quarterly Inflation Report, the bank indicated that the outlook for Consumer Prices is much higher due to a rise in the energy bills. Bank governor King suggested that the bank will do more if needed, but that there’s only so much that monetary easing can accomplish. His comments caused the Sterling to plunge even lower.
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USD/JPY- Yen Higher On G7 Concerns
The U.S. Dollar slumped against the Yen after it traded mixed throughout the day as investors continued to worry about comments made by G-7 officials, wherein they indicated their concerns over the “excessive movements” showcased by the Yen. Market investors are also trading cautiously as they await the Bank of Japan announcement regarding any changes in monetary policy, and as they look forward to the start of the G-20 summit tomorrow. Investors worry that the G-20 will frown on Japan for debasing its currency.
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AUD/USD- Aussie Climbs On Confidence
Australia’s Dollar rose to a one-week high versus its U.S. counterpart despite that investors sought safe havens in anticipation of the G-20 summit. The so-called Aussie climbed after data revealed that a gauge of Consumer Confidence reached a two-year high. According to the Westpac Banking Corporation, Consumer Confidence surged 7.7 percent this month, after posting a 0.60% hike in January.
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Today’s Outlook
Today’s economic calendar reveals that the European Central Bank will release its monthly report, and the Euro region will announce its GDP. The U.S. will release Initial and Continuing Jobless Claims. New Zealand will publish Retail Sales and Core Retail Sales. Japan will issue figures on Industrial Production and China may release the FDI.