July 10, 2012 - Forex

The U.S. Dollar traded mixed against the majority of its counterparts as market investors remained cautious ahead of a key meeting between E.U. Finance Ministers. The greenback rose early in the day following the release of economic data indicating that Japan?s Machine Orders slumped while China?s Consumer Price Inflation gained at the slowest pace since January of 2010. The Canadian Dollar slipped to the lowest price in more than one week against the U.S. currency despite a Bank of Canada survey showing that most businesses remain optimistic about the future of the economy. The currency was also weighed down by skepticism in the markets as investors remain pessimistic that the meeting of European Finance Ministers will yield a tangible solution to the debt crisis.

The sheer fact the Euro region?s Finance Ministers agreed to meet to discuss the debt crisis was enough to bolster the Euro?s strength, causing it to rebound from two-year lows versus the U.S. Dollar. The 17-nation currency rallied against the Yen after the European Central Bank?s President, Mario Draghi, suggested the bank?s officials may consider another interest rate cut should the economy necessitate such a move. The Euro erased early day losses after the European Commission stated that future capitalization of the region?s banks by the ESF won?t require a ?sovereign guarantee.? But sentiment remained fragile after official reports confirmed Investor Confidence fell the most since July of 2009. The British Pound traded higher against the greenback through its advance was limited as investors continued to worry over the sovereign debt crisis.

The U.S. Dollar steadied against Japan?s Yen after weak Chinese economic releases supported demand for refuge. The Yen remained under pressure on reports showing Japan?s Trade Surplus slipped to its lowest level since 1985 and Machine Orders plummeted the most in seven years.

Lastly, the South Pacific currencies declined against the U.S. Dollar as worries over global growth weighed on risk appetite. Metrics indicating that China?s Consumer and Producer Prices eased more than forecast in June fueled concerns that the world?s second biggest economy has slowed down.

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EUR/USD- Euro Rebounds From 2-Year Low

The Euro recovered from two-year lows, as the region?s Finance Ministers met to discuss possible measures to solve the debt crisis. But sentiment towards the shared currency remained fragile after ECB President Mario Draghi reiterated comments from last week wherein he suggested the bank?s actions point to a slowdown in growth. Prior to his speech before Parliament, Mr. Draghi indicated that inflation would probably drop below 2% in 2013. On the data front, Investor Confidence in the E.U. plummeted to the lowest since summer of 2009, and remained in negative territory. According to the Sentix Group, Investor Confidence fell from -28.9 to -29.6.

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GBP/USD- Pound Makes Slight Gains

The British Pound gained against the U.S. Dollar though gains were capped by sustained concerns over the Euro-zone?s debt crisis. The Pound was also weighed on by worries over the outlook for global growth, especially since China reported disappointing economic data. Official figures revealed that China?s Consumer Price Inflation grew at the slowest pace in more than two years, and the future is uncertain; according to Premier, Wen Jiabao, the nation?s economy still faces ? downward pressures.?

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USD/JPY- Trade Surplus Slumps

The U.S. Dollar steadied against the Japanese Yen after the country?s Ministry issued an announcement indicating May?s Trade Surplus contracted to 0.28 trillion Yen in May after it had posted a surplus of 0.29 trillion in April. These figures disappointed investors who expected a surplus increase to 0.42 trillion Yen. Other data revealed that Core Machinery Orders fell more than expected. According to the figures, the orders dropped 14.8 % in May. The Yen also dipped versus the Euro in anticipation of the meeting of Finance Ministers.

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USD/CAD- Loonie Weakens Most In One Week

The Canadian Dollar dropped the most in more than one week against its U.S. counterpart as risk aversion continued to dominate market sentiment. The Loonie slipped in tandem with commodity-related currencies like the Australian and New Zealand Dollars while investors eye the outcome of the meeting between the Euro region?s Finance Ministers. According to analysts, worries over the Spanish yields is weighing on sentiment, and bolstering flight from risk. Spain?s 10-year yields reached 7.11 % reversing last week?s drop.

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Today?s Outlook

Today?s economic calendar shows that the U.K. will report on Industrial Production MoM and YoY, Trade Balance, Manufacturing Production and the NIESR GDP Estimate. Canada will issue data on Housing Starts. Japan will release the Tertiary Industry Activity Index. And Australia will issue the Westpac Consumer Sentiment and Home Loans.

Source: http://traderbase.iforex.com/iforex-daily-july-10-2012/2178

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