Positive Eurozone Report Softens Dollar

The U.S. dollar is easing in the beginning of the week due to a more stable outlook in the Eurozone. The euro saw offers of $1.3150 and sterling …

The U.S. dollar is easing in the beginning of the week due to a more stable outlook in the Eurozone. The euro saw offers of $1.3150 and sterling pushed to $1.5630, while the Australian dollar sought parity. The yen started the week underperforming against the dollar, but the Scandies and antipodeans outperformed the reserve currency. Equity and bond markets both remain mixed, but oil and gold are both up in the commodities market. Global trading strengthened somewhat following a short period of speculating and fear buying in the wake of North Korean leader Kim Jong Il’s death. For more on this continue reading the following article from TheStreet.

U.S. dollar is softer vs. majors Tuesday as the eurozone news stream improves. EUR bounce is meeting resistance just below 1.31 and still feels heavy.

The euro is stretched according to short-term (intraday) technical studies and has run into a wall of offers up toward $1.3150. Sterling has moved tentatively through the $1.5630 area, a retracement objective. Although markets are thin, a close above there will target the $1.5800 area.

The Australian dollar is flirting with parity. This seems to be giving the clearest signal that follow-through may be difficult in North America today. Against the yen, the dollar has been confined to a 24-tick range in uninspiring turnover. It is interesting to note that the dollar has not closed below its 20-day moving average against the yen since Nov. 24. It comes in today near 77.77 yen. So far today, the Scandies and the antipodeans are outperforming vs. USD and are up on the day, while the yen is underperforming vs. USD and is basically flat on the day.

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Equity markets are mixed, with Asian stocks largely down and European stocks opening up. Euro Stoxx 600 is up 0.5% (financials up 0.9%) while U.S. equity market futures are pointing to an up open.

Bond markets are mixed. Periphery yields are mostly lower. Spain auctioned a bigger than targeted 5.6 billion euros in paper today at lower yields compared to last month. The U.S. 10-year yield is up 3 basis points, Germany is up 4 basis points, France is down 1 basis points, and the UK is up 1 basis point. The two-year U.S.-German spread is at -3 basis points vs. -2 basis points Monday, a new low for the year.

The commodity complex is mostly higher, with oil and gold up, and copper down. Emerging markets currencies were mostly weaker. Korean markets recovered some of Monday’s losses after knee-jerk reaction to North Korea news.

Hungary’s central bank meets today at 8:00 AM EST and is expected to hike rates again by 50 basis points to 7.0%. The economy is slowing, but the forint weakness is stoking price pressures.

Reserve Bank of Australia minutes suggest it is still in easing mode given its dovish tone. Concerns about Europe remain high, sees limited wage pressures and inflation remaining within target over the next couple of years.

U.S. housing starts/building permits are due out at 8:30 a.m. Starts are expected to rise 1.1% m/m in November vs. -0.3% m/m drop in October.

This article was republished with permission from TheStreet.


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