Daily Report: EUR/USD, GBP/USD, AUD/USD And NZD/USD

The U.S. Dollar declined as risk appetite improved in the market following an announcement by the European Central Bank indicating that its decision to leave interest rates at the same level was unanimous. However, the greenback remained close to 2 ½-year highs versus the Yen. Surprisingly positive news out of China helped improve investor sentiment, especially since the data revealed that exports increased by 14.1 percent even though economists only predicted a 5 percent hike. China also reported a Trade Surplus which went up to 31.6 bn Yuan. In the U.S., the Labor Department indicated that the application for Initial Jobless Claims rose from 367,000 to 371,000 when a decline to 365,000 had been expected. Continuing Claims dipped from 3236K to 3109K. Other metrics showed that Wholesale Inventories went from 0.3 to 0.6 percent though a drop of 0.2 percent had been predicted. The Dollar Index, which is utilized to track the U.S. currency versus six other monetary units from trade partner countries, slipped by 1.1 percent.

This marked the biggest intra-day decline since September. Meanwhile, the Canadian Dollar rallied against its U.S. peer for the first time in three days after China confirmed that its exports surpassed estimates, raising speculation that improvements in the Chinese economy will lead to higher demand for Canadian commodities. The Loonie pared gains as the previous day’s data suggested that the country’s real estate market was slowing down faster than anticipated. The Bank of Canada stated that the decline in home prices is a big threat to the nation’s economy, especially as household debt was higher than disposable income. Crude oil, Canada’s biggest export, traded at $93.70 per barrel on the New York Mercantile Exchange.

The Euro advanced the most in five months against the U.S. Dollar after European Central Bank President, Mario Draghi, issued a statement suggesting that the economy would recover gradually. Mr. Draghi went on to say that all of the central bank’s policy makers agreed to leave the benchmark interest rates unchanged. The 17-nation currency rose to the highest level since the summer of 2011 versus the Yen as Spain announced that it sold more than its maximum target during the first auction of 2013. The British Pound gained against the U.S. Dollar following a release indicating that the Bank of England kept the cost of borrowing money at 0.5 percent while keeping the asset purchasing program on hold. The Sterling also benefitted from an increase in risk appetite brought on by positive comments by ECB President Draghi. The Pound declined against the Euro.

The Yen plunged against all of its most traded counterparts as a document released by Bloomberg News revealed that the Japanese government expects the BOJ to implement aggressive monetary easing. In a statement issued on Wednesday, the Bank of Japan’s Governor, Masaaki Shirakawa, indicated that the bank is working closely with the government.

Lastly, the Australian Dollar climbed to the highest since September of 2008 against the Yen and traded at a three-week high versus the greenback after China released surprisingly positive economic data revealing that imports climbed to a record high. The New Zealand Dollar traded at the highest in over four year versus Japan’s monetary unit following gains in Asian stocks and the release of stellar Chinese metrics.

EUR/USD- ECB Makes Unanimous Decision
While investors speculated that the European Central Bank would lower the interest rates given the slumping economic data issued across the region, the ECB agreed to leave the interest rates at 0.75 percent. The Euro found support in comments by ECB President Draghi suggesting that the Euro-zone is slowly recovering. The shared currency remained strong after Italy and Spain saw their borrowing costs decline. Italy reported that during its auction of 12-month government bonds, borrowing costs dropped to the lowest since the start of 2010. The Euro jumped the most when Mr. Draghi indicated that the decision to leave the rates at 0.75 percent was unanimous.
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GBP/USD- BOE Issues Its Decision
The British Pound rallied against the U.S. Dollar as risk appetite dominated market sentiment following positive comments by European Central Bank President Draghi. Risk appetite remained strong as the Bank of England kept the benchmark interest rates at 0.5 percent and its asset buying program at 375 bn Pounds. The Pound continued to gain as China surprised the market with data revealing unexpected increases in its exports and an expansion of the trade surplus. Signs that China’s economy was gaining momentum raised demand for high risk assets.
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AUD/USD- Aussie Rallies On The Dragon’s Data
The Australian Dollar rose close to a one-month high versus the greenback after China reported a record increase in its imports and an accelerated climb in its exports. China is Australia’s biggest trade partner. Analysts predict that if the Chinese economy stays on the recovery course it will help boost the Australian Dollar even higher. On the domestic data front, Australia’s releases indicated that Building Approvals increased 2.9 percent in November, advancing for the third time in a r
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NZD/USD- Trade Deficit Swells
New Zealand’s Dollar traded close to a one-month high versus the greenback following the release of better than expected economic data out of China, and it remained supported as Asian stocks climbed. However, its gains were capped after official reports indicated that the country’s trade deficit expanded to the widest in over three years in November as a result of an increase in imports, and the rise in the currency’s value. According to analysts, the latter factor dampened returns from exports. Official data revealed that the South Pacific nation’s trade deficit swelled to 700 million NZD in November after it posted at 666 million NZD the prior month.
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Today’s Outlook
Today’s economic calendar shows that Switzerland will issue data on CPI. The U.K. will report on Industrial and Manufacturing Production. It will also announce the NIESR GDP Estimate. Canada will release the Trade Balance. The U.S. will publish the Import Price Index and Trade Balance.