Major Currency Pairs Analysis: March 08, 2012

The euro traded higher against the U.S. dollar Wednesday, on positive Greek debt swap news and slightly stronger-than-forecast U.S. employment data. Fueling the single currency rally, investors holding 58% of Greek bonds eligible for the nation’s debt swap have agreed to participate in the sovereign restructuring. The swap offer ending at 10:00 p.m. Athens time has a goal of reducing the EUR206 billion of privately held Greek debt by 53.5%. Meanwhile, Greece has ramped up its rhetoric saying it will force uncooperative debt holders into the swap via collective action clauses if needed. A report from ADP employer services indicated that U.S. companies added 216,000 workers in February compared to 170,000 in January, supporting the greenback.  In bearish news, German factory orders surprisingly declined in January missing estimates for a 0.6% increase. The euro was higher against the pound and the yen, with EUR/GBP adding 0.08% to hit 0.8351 and EUR/JPY advancing 0.42% to hit 106.52.
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GBP/USD

The pound was almost unchanged against the U.S. dollar on Wednesday, after upbeat U.S. employment data as uncertainty over the signing off of a long awaited Greek debt swap deal weighed on risk sentiment. A report by U.S. payroll processing firm ADP showed that non-farm private employment rose by a seasonally adjusted 216,000 in February, beating expectations for an increase of 205,000. The previous month’s figure was revised up to a gain of 173,000 from a previously reported increase of 170,000. Meanwhile, investors eyed Thursday’s deadline for Greece’s private creditors to sign up to a bond swap deal, which is aimed at writing down 53.5% of the country's EUR177 billion debt. A participation rate of more than 75% of creditors is required for Greece to secure a EUR130 billion bailout in order to avoid a default when a bond repayment due on March 20. Market sentiment was dented earlier after a report showed that German factory orders fell unexpectedly in January. In addition, official data showing that Australia’s economy grew less-than-expected in the last three months of 2011 contributed to the weak tone.
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USD/JPY

The U.S. dollar trimmed losses against the yen on Wednesday, pulling away from a one-week low but the greenback remained under pressure amid ongoing concerns over Greece’s financial woes. Concerns over a potential Greek default persisted ahead of the March 8 deadline for the country’s private creditors to sign on to a EUR106 billion debt swap deal, a requirement for Athens to tap a recently approved EUR130 billion bailout fund. On Tuesday, Greek finance minister Evangelos Venizelos strongly urged private sector creditors to take part in the debt swap deal and warned that bond-holders who rejected the deal would not be paid out later. Market sentiment was also dented by fears that the euro zone is slipping into a recession after data on Tuesday confirmed that the region’s economy contracted by 0.3% in the last three months of 2011, as household spending, exports and imports all fell.
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USD/CAD

The U.S. dollar was slightly higher against its Canadian counterpart on Wednesday, after slightly better than forecast U.S. employment data, as markets focused on the outcome of a Greek debt restructuring deal. In Canada, official data showed that building permits dropped 12.3% in February, the steepest drop in eight months and significantly more than the forecast 2.3% decline, reversing all of the previous month’s downwardly revised 10.5% gain. The loonie, as the Canadian dollar is also known was fractionally higher against the euro, with EUR/CAD inching up 0.02% to hit 1.3134.
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