By Omer Esiner of Travelex
The U.S. dollar maintained its generally buoyant tone overnight, continuing to benefit from worries over Greece's ability to finance its massive budget deficit. Greek lawmakers requested official talks with EU and IMF leaders yesterday, a move seen as a step closer to obtaining a 40 billion euro lifeline. Market participants, however, remain unclear on how such a lifeline would be administered.
Moreover, investors worry that Germany, where voters are staunchly opposed to any financial aid for Athens, could delay or even bloc a bailout. The euro, which had risen to a three-week high earlier this week, pared those gains amid a backdrop of renewed sovereign credit concerns.
The Japanese yen initially firmed as investors sought lower-yielding assets amid a selloff in stocks and commodities overnight. It quickly gave up its initial gains, however, after a member of the leading party called for easier monetary policy and steps to weaken the yen to combat persistent deflationary pressures in the world's second-largest economy.
A poll showing the head of the U.K.'s Liberal Democrats put in a better performance than the leaders of the nation's top two parties in yesterday's debate sparked concerns of a hung parliament following next month's general election and undermined some of the pound's recent strength.
Investors await U.S. housing starts, the University of Michigan's consumer sentiment index and two speeches by
: Sovereign credit concerns in the euro zone continued to weigh on the single currency and risk appetite in general. Last weekend's announcement that the EU and IMF will provide up to 40 billion euros in aid to Greece, if needed, initially reduced some of the market's concerns about Athens' ability to finance its gapping deficit. However, uncertainty over what kind of conditions financial aid will come with has rekindled some of the market's nervousness.
Moreover, investors remain worried that the need for unanimous approval for aid in the EU could see Germany, whose voters remain overwhelmingly opposed to assistance for Greece, delay or block aid for Greece.
The fact that debt issues in the euro zone are likely to remain in place for some time, should see the market continue to view EUR rallies as selling opportunities. Data overnight showed the 16-member bloc's balance of trade surprisingly post a surplus of 2.6 billion euros in February. March's CPI was confirmed at 1.4% (year/year), just under the 1.5% (year/year) expected.
: The Japanese yen briefly firmed amid a backdrop of softer stocks and commodities overnight. The yen's low yield benefits it during periods of increased risk aversion and financial market uncertainty. It quickly gave up those gains after a member of the ruling Democratic Party called on the Bank of Japan to adapt more reflationary policies that include increased asset purchases and currency intervention to weaken the yen.
Officials worry that Japan's very anemic recovery and lack of domestic demand could see it slip back into its decade-long battle against deflation. Easier monetary policy and the threat of BOJ intervention should leave the yen vulnerable to additional losses in the months ahead.
: Sterling pared some of this week's gains overnight after the results of the first of three electoral debates saw Britain's third party lead in initial poll results. Nick Clegg, the head of the U.K.'s Liberal Democrats, was seen as outshining his counterparts from Britain's two main parties, the Conservatives and Labour. The initial results suggest that the Liberal Dems could rob votes from the leading Conservatives and narrow any marginal lead they have enjoyed over Labour. Any signs that May's election will result in a hung parliament will fan fears of political gridlock and likely see the pound revert back toward the lower end of its recent ranges.
: Canadian manufacturing sales rose by just 0.1% (month/month) in February, well below market forecasts for 0.8% (month/month). January's originally reported 2.4% (month/month) was revised down to 1.8% (month/month). Softness in the auto and energy sectors was largely responsible for the weaker-than-expected read in factory sales. The loonie slipped toward lows of the session on the news.
The U.S. dollar firmed after data showed a 1.6% (month/month) rise in housing starts last month. February's originally reported -5.9% (month/month) was revised up to show a 1.1% (month/month) improvement. Permits, a forward-looking gauge of housing starts, rose by 7.5% (month/month).
Omer Esiner serves as the Senior Currency Market Analyst at Travelex, Inc. a global financial institution specializing in corporate foreign exchange services and international payment solutions. In this capacity, he monitors, analyzes and interprets the economic, financial, political and technical factors that drive the movements of more than 100 currencies for Travelex. Mr. Esiner explains the currency markets' reaction to market events to clients, employees and members of the media.
You can view his daily reports, recording briefings, and quarterly reviews posted
. As an expert in foreign exchange, Mr. Esiner is quoted regularly by the financial media including The Wall Street Journal, CNN, Dow Jones Newswires, Reuters, the Nightly Business Report, National Public Radio, among others. Based in Washington, D.C., Esiner joined Travelex in February 2000. Prior to his current position, Esiner was a currency trader for several years. Mr. Esiner holds a bachelor's degree in economics from the University of Maryland, College Park. He is fluent in Turkish and proficient in Spanish.