U.S. Dollar – The dollar has not fared so well this time around under the safe haven banner and as equity futures rebound, sellers have one more reason to test the downside for the unit. This morning the dollar index is lower by close to 1% as equity futures display double-digit gains. On the data-train this morning investors will learn the latest reading for inflation with an annual pace of 2% expected. Stripping out all of the volatile stuff should leave prices 1% higher than a year ago. Initial claims are expected to maintain downside pressure and could fall by 9,000 from the previous weekly reading of 397,000. Finally the Philly Fed’s index of manufacturing health is due later and is expected to come off the boil declining from 35.9 to 28.8. The dollar index currently stands at 75.95.
Euro – The euro advanced against the dollar as contagion fears subsided following a successful auction of Spanish 10-year bonds. Following weekend negotiations at which lawmakers appeared to make progress towards a lasting solution to dealing with the sovereign debt crisis, more willing buyers showed up at the auction compared to the last event one month ago. Data earlier in the session showed a rebound during January for construction output by 2.1%. In December the series declined by 2.0% according to today's data. Against a weakening dollar the euro extended its gains to a two-week high reaching $1.4052 according to Interactive Brokers data.
British pound – Gains for the pound accelerated on a data-free session to reach $1.6170. Investors looking for monetary tightening out of the Bank of England have recently been beaten back by global events as the central bank tries to spin gold out of flax and create growth at a time when inflation has remained elevated beyond target for almost one year. The euro made gains against the British unit rising to 86.90 pence earlier.
Canadian dollar – The resumption of risk appetite propelled the Canadian dollar higher on Thursday. The unit continues to draw attention on economic fundamentals and, unlike the Aussie dollar, commands a far smaller yield cushion above the U.S. dollar, leaving it less vulnerable to risk aversion woes. At the same time, the Canadian dollar commands more respect at a time of Middle East tensions, which are escalating almost unwatched in Bahrain and Libya. The best barometer here is the price of crude oil, which should break back above $100 per barrel before the day is done. The Canadian dollar rose to buy $1.0125 U.S. cents this morning.
Andrew Wilkinson is a Senior Market Analyst at Interactive Brokers LLC
Note: The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Interactive Brokers LLC nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither IB nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.