Overall: The dollar strengthened as the U.S. futures and global equity markets dropped at a sustained pace in the overnight session, with most of the majors trading to near the lows of the last days of trading. But the momentum reversed when Wall Street opened, sending the dollar lower against the higher-yielders for the first 60 minutes of trading. Stocks basically range-traded through small gains and losses for most of the day, and currencies followed suit as little new information came into the market.
There were no U.S. economic reports on Monday.
The Euro (Eur/Usd) rose 70 pips during the early hours of the Asian session, but started to decline as U.S. futures dropped. At the same time, the pair was testing the 20-day moving average. The pair fell 115 pips from the overnight high, and continued the decline during the European session. After rising in the first 60 minutes of Wall Street trading, the pair range traded with a base of support around 1.2620. The high for the N.Y. session was on 1.2662.
The Sentix reading resumed its downward path, falling to a new all-time low for the Euro-area. The index fell 6.6 points from February, to -42.7. The Euro-zone's assessment is in-line with the other important regions. According to the release, the current situation index for the Euro-zone reached -59.75, an all-time low, while the expectation index resumed its decline after three consecutive months of improvements.
The Pound (Gbp/Usd) plunged 220 pips overnight as the U.K. financial system has entered into a prolonged slump. The selling saw the pair break below the 1.40 level which had held the pair for almost two weeks. The plunge continued into the 1.3760 area, the lowest level seen in sterling since June 2001.
The Aussie (Aud/Usd) plunged over 100 pips overnight after the pair failed another attempt at the 20-day simple moving average. The fall continued until Wall Street opened but after about an hour of trading, the pair resumed its decline and eventually bottomed out in the .6300 area.
The Cad (Usd/Cad) advanced 80 pips tonight and closed the 30-pip gap seen at the Sunday open. It moved near the 1.29 area, where it topped in the previous two days of trading. The pair was mostly lower in N.Y. as crude gained about $1.50 on the day.
In economic news, the Canadian Mortgage and Housing Corp. (CMHC) reported that housing starts in Canada were at a seasonally adjusted annual rate (SAAR) of 134,600 in February, down 12.31% from January. Single family starts fell 11% to 44,500 (SAAR) while multiple starts, which include condominiums, row houses and other non-detached units, fell by 17.5% to 63,000 units (SAAR).
The Swissy (Usd/Chf) moved without too much volume or momentum since the Sunday session started. The pair tried twice to break above the 1.1600 area, but has been rejected, each time, on relatively strong selling volume. The pair declined steadily in N.Y. as stocks spent most of the day in negative territory, finding a base only at the 1.1575 area.
In February, unemployment in Switzerland rose to 3.1%, as expected. In unadjusted terms, the Swiss unemployment jumped to 3.4% in February, from 3.3% in the period before. Previously the unemployment rate had remained stable for a longer period, near 2.5%
The Yen (Usd/Yen) lacked momentum during the overnight session. The pair fell in the first minutes after the opening bell, but then recovered. The yen managed to break above the Friday’s high after the London open, when the pair formed a large bullish pin bar and it traded very flat in N.Y. despite the slow decline in equities. For now, it looks as if the yen is not moving with the S&P, something which traders will need to stay mindful of.
Japan had its first deficit in the last 13 years (in the current account in January) due to the global recession killing demand for exports. The global slump has eroded earnings, which has prompted companies to lay off workers and slow down production. Shipments to the United States, which is Japan’s largest trading partner, plummeted 52.9 percent in January when compared to one year earlier.