The US dollar remains largely range bound against a basket of currencies despite weaker than expected economic data. The Commerce Department said the nation's trade gap shrank 6.6% to $37.3 billion in January as oil imports fell to their lowest since February 1999. Data from the Labor Department indicated initial claims for state unemployment benefits slipped 6,000 to 462,000 last week. The market is a touch more volatile today as investors' appetite for risk interchanges.
Also weighing on the dollar were comments from Standards and Poor's stating that though the dollar is still the most important world currency, rising levels of US debt and dependence on foreigners to finance much of this debt may pose risks to the currencies primacy. Without a credible plan to rein in fiscal spending, external creditors could reduce dollar holdings which keeps government borrowing costs low, and ultimately put pressure on the US's AAA credit rating.
The euro is trading within a tight range as investor's appetite for risk alternates. European Union policymakers injected a cold dose of reality into talk of creating a European monetary fund, stating the principle of no bailouts for countries in financial trouble must stay. Eurogroup Chairman Jean-Claude Juncker said that such a fund should protect only the interests of the entire Eurozone and not any individual member of the currency bloc. ECB governing Council member Yves Mersch said central banks were not in the business of budget bailouts.
The British pound rose after inflation data came in slightly higher than expected, though the gains were minimal ahead of the economic and political concerns of the upcoming general election. A quarterly survey from the Bank of England showed Britain's expectations for inflation over the next 12 months rose to 2.5% in February.
The Japanese yen weakened overnight after reports showed the economy grew less than initially estimated in the fourth quarter. Japan's Q4 GDP was revised to +0.9% quarter-over-quarter vs. a preliminary +1.1%.
The Canadian dollar initially lost its momentum against the greenback after oil prices fell below $82 a barrel, but recouped some of those losses after Canada's Q4 capacity increased. Data from Statistics Canada reported industries ran at 70.9% of capacity in Q4, up from 68.7% in the previous quarter for the first substantial increase in three years.
The Australian and New Zealand dollars held on to their recent gains as bets of further interest rate rises in Australia offset any concerns that China may tighten policies further. Many analysts are expecting the Reserve Bank of Australia to raise interest rates by another 25 basis points in April.
10-Year Treasury Note Yield: 3.739%
Dow Jones Industrial Average: 10,556.30 - 11.03