US Dollar Lower Against Euro, British Pound As Risk Trends Consolidate

Daily Forex Fundamentals | Written by DailyFX | Feb 19 09 06:01 GMT |

The US Dollar slipped -0.5% against the Euro and the British Pound as Asian stock markets rose for the first in four sessions, weighing on safe-haven currencies. Switzerland's Trade Balance is on tap in European hours but risk trends are likely to sustain dominance over forex price action. Key Overnight Developments Australian Vehicle Sales Fall as Companies Cut Back Spending Euro, British Pound Rebound Against US Dollar As Risk Trends Consolidate Critical Levels The Euro and the British Pound added 0.5% apiece against the US Dollar in overnight trading as Asian stock markets rose for the first in four sessions, weighing on safe-haven currencies. Asia Session Highlights Australian New Motor Vehicle Sales fell -1.1% in January, amounting to a whopping -16.9% decline in annualized terms. Sales have sagged as consumer confidence continued to fall while the unemployment rate rose to 4.8%, the largest monthly gain since February 2001. The global credit shortage has also helped steer consumers away from big-ticket purchases as financing has become increasingly elusive even for typically well-qualified applicants. Still, sales of passenger and sport-utility vehicles both rose (albeit very modestly), adding 0.8% and 0.5% from the preceding moth, respectively. Most of the month-to-month decline (-1.1%) was accounted for by a -7.5% contraction in sales of 'other' vehicles, a category that includes utility transports, vans, and trucks. The negative implications here extend well beyond pointing to sluggish consumer spending, alluding to a sharp slowdown in business activity. Westpac's leading economic index said the Australian economy will shrink at a rate of -1.2% in the first half of 2009, suggesting the antipodean nation is on pace to see its first recession since 1991. The Bank of Japan voted unanimously to keep interest rates at 0.10%. The bank said they are planning to buy up to 1 trillion yen in corporate bonds starting March 4th as well as extend existing special lending programs through September and relaxed collateral rules through December in an effort to keep funding accessible for Japanese companies. Policymakers said economic conditions have 'deteriorated significantly' and will continue lower for the time being, with consumer prices expected to start falling in the spring. Still, the bank said they see the economy beginning to recover in the second half of the fiscal year (October 2009 – April 2010 in Japan). Stock markets rebounded across Asian exchanges, helping risk-linked currencies higher against the US Dollar. Japanese exporters and Australian commodity firms led gainers as the Yen plunged 1.4%; Iluka Resources Ltd, the world's largest zircon producer, said second-half earnings rose nearly sevenfold; and rumors circulated that a Chinese company may buy a stake in Australia's number-three iron ore producer Fortescue Metals Group Ltd. Euro Session: What to Expect Switzerland's Trade Balance may slip into deficit for the first time since August 2005: the surplus was completely erased in December as outbound shipments plunged -13.3%, the most on record, reflecting deepening recession in Switzerland's key export markets in the US and Europe. With no noticeable improvement in overseas demand, it seems unlikely that there is much scope for trading terms to head anywhere but lower. That said, one way that the headline figure could improve would be if the decline in imports were to outpace that of exports. Unemployment has risen to a 2-year high of 3.3%, weighing on disposable incomes to discourage consumption, including that of foreign-made products. On balance, the economic calendar offers little that can be expected to stir significant volatility. Rather, risk sentiment is likely to remain in focus as the primary driver of forex price action. Wall St consolidated to end the day down just -0.2%, Asian stocks advanced about 0.5% and the VIX volatility index slipped -0.4%. Overall, this points to consolidating risk trends, creating room for a corrective pullback in safe haven assets including the US Dollar. US index futures are about 0.5% higher ahead of the opening bell in Europe. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent