Better Than Expected Housing and Industrial Data

The US dollar was supported by better than expected economic data and the minutes of a recent Fed meeting that showed Fed policymakers are discussing exit strategies from stimulus programs. Strong US housing and industrial production data pushed the dollar within reach of a seven month high. The euro fell once again against the dollar as Greek fiscal worries persist, putting immense pressure on the euro. Many experts and analysts believe that if Greece implements the harsh budget cutting measures necessary to solve the nation’ debt problems could slow euro zone growth and force the European Central Bank to postpone tightening monetary policies. The Fed minutes showed that several Fed policymakers want to sell securities as soon as the US economy is on a sure footing. Johan Javeus of SEB in Stockholm stated, “It hasn’t been a huge move but the Fed minutes have helped the dollar as they were perceived as hawkish. Whereas before there was a sense that the ECB would be ahead of the Fed in raising rates it now looks increasingly likely that the Fed will move before the ECB.”

Greece Struggles to Implement Unpopular Austerity Measures

The euro has fallen a full 5% since January due to concerns about the fiscal health of several EU nations most notably Greece. Many investors fear that Greece’s problems could spread to other EU nations and cause investors to lose confidence in euro zone assets. German Chancellor Angela Merkel’s government has taken a particularly hard stance against any EU aid to Greece. Greek Prime Minister George Papandreou said that Greece is not seeking a bailout but needed time to implement severe budget cutting measures. Measures include wage and pension reductions, higher taxes and fuel prices and raising the retirement age. The proposed measures have prompted several strikes by public sector employees and are unpopular throughout the country. At the present time there are no concrete policies in place to deal with the Greek debt crisis.

IMF Gold Sale Pressures Aussie and Kiwi Dollars

The Aussie dollar fell after the International Monetary Fund announced the sale of 191.3 tons of gold on the open market to raise funds for lending.  Spot gold prices dropped after the IMF announcement putting downward pressure on both the Aussie and Kiwi dollars. The Aussie dropped 0.2% to $0.8960 and the Kiwi fell 0.2% to $0.7006 following the IMF announcement. Jonathan Cavenagh of Westpac stated, “The gold sale news is weighing on the Aussie especially against the U.S. dollar which is seeing a biddish tone.”