• Eurozone inflation disappoints
  • US gains by default
  • Chinese government intervenes
  • Oil shrugs off tensions

After yesterday’s decent manufacturing news the Euro reversed on poor CPI numbers for December.  Many economists expected a rise of 0.3% and were disappointed when inflation rose by only 0.2%.  This indicates that the ECB will need to react further to try and reach their target of 2% annual inflation.  The Euro is taking a hard hit on this and is down 0.75% as of this writing.

After yesterday’s equities route froze the markets in China the government has intervened once again to try and get the stumbling economy back on track.  The silver lining for China is that this government intervention has proved to be a positive for the currency with the Chinese Yuan rebounding somewhat from 5 year lows.

Despite tensions in the Middle East between Saudi Arabia and Iran, oil prices have remained relatively stable for the moment falling only $0.02 per barrel yesterday as the global focus was on China and the stock markets.  With tensions rising though there appears to be no relief in sight for oil and it is predicted that Middle Eastern governments will need to increase yields on bonds to continue to finance their budgets to make up for the shortfall caused by low oil prices.  This will only serve to exacerbate the issue and hurt currencies such as the Canadian dollar.

The winner of all this global uncertainty is of course the US dollar which despite soft data coming out recently has found significant strength against several currencies and is generally up across the board.  With FOMC minutes due tomorrow and Non-Farm Payroll numbers on Friday economists will be looking closely at these reports to indicate any reason for a move one way or another.

EURUSD: Euro down significantly on poor inflation data.

GBPUSD: The pound is trading down on overall Eurozone weakness and USD strength.

AUDUSD: Aussie dollar down more this morning as Chinese uncertainty continues.

USDCAD: Canadian dollar trading close to flat as oil seems to be stable for the moment.