• Foreign demand for US Treasury bills up
  • EU emergency meeting scheduled for Wednesday
  • Waiting on Bank of England’s report on inflation
  • Chinese imports down in January

The US dollar attempted to rally yesterday, though ultimately struggled, as there was no major data to move the currency.  That said, bond traders are well known for presciently anticipating economic events or news which could affect bond prices.  Therefore, an increased demand for US Treasury bills auctioned yesterday suggests a growing global concern over the possible Greek exit from the Eurozone.

Since winning the national election in January, a newly elected Greek government has made it clear that it will no longer comply with the austerity requirements imposed by the ECB for additional loans.  In turn, the ECB cut off emergency funding to Greek banks last week.  And with no access to the ECB funding, Greek banks are rapidly running out of money to meet the demand for deposit withdraws.

Consequently, without an emergency loan from the ECB in the coming weeks, Greece may be forced to default on its debt payments and exit the Eurozone. For that reason, the European Union called for an emergency meeting for this Wednesday to discuss if the ECB should extend a bridge loan to Greece to avoid possible financial turbulence.

Meanwhile, a foreign demand for US 3- and 6- month Treasury bills soared yesterday. There were more than 4 times the demand for the amount of bills offered in the auction, suggesting that overseas investors are eager to hold onto safe dollar assets until the Greek crisis passes.  As a consequence, the US dollar is expected to be well supported today and inclined to go higher ahead of Wednesday’s EU emergency meeting.

EUR-USD continues to trade near 1.1300 ahead of Wednesday’s EU emergency meeting over the Greek debt crisis.  The market remains bearish on the euro as Greece continues to take hardline stance ahead of the EU meeting.   There is no major economic data or event scheduled for today.

GBP-USD traded sideways overnight and managed to find a temporary support at 1.5220.  The market is waiting on a quarterly report on inflation from the Bank of England tomorrow to see if the pound could continue its recent rally.  Stay tuned.

USD-CAD fell by 0.7 percent overnight to 1.2480 in conjunction with a rise in oil prices.  As mentioned in yesterday’s update, the Canadian dollar movements have been closely correlating with the oil price movements in recent weeks.

AUD-USD is has settled above 0.7800 overnight and continues to show a downward bias.  A slide in Chinese imports in January is putting additional pressure on the Australian dollar today.  The January employment report will be released on Thursday.

Have a great day.