Better Than Expected US Data

The US dollar hit a two week high on February 17th as better than expected housing and industrial output data pushed the greenback higher in currency markets. The euro remains pressured by the fiscal problems in Greece, Portugal and Spain. Jessica Hoversen of MF Global Ltd., in Chicago stated, “When it comes to economic fundamentals, the U.S. is ahead of most other regions. If you combine that with the fact that the situation in Greece is still very far from being reconciled, what you get is support for the dollar.” On Tuesday European finance ministers gave Greece one month to show that the nation’s deficit reducing measures are being implemented. Greek fiscal problems have pressured the euro since late last year and currency traders raised euro short positions to a record high last week.

FOMC Minutes Due

Investors are waiting for the release of January’s FOMC meeting and will be searching for any sign of the Fed’s exit strategies. Kansas City Federal Reserve Bank President Thomas Hoenig said the central bank should get rid of some of the assets the Fed bought to stabilize the economy.  Kathy Lien, of GFT stated, “When you have one FOMC member voting in favor of more hawkish language in the monetary policy statement, additional members are likely to follow suit and traders will be looking to see if this sentiment is reflected in the minutes. If the minutes reveal optimism, it could fuel further gains in the dollar.”

EU Ministers Offer No Solution to Greek Fiscal Crisis

German opposition to any kind of aid to Greece remains fierce. A recent poll showed that a majority of Germans are opposed to aid to Greece and a recent Dutch poll revealed similar sentiments. Germany’s Chancellor Angela Merkel stated that “not a single euro” should be used for aid to Greece. European finance ministers said after a two day meeting that they want assurances that Greece will be able to cut spending before they make any decision on aid. The finance ministers did not offer specifics on the Greek issue much to the chagrin of traders and investors. Michael Hart of Citigroup stated, “European leaders are missing an opportunity to clarify their stance vis-à-vis Greece and to provide markets with an explicit roadmap. The relief rally in euro-dollar could be short-lived.” On Tuesday the euro gained as much as 1.3% after Greek Prime Minister George Papaconstantinou said that his government does not need a bailout. European finance ministers will meet in early March to determine what actions need to be taken in regard to Greece.