G-20 Meeting Ends Without Reassurance

The weekend meeting of G-20 finance ministers ended with discussions surrounding the potential expansion of IMF resources, with non-euro area members demanding more effort from Europe before providing any help. All eyes are now on the ECB’s second 3-year LTRO later this week which is expected to ease funding pressures in the region. With a light economic calendar today, markets are awaiting the outcome of bond auctions across the Eurozone and German lawmakers vote on the second bailout package for Greece later today. At home, data released earlier today indicated that average house prices in the UK remained flat for February.

Pound Sterling – UK Markets

Sterling is trading under pressure against the US Dollar this morning after Home track reported that UK home prices remained stagnant for the second consecutive month for February. Highlighting the bleak housing market scenario, the agency projected further decline in coming months amid waning demand. However, the Pound has managed marginal gains against the Euro after the BoE policymaker, Paul Fisher, indicated that the central bank is unlikely to resort to further easing if the economy continued on its current trajectory and showed no contraction over the next few months. The release of GDP data on Friday revealed stronger-than-expected consumption and export components and has fanned speculation that growth may not be so dismal after all. Meanwhile, the British Chancellor, George Osborne, affirmed that budget for March does not include borrowing more money to lift spending or cut taxes.

US Dollar – US Markets

The US Dollar has strengthened against the majors this morning amid concerns over global economic growth. On the fiscal front, New York Fed President, William C. Dudley, cautioned that interest costs on government debt would eventually increase as the central bank raises borrowing costs and added that it is “essential” for the US to start aiming for fiscal balance. On Friday, there was more evidence of improving US fundamentals, with data indicating more-than-expected improvement in Thomson Reuters/University of Michigan consumer sentiment index. Additionally, housing market showed signs of revival as sales of new single-family homes in the US rose to an annual rate of 321,000 for January, surpassing market expectations. Today’s economic calendar features pending home sales and Dallas Fed manufacturing index, both of which are expected to be largely positive.

Euro – European Markets

The Euro has weakened against both the Pound and the US Dollar this morning after leading economies at the G20 meeting asked Europe to commit more resources to fight the debt crisis before seeking their help. Meanwhile, with little on offer in terms of economic releases in the Eurozone, markets appear to be glued to the outcome of German lawmakers vote on the second bailout package for Greece, later today. Additionally, bond auctions in Germany, Italy and Belgium will also be keenly tracked by market participants. Meanwhile, ECB’s second liquidity operation due later this week is expected to provide direction to the Euro. The first of these operations seemingly had a positive impact in easing funding pressures in the region and it will be interesting to watch the impact of the second LTRO. Data released earlier today indicated that French producer price inflation rose more-than-expected while M3 money supply in the Eurozone climbed for January.

Other Currencies – Highlights

The Kiwi Dollar has slipped against the US Dollar this morning after New Zealand swung to a trade deficit for January. Data indicated that New Zealand’s merchandise trade deficit stood at NZ$199 million for January, higher than market estimates and compared to a downwardly revised surplus of NZ$306 million posted for December. Additionally, a weak start to the European equity market session today has further crimped demand for high yield assets. Market participants now await the release of New Zealand’s business confidence and money supply data, due later this week, for further insights into the health of the economy.