The Euro continues to trade within a tight range as the market tries to feel out all the uncertainty that surrounds it. The big news this week has been the private investor’s hesitation to accept a debt swap on Greek treasuries. This news seemed to hamper any Euro movement throughout much of the week. It seems to be settled for now with 60% of investors agreeing to reduce their bond holdings. Additionally, the ECB met on Thursday and decided to keep their interest rates at 1%.
There is concern growing for the value of the Japanese Yen, which has decreased over the last couple of weeks. Japan has their largest account deficit in 3 decades at 437.3 billion JPY. The Bank of Japan usually has their trade surplus to rely on but recently posted a negative trade surplus. Some economists predict the account deficit will rebound in March, which is typically when Japan has its largest surplus. However, concern in the market is that Japan will continue to have a diminishing surplus in the coming months.
The Bank of Canada also met on Thursday and decided to leave interest rates unchanged. Although the price of oil has risen above 106 dollars per barrel and the CAD has moved past parity with the USD, the RBC continues to site global economic problems for deciding not to raise interest rates. Their economy is showing modest signs of growth and inflation. The currency rallied as the RBC kept their interest rates unchanged and predicted inflation to be around 2% for the remainder of the year. Additionally, Canadian household spending is expected to remain high as households increase their debt burden. Exports have been supported by stronger than expected US demand.