Decrease of World Stock Markets Boosts Greenback
The US dollar rose sharply against major currencies amid falling global stock markets and an unprecedented growth in the volatility index, increasing risk aversion. Investors are returning to more reliable assets, in the results of which the dollar, gold prices and US government bonds are growing. The yield of 10-year US Treasury bonds fell to 2.7%. The main European indices traded with a decrease. The FTSE 100 declined by 1.9%, DAX declined by 2.4%, and CAC 40 fell by 2.7%.
The euro strengthened mildly against the US dollar at the beginning of the European session, receiving support from strong data from Germany. Production orders in Germany increased by 3.8% in December compared to the previous month, when the decrease was 0.1%. On an annualized basis, production orders rose by 7.2%, which is higher than the economists' forecast of 3.1%, however, lower than the previous value (9.1%). In addition, activity in the German construction sector expanded in January at the fastest pace for almost 7 years. German Construction PMI rose to 59.8 in January from 53.7 in December.
The US trade deficit widened to USD -50.4b in December. Canada trade deficit widened to CAD -3.19b in December. Eurozone retail PMI fell from 53.0 in December to 50.8 in January. Australia retail sales declined by 0.5% mom in December, trade balance indicated AUD -1.36b deficit in December. RBA left cash rate unchanged at 1.50%. Governor of the Bank of Japan Haruhiko Kuroda excluded the possibility of an early rate hike, arguing that inflation in Japan hasn't even reached 1%.