The dollar has continued to gain ground versus its major European rivals on Thursday, despite several weaker than expected economic reports. Meanwhile, the U.S. currency has extended its recent losses versus the Japanese Yen.
A set of proposals released yesterday by the European Commission helped to take some of the pressure off of concerns over the situation in Spain. The Commission proposed that the Eurozone's permanent bailout fund must be given authority to directly recapitalize the troubled banks.
The commission said a 'banking union' will be another step towards full economic and monetary union. Allowing direct bank recapitalization by the European Stability Mechanism will serve as a link between banks and their national governments, the executive branch of the EU said.
The yield on Spanish 10-year government bonds also eased a bit on Thursday, back to around the 6.5 percent level.
The European Central Bank President Mario Draghi said Thursday that the bank cannot fix the turmoil in the currency bloc and urged Eurozone leaders to come up with a 'vision' for years ahead.
Speaking as the Chairman of the European Systemic Risk Board, Draghi called for centralization of financial sector regulations. Also, the central banker hinted that he supports the direct injection of capital into banks by the permanent rescue fund.
The greenback retreated versus the Euro in early trade Thursday, but has since bounced back near Wednesday's high. The U.S. currency briefly touched a new 23-month high of $1.2335.
Eurozone inflation slowed more than expected to a 15-month low in May, flash estimates from Eurostat showed Thursday. Annual inflation fell to 2.4 percent from 2.6 percent in April. The rate was slightly below the expected rate of 2.5 percent.
The number of persons out of work in Germany remained unchanged in May, while the jobless rate ticked down suggesting that the economy's strong resilience to the turmoil in the rest of euro area prompted employers to hold on to their hiring plans.
Seasonally adjusted unemployment remained unchanged at 2.872 million in May, while economists had forecast a decline of 7,000. The unemployment rate edged down to 6.7 percent in May from 6.8 percent in April. Economists had expected the rate to hold steady at 6.8 percent for a fifth straight month.
Germany's retail sales increased at a slower pace in April, but the rate of growth exceeded economists' forecast, data released by the Federal Statistics Office showed Thursday. Retail sales turnover, in real terms, increased a calendar and seasonally adjusted 0.6 percent on a monthly basis in April, faster than the 0.2 percent growth economists expected.
The Bank of England still has room for more asset purchases and has enough tools to keep the economic recovery going, Deputy Governor Charles Bean said in a newspaper interview, published Thursday.
"What we as policy makers can do is make it clear that if things do take a turn for the worse that we will try and do everything we can to work against that and to try and keep the recovery going, he told the Eastern Daily Press.
The buck has also extended its month long upward trend versus the pound sterling on Thursday, reaching a 4 1/2 month high of $1.5360.
Consumer confidence in the United Kingdom improved slightly in May, but remained negative overall. The GfK NOP research group's confidence index for May improved two points to minus-29 from the April reading of minus-31. The reading was better than the minus-33 reading forecast by most economists.
The dollar has extended yesterday's losses against the Japanese Yen on Thursday, reaching a 3 1/2 month low of Y78.203. The U.S. currency has been declining versus the Yen since late March, when it had been trading around Y84.
Industrial output in Japan added a seasonally adjusted 0.2 percent on month in April, the Ministry of Economy, Trade and Industry said in Thursday's preliminary reading, expanding for the second straight month. The headline figure was shy of forecasts for an increase of 0.5 percent following the 1.3 percent increase in March.
While the U.S. economy saw continued growth in the first quarter of 2012, the Commerce Department released a report on Thursday showing that the pace of growth was slower than previously estimated. The report showed that GDP increased at an annual rate of 1.9 percent in the first quarter compared to the initial estimate of 2.2 percent growth. The downward revision to the pace of growth came in line with expectations.
Chicago-area business activity expanded at a much slower rate in the month of May, according to a report released by the Institute for Supply Management - Chicago on Thursday, with the business barometer falling to its lowest level in well over two years.
The report showed that the Chicago business barometer fell to 52.7 in May from 56.2 in April, although a reading above 50 still indicates growth. Economists had been expecting the business barometer to show a much more modest decrease to a reading of 56.1.
Employment in the U.S. private sector rose by less than expected in the month of May, according to a report released by payroll processor Automatic Data Processing, Inc. (ADP) on Thursday, with the report providing further signs of sluggishness in the labor market.
ADP said private sector employment rose by 133,000 jobs in May following a downwardly revised increase of 113,000 jobs in April. Economists had expected an increase of about 154,000 jobs compared to the addition of 119,000 jobs originally reported for the previous month.
New claims for U.S. unemployment benefits unexpectedly showed a modest increase in the week ended May 26th, according to figures released Thursday by the Labor Department.
Initial jobless claims came in at a seasonally adjusted level of 383,000 for the week, up 10,000 from the previous week's revised level of 373,000. The level of initial claims was higher than the predictions of most economists, who had expected new claims to hold steady at the 370,000 level initially reported for the previous week.
by RTT Staff Writer
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