The dollar has weakened in comparison to its major rivals on Friday. The highly anticipated second round of elections in Greece will be held on Sunday and the outcome could determine whether Greece remains a member of the Eurozone, or makes an exit. Central banks are reportedly prepared to inject cash in the event of an escalation in turmoil in the region after the elections.
European Central Bank President Mario Draghi said on Friday that inflation expectations remain well anchored and there is no inflation risk in any euro area country. "Should risks to price stability emerge, the Eurosystem has sufficient tools at its disposal to absorb excess liquidity," Draghi said in a speech at the 14th ECB Watchers Conference in Frankfurt. "And should risks to price stability emerge, the Eurosystem has sufficient tools at its disposal to absorb excess liquidity."
Greece can decide about its membership in the euro area, but the country would have to bear the consequences, European Central Bank Governing Council member Jens Weidmann reportedly said in a joint interview.
In the interview jointly given to newspapers Kathimerini, Corriere della Sera, El Pais and Publico, the Bundesbank president said if it decides to exit, then Greece will be worse affected than any other member nations.
The greenback recovered some ground Friday morning, following its losses versus the Euro during the previous two sessions. The currency has since reversed direction and hit a one-week low of $1.2652.
Employment in the euro area decreased for the third consecutive quarter in the first three months of 2012, as companies reduced their staff strength to cut costs in the face of weak demand and uncertain economic outlook. Data from Eurostat on Friday showed that the number of persons in employment in the single currency bloc decreased a seasonally adjusted 0.2 percent sequentially in the first quarter. This follows a fall of 0.3 percent in the fourth quarter, which was revised up from 0.2 percent fall.
The trade surplus in the Eurozone surged in April from a month ago. But it does not reflect an improvement in foreign trade, as this was driven by a bigger fall in imports. The seasonally adjusted trade surplus increased in April to EUR 6.2 billion from EUR 3.7 billion in the previous month. The surplus also exceeded the expected level of EUR 4.2 billion.
Bank of England Governor Mervyn King said that the case for more stimulus is increasing amid deterioration in the economic outlook. "With signs of a deterioration in the outlook, especially in world markets, the case for a further monetary easing is growing," he said in a speech at the Mansion House on Thursday.
The dollar was relatively flat in comparison to the pound sterling early Friday, around $1.5540, but has since dropped to over a 2-week low of $1.5680.
The Bank of Japan left its benchmark interest rate unchanged and refrained from initiating fresh stimulus as policymakers await Greek election which in turn will decide the direction of Eurozone debt crisis.
The Policy Board on Friday unanimously decided to hold the key uncollateralized overnight call rate at around 0-0.1 percent. The size of the asset purchase fund and credit facility was also left unchanged at JPY 40 trillion and JPY 30 trillion, respectively.
The buck also held level against the Japanese Yen on Thursday, around Y79.45. The U.S. currency has declined to a week and a half low of Y78.603 on Friday.
New York manufacturing activity has seen only a slight expansion in the month of June, according to a report released by the Federal Reserve Bank of New York on Friday, with the index of activity in the sector falling by much more than economists had anticipated.
The New York Fed said its general business conditions index fell to 2.3 in June from 17.1 in May, although a positive reading still indicates growth in regional manufacturing activity. Economists had expected the index to show a much more modest decrease to a reading of 13.8.
With a drop in manufacturing output offsetting increases in mining and utilities production, the Federal Reserve released a report on Friday showing an unexpected decrease in U.S. industrial production in the month of May.
The report showed that production edged down by 0.1 percent in May after a downwardly revised 1.0 percent increase in April. Economists had expected production to come in unchanged following the 1.1 percent increase originally reported for the previous month.
Consumer sentiment in the U.S. deteriorated by much more than anticipated in the month of June, according to a report released by Thomson Reuters and the University of Michigan on Friday, with the drop likely reflecting the disappointing jobs data. The report showed that the consumer sentiment index fell to 74.1 in June from the final May reading of 79.3. Economists had expected the index to show a more modest decrease to a reading of 77.5.
by RTT Staff Writer
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