The dollar has given back some of its recent gains at the end of the trading week. The growth concerns of the past few days eased on Friday after the release of China's second quarter GDP result overnight. The news helped to spark a rally in the European stock markets. Some positive earnings results and the surprisingly good Producer Price Index result for June helped the U.S. markets to snap their recent losing streak. The increase in the risk appetite of investors translated into some weakness in the U.S. currency.
China's economic growth eased to a three-year low of 7.6 percent year-on-year in the second quarter, fresh figures from the National Bureau of Statistics showed Friday. In the first quarter, the gross domestic product was up 8.1 percent year-on-year. The outcome was almost in line with economists' expectations of 7.7 percent expansion.
Moody's Investors Service on Friday downgraded Italy's credit rating by two notches, citing contagion risk from Greece and Spain, higher funding costs and a deteriorating economic outlook. Italy's government bond rating was cut to Baa2 from A3. The agency maintained the 'negative' outlook on the rating, citing "substantial" risks to implementing the planned fiscal reforms.
"Italy is more likely to experience a further sharp increase in its funding costs or the loss of market access than at the time of our rating action five months ago due to increasingly fragile market confidence, contagion risk emanating from Greece and Spain and signs of an eroding non-domestic investor base," Moody's said in a statement.
Italy saw its three-year borrowing costs decline at a debt auction on Friday, just hours after Moody's downgraded the country's rating citing contagion risk. Falling yields at the auction indicate that investors shrugged off Moody's warning and retained the optimism derived from the latest EU summit and Spain's efforts to meet its deficit goals.
The greenback has pulled back from a high of $1.2166 versus the Euro Friday morning, to nearly a 2-day low of $1.2256.
Retail business activity in France rebounded in June as sales of food products improved after lackluster performance in the first two months of the second quarter, a survey by Bank of France showed Friday. Retail activity grew 4.3 percent month-on-month in June on a seasonally and working-day adjusted basis. On a quarter-on-quarter basis, sales declined 1 percent in the June quarter.
The Bank of England and HM Treasury on Friday unveiled details of a lending scheme that was introduced to boost lending to the real economy and thereby lift it out of the double-dip recession. The new measure called the Funding for Lending Scheme (FLS) is designed to improve bank lending to households and firms. Banks that increase lending to households and businesses will be able to borrow more from the central bank at lower cost.
Under the scheme, the Bank of England will make GBP 80 billion available if banks raise their lending by 5 percent. Moreover, there will be no upper limit on the size of borrowing.
The dollar has been steadily giving back ground in comparison to the pound sterling on Friday. The U.S. currency retreated from Thursday's high of $1.5392, to a 2-day low of $1.5572 on Friday.
The U.K. leading index declined in May due to the weakness in stock prices and business sentiment, the Conference Board said in a report on Friday. The leading index fell 0.8 percent in May, following a 0.2 percent rise in April. Only two of the seven components made positive contributions to the index.
The Bank of Japan on Friday said that the economic activity has started to pick up moderately amid firm domestic demand. The central bank, in its monthly report, noted that public investment as well as business fixed investment continued to increase. Private consumption also continued to increase moderately due to the effects of measures to stimulate demand for automobiles.
The buck extended yesterday's losses versus the Japanese Yen on Friday and reached a 3-week low of Y79.061.
Japan's industrial production declined more than estimated in May, final data from the Ministry of Economy, Trade and Industry showed Friday. Industrial output was down 3.4 percent from a month ago, sharper than the 3.1 percent drop initially estimated.
Producer prices in the U.S. unexpectedly showed a modest increase in the month of June, according to a report released by the Labor Department on Friday, with prices rebounding slightly after showing a sharp drop in the previous month.
The Labor Department said its producer price index edged up by 0.1 percent in June after tumbling by 1.0 percent in May. The modest increase surprised economists, who had expected prices to see further downside and fall by about 0.4 percent.
Consumer sentiment in the U.S. has unexpectedly seen a continued deterioration in the month of July, according to a report released by Thomson Reuters and the University of Michigan on Friday. The report showed that the consumer sentiment index fell to 72.0 in July from the final June reading of 73.2. Economists had been expecting the index to edge up to 73.5.
by RTT Staff Writer
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