The dollar is trading mixed in comparison to its major rivals on Wednesday, but overall is little changed. The news of the day has been relatively light, with the exception of the S&P downgrade of the Greek credit rating.
Standard and Poor's downgraded the credit rating outlook on Greece to 'negative' and said worsening economic activity would make it difficult for the government to make further spending cuts, which is crucial to secure the next disbursement under the international bailout program.
The outlook on the country's long-term sovereign credit rating was revised to 'negative' from 'stable', while the 'CCC/C' long- and short-term foreign and local currency sovereign credit ratings remained intact.
Fitch Ratings affirmed Germany's triple-A credit rating on Wednesday with stable outlook, citing the longstanding credit strengths and robust economic performance of the country over the past two years.
However, the biggest Eurozone economy remains exposed to the systemic component of the crisis, Fitch said. A significantly deeper recession of its large eurozone trading partners could also push Germany into recession with negative repercussions for the fiscal stance, it warned.
The dollar reached over a 2-session high of $1.2326 versus the Euro on Wednesday, but has since eased back to around $1.2365.
German trade surplus unexpectedly increased in June as imports declined at a pace double than that of exports, indicating that the sovereign debt crisis and the economic slowdown has dampened both domestic and foreign demand. Trade surplus for June was EUR 17.9 billion compared to expectations of EUR 14.6 billion. The surplus figure grew from EUR 15.6 billion in May and EUR 12.5 billion in June last year.
Germany's industrial production decreased more-than-expected in June, adding to fears that the economy may have contracted in the second quarter, preliminary data showed Wednesday. Overall industrial production fell a calendar-and-seasonally adjusted 0.9 percent from May, the Ministry of Economics and Technology said. The rate of decline was slightly faster than 0.8 percent forecast by economists.
French business confidence weakened marginally as expected by economists for July, survey results from the Bank of France revealed Wednesday. The business sentiment index fell to 90 from 91 in June.
France's merchandise trade deficit increased in June, after falling in the previous month, according to data released Wednesday by the Directorate General of Customs and Excise. The trade deficit increased to EUR5.99 billion in June from EUR5.47 billion in May. Economists were looking for a shortfall of EUR5 billion.
The Bank of England cut U.K.'s growth estimate as fiscal consolidation and Eurozone debt crisis weigh on demand. Moreover, a below-target inflation forecast added hopes of more asset purchases by the year end.
In its quarterly Inflation Report released Wednesday, the central bank said economic growth is likely to be around 2 percent in two years, down from the 2.6 percent expansion estimated in May.
"The impact of the euro-area debt crisis, together with the fiscal consolidation and tight credit conditions at home, is likely to continue to weigh on demand," the report said. The bank said the outlook for growth remains unusually uncertain.
The greenback has pulled back from an early morning high of $1.5574 versus the pound sterling on Wednesday, to around $1.5655.
The buck reached a low of Y78.225 versus the Japanese Yen this morning, but has since bounced back to around Y78.445.
Japan posted a current account surplus of 433.3 billion yen in June, the Ministry of Finance said on Wednesday, down 19.6 percent on year and falling for the 16th consecutive month. The headline figure topped forecasts for a surplus of 415.4 billion yen and a 24.9 percent annual contraction after showing a surplus of 215.1 billion and a 62.6 percent plunge in May.
Labor productivity in the U.S. rose by more than expected in the second quarter, according to a report released by the Labor Department on Wednesday, although the report also showed a sharper than expected jump in labor costs.
The report said productivity increased by 1.6 percent in the second quarter following a revised 0.5 percent drop in the first quarter. Economists had been expecting productivity to increase by about 1.3 percent compared to the 0.9 percent decrease originally reported for the previous quarter.
Unit labor costs rose by 1.7 percent in the second quarter compared to economist estimates for a 0.9 percent increase.
by RTT Staff Writer
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