The dollar extended its losses against the Euro on Thursday, but was little changed against the rest of its major competitors. The minutes from the most recent FOMC meeting were released Wednesday afternoon and they suggest that the Federal Reserve may proceed with a third round of quantitative easing.
The Federal Reserve is losing patience with the pace of the fragile U.S. economic recovery. Many members of the Federal Reserve say additional monetary policy accommodation is likely warranted unless the economy improves substantially. This may open the door for another round of quantitative easing measures at their next meeting in September.
The Fed said information reviewed at the July 31-August 1 meeting indicated that economic activity increased at a slower pace in the second quarter than earlier in the year and that labor market conditions had improved little in recent months.
Consumer spending was tepid as the unemployment rate stayed above 8 percent. Policymakers also expressed concerns that manufacturing production slowed significantly in the second quarter following a large gain in the first quarter.
Despite the slight improvement in the housing market, the Fed seems prepared to jump-start the economy with additional asset purchases. The longer the recovery proceeds at a snail's pace, the more susceptible the economy will be to external shocks such as the European sovereign debt crisis.
Germany's Finance Minister Wolfgang Schaeuble said on Thursday that allowing more time to Greece to implement economic reforms is unlikely to solve the country's problems.
In an interview to SWR Radio, Schaeuble said, "More time is no solution to the problems." More time could also mean 'more money', he said, adding that euro area had reached its limits of what is economically feasible in providing funding to Greece.
The dollar extended its losses against the Euro to a third session on Thursday and reached a low of $1.2588, its lowest level since July 4th.
Eurozone consumer sentiment declined for the third consecutive month in August, preliminary data released by the European Commission showed Thursday. The flash consumer confidence indicator dropped sharply to -24.6 from July's -21.5. Economists were looking for a score of -22. The latest reading is the worst in at least the last 12 months.
The Eurozone private sector contracted for the seventh successive month in August indicating that the economy is moving firmly into a recession. Output, as well as new orders, continued to shrink as a combination of austerity and financial market tension dampen both domestic and foreign demand.
The composite output index rose marginally to 46.6 from 46.5 in July, flash estimate from Markit Economics showed Thursday. The reading was forecast to remain unchanged at 46.5. Output declined in both the manufacturing and service sectors, with manufacturers again reporting by far the steeper pace of contraction.
However, the Purchasing Managers' Index (PMI) for manufacturing rose to 45.3, a four-month high, from 44 in July. The expected reading was 44.2. Meanwhile, the services PMI came in at 47.5, down from 47.9 in July. The index stayed below the consensus forecast of 47.7.
The German economy expanded for the second straight time during the quarter ended June as robust growth in exports and domestic spending offset contraction in investment, data from Destatis showed Thursday. Gross domestic product rose 0.3 percent sequentially in the second quarter, in line with initial estimates, but slower than the 0.5 percent growth seen in the previous quarter.
Germany's private sector activity contracted at the fastest pace since June 2009, flash data from Markit Economics revealed Thursday. The flash composite output index fell to 47 in August from 47.5 in July. The reading stayed below the 50 mark for the fourth consecutive month.
The manufacturing Purchasing Managers' Index rose more than expected to 45.1 from 43 in July. The index was forecast to rise slightly to 43.4. Meanwhile, services activity contracted unexpectedly in August. The index came in at 48.3, a 37-month low, down from 50.3 a month ago. Economists had forecast the index to ease to 50.1.
The French manufacturing sector contracted at a slower pace in August, preliminary data released by Markit Economics and HSBC Bank showed Thursday. The seasonally adjusted purchasing managers' index (PMI) for the manufacturing sector increased to a four-month high of 46.2 in August from 43.4 in July, indicating a slower decline in activity. Economists were looking for a reading of 43.7.
Most people in the U.K. would have been worse off without quantitative easing and interest rate reduction to record low, the Bank of England said in a paper published on Thursday. The asset purchases added over GBP 600 billion wealth to households, equivalent to around GBP 10,000 per person if assets were evenly distributed across the population, it said.
The buck is little changed against the pound sterling on Thursday, bouncing back from a 3-month low of $1.5912, to around $1.5875.
UK's high street sales decreased modestly in August, contrary to economists' forecast for an increase, data from a survey by the Confederation of British Industry (CBI) showed Thursday.
In the latest distributive trade survey, 27 percent of the surveyed retailers said sales increased in August, while 31 percent reported a decrease. The resulting balance of -3 percent was broadly in line with retailers' expectations. Economists were looking for a balance of 16 in August.
The greenback has held steady around the Y78.500 level versus the Japanese Yen on Thursday, following yesterday's sharp decline.
First-time claims for U.S. unemployment benefits unexpectedly showed a modest increase in the week ended August 18th, according to a report released by the Labor Department on Thursday.
The report showed that initial jobless claims edged up to 372,000 from the previous week's revised figure of 368,000. The modest increase came as a surprise to economists, who had expected jobless claims to slip to 365,000 from the 366,000 originally reported for the previous week.
New U.S. home sales rebounded to a stronger level than expected in July following a drop in June that proved somewhat less steep than initially reported. According to figures released Thursday by the Commerce Department, new single-family home sales for July came in at a seasonally adjusted annual rate of 372,000, a 3.6 percent increase from the revised June rate.
Most economists had predicted a rebound following the drop in June, though most had expected the bounce back of new home sales to reach a lower, 362,000, annual sales rate.
by RTT Staff Writer
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