The dollar has weakened in comparison to its major competitors on Tuesday, before the FOMC meeting begins on Wednesday. There has been speculation among investors that the Federal Reserve will announce further economic stimulus on Thursday, at the conclusion of its 2-day meeting. Fed Chairman Ben Bernanke's press conference Thursday afternoon will also be closely watched.
Germany's top court is set to deliver a crucial judgment on the viability of the European Stability Mechanism, or ESM, and the fiscal pact on Wednesday, which would decide the fate of the EUR 500 billion bailout fund and the future course of the region's fight with the protracted debt crisis.
While politicians expressed confidence that the bailout fund will survive, many economists feel that the Federal Constitutional Court in Karlsruhe may delay the ruling or even impose some conditions, rather than rule against it. Both houses of the Parliament approved the ESM and the fiscal pact on June 29, with two-thirds of the German lawmakers voting in favor of it.
Peter Gauweiler, a lawmaker in Chancellor Angela Merkel's ruling party and one of the plaintiffs who lodged a temporary injunction request against the ESM, said in a statement on Sunday that the fund should not be ratified until the ECB revoke its plans to become "a hyper rescue fund."
Europe still has a "long way to go" in resolving its debt crisis, International Monetary Fund Deputy Managing Director Zhu Min reportedly said Tuesday.
"The crisis is not over," he was quoted as saying during a speech at the World Economic Forum in the Chinese port city of Tianjin. "We are still in the middle" and "there is a long way to go," he said. Zhu also urged Europe to keep faith in the single currency.
The dollar has fallen below yesterday's range around the $1.2800 level versus the Euro on Tuesday and has set nearly a 4-month low of $1.2870.
Germany's wholesale price inflation accelerated for the second consecutive month in August, data released by the Federal Statistical Office showed Tuesday. The wholesale price index increased 3.1 percent on an annual basis in August, faster than the 2 percent growth seen in July. In June and May, the index rose 1.1 percent and 1.7 percent respectively.
French payroll employment in principally market sectors declined 0.1 percent in the second quarter, final data from the statistical office Insee showed Tuesday. That follows a 0.1 percent rise in the first quarter.
The buck has also dropped below yesterday's range near the $1.600 level versus the pound sterling and has set nearly a 4-month low of $1.6083 on Tuesday.
The U.K. visible trade deficit narrowed sharply in July driven by strong growth in exports, weathering the global economic slowdown. The visible trade gap fell more-than-expected to GBP 7.1 billion in July, the smallest since February 2011, data from the Office for National Statistics revealed Tuesday. The deficit was forecast to drop to GBP 10 billion from GBP 10.1 billion in June.
The greenback has also weakened against the Japanese Yen on Tuesday, dropping to over a 3-month low of Y77.700.
Business confidence among Japanese major firms improved to 2.2 in the third quarter, marking the first increase in four quarters, a quarterly survey published by the Ministry of Finance showed Tuesday.
With the value of exports falling by more than the value of imports, the U.S. trade deficit widened in July but still came in much narrower than the expectations of most economists. According to figures released by the Commerce Department on Tuesday, the U.S. exported $183.3 billion worth of goods and services in July, compared to imports of $225.3 billion for the month.
The difference marks a trade deficit of $42.0 billion in July compared to the June trade deficit of $41.9 billion. While slightly wider compared to the previous month, the trade deficit is much narrower than the $44.3 billion deficit projected by most economists, in part because of the revision of the June deficit figures from the $42.9 billion initially reported.
by RTT Staff Writer
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