The dollar has climbed against its major European competitors on Wednesday, largely due to its safe haven status. The turmoil in Spain ahead of the government's budget announcement tomorrow has investors concerned. The protests in Madrid led to clashes between protesters and police and the region of Catalonia calling for elections.
Philadelphia Federal Reserve President Charles Plosser said Tuesday that the Fed's third round of quantitative easing is not likely to do much to benefit growth or employment. He said the move risks the central bank's credibility.
In an interview to the Wall Street Journal on Tuesday, Prime Minister Mariano Rajoy said his government would seek a bailout only if it is satisfied that the conditions attached to it are "reasonable". But, if Spain's bond yields remain "too high for too long", "I can assure you 100 percent that I would ask for this bailout," Rajoy told the daily.
Spain's benchmark 10-year yield moved closer to 6 percent today as Rajoy's government prepares to present the 2013 budget tomorrow, which is expected to unveil more austerity measures. Protesters took to streets in Madrid and clashed with the police.
Meanwhile, political pressure on Rajoy is mounting with the autonomous region of Catalonia calling for election in November. The region, which generates nearly 20 percent of Spain's economic output, had also raised secession calls in recent days due to dissatisfaction over Rajoy's handling of the crisis.
The Bank of Spain on Wednesday signaled further decline in the gross domestic product in the third quarter amid continued financial difficulties in the economy. The available data for the third quarter suggest that the GDP kept "falling at a significant pace in an environment in which financial stress remained at very high levels," the bank said in its monthly economic bulletin.
According to official data, Spanish GDP contracted 0.4 percent quarter-on-quarter in the second quarter of 2012, deepening recession in the Eurozone's fourth-largest economy. This followed a 0.3 percent decline in GDP in the first quarter.
European Commissioner for Economic and Monetary Affairs Olli Rehn reportedly said Tuesday that he does not foresee the possibility of another restructuring of Greek debt. Rehn declined to comment more on Europe's future plans on Greece, saying the country is currently undergoing a review of its bailout program by the troika.
The dollar broke out of yesterday's trading range around the $1.2950 level versus the Euro on Wednesday and has climbed to around $1.2860.
Eurozone leading index rose 0.6 percent month-on-month in August to 105.3, the Conference Board said Wednesday. This was the first increase in the index in six months. The uptick followed no change in July and 0.2 percent fall in June. The positive outcome was "fueled by good stock market performance and improved business confidence," said Jean-Claude Manini, the Conference Board's Senior Economist for Europe.
French consumer confidence dropped slightly in September weighed down by households' weak assessment about future economic situation as well as labor market conditions. The consumer confidence index fell to 85 in September from 86 in August, and 87 in July, survey data from the statistical office Insee showed Wednesday. The index was forecast to remain steady at 86.
Germany's EU harmonized inflation slowed in September as expected by economists, preliminary data from the Federal Statistical Office showed Wednesday. The EU measure of inflation, as per the harmonized index of consumer prices (HICP), decelerated to 2.1 percent in September from 2.2 percent in August. The latest figure matched economists' expectations.
The buck has rebounded from yesterday's low of $1.6267 versus the pound sterling on Wednesday, to around $1.6150.
UK's high street sales volumes increased more than expected in September, recovering from the previous month's decline, data from a survey by the Confederation of British Industry (CBI) showed Wednesday.
In the latest distributive trade survey, 33 percent of the surveyed retailers said sales increased from last year in September, while 27 percent reported decline. The resulting balance of 6 percent was in line with retailers' expectations. Economists were looking for a balance of 5 percent in September.
The greenback has remained relatively flat in comparison to the Japanese Yen on Wednesday, hovering around the Y77.750 level.
New home sales in the U.S. unexpectedly showed a modest decrease in the month of August, according to a report released by the Commerce Department on Wednesday, although the report also showed that home prices jumped to a five-year high.
The Commerce Department said new home sales edged down 0.3 percent to a seasonally adjusted annual rate of 373,000 in August from the revised July rate of 374,000. Economists had expected new home sales to climb to an annual rate of 380,000 from the 372,000 rate originally reported for the previous month.
by RTT Staff Writer
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