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Dollar Extends Losses Against Euro After Jump In Jobless Claims

Dollar Extends Losses Against Euro After Jump In Jobless Claims
11/15/2012 12:40 PM ET

The dollar has extended its recent losses versus the Euro on Thursday and is also down slightly against the pound sterling. Weekly jobless claims increased more than expected today, while the Philly Fed index came in with a larger than expected decline. Meanwhile the impending fiscal cliff continues to be a source of concern and uncertainty for investors.

President Barack Obama has reiterated that higher taxes on wealthier Americans should be part of an agreement to address the looming fiscal cliff. Obama once again called for a balanced approach to dealing with the U.S. budget deficit. "But what I'm not going to do is to extend Bush tax cuts for the wealthiest 2 percent that we can't afford and, according to economists, will have the least positive impact on our economy," he said.

With the data reflecting the impact of the major disruptions caused by Hurricane Sandy, the Labor Department released a report on Thursday showing that initial claims for U.S. unemployment benefits rose by much more than anticipated in the week ended November 10th.

The report showed that jobless claims jumped to 439,000, an increase of 78,000 from the previous week's revised figure of 361,000. Economists had expected jobless claims to climb to 376,000 from the 355,000 originally reported for the previous week.

Consumer prices in the U.S. saw a modest increase in the month of October, according to a report released by the Labor Department on Thursday, with the price growth matching economist estimates.

The Labor Department said its consumer price index inched up by 0.1 percent in October after rising by 0.6 percent in each of the two previous months. The modest price increase came in line with the expectations of economists.

Conditions for New York manufacturers declined at a modest pace in the month of November, the Federal Reserve Bank of New York revealed in a report on Thursday, with the general business conditions index remaining negative for the fourth consecutive month.

The report said the general business conditions index rose to a negative 5.2 in November from a negative 6.2 in October, although a negative reading indicates a continued contraction in regional manufacturing activity. Economists had expected the index to climb to a negative 5.0.

Reflecting the disruptive effects of Hurricane Sandy, the Federal Reserve Bank of Philadelphia released a report Thursday morning showing an unexpected contraction in regional manufacturing activity in the month of November.

The Philly Fed said its diffusion index of current activity plunged to a negative 10.7 in November from a positive 5.7 in October, with a negative reading indicating a contraction in regional manufacturing activity. Economists had expected the index to edge down to a positive 4.5.

Spain should urgently seek an emergency aid, European Central Bank Governing Council member Luc Coene was quoted as saying by Belgian daily De Standaard on Thursday.

Coene, who also heads Belgium's central bank, expressed concern over the Spanish economy as the country's 10-year bond yields have climbed back to around 6 percent in the recent days.

The fiscal and monetary possibilities to stimulate the Eurozone economy have become very remote. "The margins have exhausted," Coene said in remarks made during an event at Ghent University.

On Greece, Coene said a partial waiver of Greek debt is necessary to bring it to the sustainable level. His views were similar to that expressed by the International Monetary Fund. However, Germany has repeatedly rejected the idea.

The dollar has extended its losses against the Euro to a third consecutive session. During that time, the U.S. currency has fallen from a 2-month high of $1.2659, to a one-week low of $1.2772 on Thursday.

Despite expansions in Germany and France, the euro area officially slipped into a recession in the third quarter as governments across member nations unfold tough austerity measures in the face of widespread protests.

In line with expectations, gross domestic product slid 0.1 percent from a quarter ago, when it dropped 0.2 percent, the flash estimates published by Eurostat on Thursday showed.

The German economy expanded for the third straight quarter and at a faster than expected pace, preliminary data from the Federal Statistical Office showed Thursday. The gross domestic product gained 0.2 percent sequentially in the third quarter, but slightly slower than the 0.3 percent rise in the second quarter. Economists had forecast a 0.1 percent expansion.

The French economy expanded 0.2 percent quarter-on-quarter in the third quarter, the latest figures from the statistical office Insee revealed Thursday. Economists expected the economy to stagnate during the period. Meanwhile, the GDP estimate for the second quarter was revised down to show 0.1 percent contraction for the economy.

Inflation in the euro area weakened in October as estimated earlier, final data released by statistical office Eurostat showed Thursday.

The harmonized index of consumer prices (HICP), measured under the EU methodology, increased 2.5 percent year-on-year in October, in line with the preliminary estimates. In September, the rate of inflation was 2.6 percent.

Moody's Investors Service on Wednesday said it will revisit the U.K.'s AAA government debt rating and the current 'negative' outlook next year in the face of gloomier economic prospects and rising risks from euro area crisis.

Releasing the annual credit report on the country, Moody's cautioned that the government's efforts to achieve fiscal consolidation and reduce debt are being hampered by weaker economic prospects as well as by the risks posed by the ongoing euro area sovereign debt crisis.

The greenback has pulled back from over a 2-month high of $1.5822 against the pound sterling Thursday, to around $1.5860.

U.K. retail sales eased more-than-expected in October, reflecting weak demand for food and clothing ahead of the Christmas shopping season.

Sales volume that include automotive fuel declined 0.8 percent month-on-month in October, reversing the previous month's 0.5 percent rise, the Office for National Statistics reported Thursday. It was forecast to fall just 0.1 percent in October.

The buck has extended its recent gains against the Japanese Yen on Thursday, breaking out to over a 6-month high of Y81.450.

by RTT Staff Writer

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