Date: Thursday 01 Jul 2010
The euro regained its poise on Wednesday as fears about the balance sheet strength of European banks dissipated in the wake of the European Central Bank´s (ECB) withdrawal of €442bn of loans at 1%.There had been fears that the end of the ECB’s offer might find some banks scrabbling for funds but the new three-month facility offered by the central bank attracted a relatively modest amount of demand.
Around 171 banks borrowed €131.9bn over three months, a lower amount than expected. There were 1,121 institutions that were beneficiaries of the previous scheme, which was introduced a year ago.
The common currency rose to $1.2247 in New York trading from $1.2206 the day before, though that was below its best level. The greenback had rallied after disappointing jobs data from payroll services outfit ADP which indicated that private-sector employment rose by 13,000 in June, versus expectations of a 65,000 increase.
The euro also made headway against the Japanese yen, rising to 108.36 yen from 107.99 the day before.
The warning by debt ratings agency Moody’s that it may downgrade Spain’s Aaa sovereign debt rating took a bit of the air out of the euro’s balloon, but most traders took the view that Moody’s was only playing catch-up with other ratings agencies on Spain.
Of more concern was a smaller than anticipated decline in German unemployment. The number of unemployed fell 21,000 in June, versus expectations of a 25,000 decline. The German unemployment rate held steady at 7.7%.
The release of the ADP data saw the greenback stage a small comeback. The dollar index, which measures the US currency’s value against a basket of six currencies, had been languishing below 85 before the ADP figures were released, but rallied to 86.012 towards the end of the afternoon in New York, though this was still below the level of 86.053 late on Tuesday.
The ADP figures are regarded as a moderately reliable indicator of the US non-farm payrolls data, due out this Friday.
The dollar made headway against sterling in New York trade. The pound dipped to $1.4961 from around $1.4970 the day before. At one point this week the pound had been riding as high as $1.5130 against the greenback.
Against the euro sterling fell by a percentage point, leaving the euro worth 81.79p.
There was no immediate sign of growing support among the Bank of England’s Monetary Policy Committee (MPC) members for an interest rate rise.
MPC member Paul Fisher warned against hasty rate rises, which he believes would lead to higher unemployment, more companies going bust and inflation well below the government-set target of 2%.
Fellow policymaker Adam Posen highlighted the risk that austerity measures introduced by governments across Europe may plunge Britain back into recession.
The comments contrasted with those from MPC hawk Andrew Sentance, who voted for a quarter point increase in the bank’s key lending rate last month. 
No comments:
Post a Comment