The U.S. dollar retraced yesterday’s losses overnight and traded back to similar ranges from yesterday morning versus the Euro. The dollar remains under pressure against the majority of its counterparts as the U.S. Congress continues to play politics with the nation’s debt ceiling and thus the future outlook for the economy and the U.S. dollar. U.S. House Speaker John Boehner canceled a vote on increasing the debt limit after failing in one-on-one appeals to members. Meanwhile, Treasury Secretary Timothy Geithner has said options to prevent a default will run out August 2nd if the limit isn’t increased. Meanwhile, the economic docket showed that the U.S. economy grew less than forecast in the second quarter, after almost coming to a halt at the start of the year. Gross domestic product rose at a 1.3% annual rate following a 0.4% gain in the prior quarter. The print failed to meet expectations of a 1.8% gain. Household purchases, about 70% of the economy, climbed a dismal 0.1%. The poor data reaffirms the Fed’s scope to keep interest rates near zero for the foreseeable future. The U.S. dollar has begun to sell off in early trading following the release of the weak data.
The Euro slid modestly versus the U.S. dollar and fell to a two-week low against the yen as Moody’s Investors Service said it may cut Spain’s credit ranking and the nation’s prime minister called an early election. Spain’s Prime Minister Jose Luis Rodriquez Zapatero, whose ruling Socialist Party has been losing support as he embarked on austerity measures, said at a news conference in Madrid today that elections will be held November 20 instead of March to “project political and economic certainty.” Spain’s Aa2 rating was placed on review for a possible downgrade by Moodys.
The Japanese yen continued to push higher against all of its counterparts on widespread risk aversion. Indeed, the yen broke a fresh 4-month high versus the U.S. dollar and continued to gain after the U.S. released poor economic growth data. Meanwhile, the Japanese Finance Minister once again signaled he is ready to take action to respond to the rising yen, stepping up his rhetoric against a currency appreciation that threatens the nation’s export-led recovery.
The British pound weakened against the dollar overnight after a measure of consumer sentiment declined in July, fueling speculation that the Bank of England will delay raising interest rates. An index of sentiment slipped five points from June to minus 30, London based research group GfK NOP Ltd said today. However, the pound has rebounded in early trading as the U.S. Commerce Department released data that showed the U.S. economy continues to struggle.
