The U.S. dollar fell against most of its counterparts overnight, as rising equities and speculation European officials are nearing agreement on measures designed to halt contagion of the debt crisis weighed on the greenback. The dollar remained lower after President Barack Obama yesterday vowed to veto a Republican proposal to impose mandatory budget cuts. The government says it has until August 2 before its ability to pay its debt expires and the world’s largest economy cannot service its debts. Standard & Poor’s says there is a 50% likelihood it will cut the U.S.’s AAA credit rating even if Congress reaches agreement on raising the debt ceiling. The greenback also fell against the Aussie and New Zealand dollars as the price of gold held near its all-time record. The Canadian dollar also got a boost as oil prices spiked even as the Bank of Canada is expected to keep its main interest rate unchanged at 1.0% for the seventh straight meeting today. Meanwhile, the economic docket showed that housing starts in the U.S. rose more than forecast in June to the fastest pace in five months. Work began on 629K homes, up 14.6% from the prior month, figures from the Commerce Department showed today in Washington. The print beat expectations of a 2.7% rise. Also, building permits, a sign of future construction, unexpectedly climbed 2.5% in June.
The Euro rose against the U.S. dollar as threats of contagion of the European debt crisis subsided modestly. Indeed, Italian bonds narrowed their yield difference, or spread, over German debt. At the same time, Greek Finance Minister Evanelos Venizelo said a resolution of the crisis is “attainable.” European Union leaders are preparing for a summit on July 21 to hammer out a solution to the Greek debt crisis, which pushed the Euro to its lowest level since March last week, as concern deepened that it would spread to Italian and Spanish bonds. The Euro stayed higher as the Zew Center for European Economic Research in Mannheim said its gauge of current economic conditions rose to 90.6 from 87.6 in June, which exceeded the median estimate of 85.
The Japanese yen opened this morning mostly unchanged versus the U.S. dollar, but fell versus its higher-yielding counterparts on a fresh bout of global risk assumption. Nevertheless, the Japanese currency remains near its highest level against the greenback since late March, when the Group of Seven nations unilaterally sold the yen to weaken the currency.
The British pound climbed for the first time in three days against the dollar as the British FTSE 100 equity Index rose, boosting demand for higher-yielding assets. However, the pound may hold a tight range versus the greenback during our trading session before the Bank of England releases minutes from its last meeting tomorrow. Consumer confidence probably declined from a five-month high, Nationwide Building Society will say tomorrow, according to the median prediction of economists. The index of sentiment probably fell to 49 in June, from 55 in May.
