The U.S. dollar held a relatively tight range against the majority of its counterparts and drifted slightly higher versus the Euro as the EU debt crisis summit in Brussels over the weekend failed to impress investors. However, the dollar’s advance was dampened as Asian equities rose amid signs of growth in China and Japan. Indeed, an index of Chinese purchasing managers showed a rebound in new orders and output. The U.S. economic docket showed that U.S. economic activity rose in September, according to the Federal Reserve Bank of Chicago. The Chicago Fed national index, which draws on 85 economic indicators, was minus 0.22 in September versus minus 0.59 in August. Tomorrow sees the release of the S&P Case/Shiller Home Price index and consumer confidence, followed by durable goods orders and new home sales on Wednesday. Weekly jobless claims, gross domestic product and pending home sales are slated for Thursday, while personal income and consumer sentiment will round out the week on Friday.
The Euro pulled back from a 6-week high versus the U.S. dollar as Euro-zone policymakers seemed to make little progress toward what was being billed as yet another “comprehensive” solution to the sovereign risk malaise that continues to plague the currency bloc. The broad outline of what was needed was well-established heading into the summit. Officials had to acknowledge that Greece is bust and initiate restructuring, formulate a plan to recapitalize banks that take heavy losses on holdings of Greek debt, and give a tangible cash-backed commitment to ensure other EU members will not be allowed to fail to prevent contagion. However, leaders failed on all three accounts to provide details of a strategy to resolve the debt crisis. The summit excluded a forced restructuring of Greece’s debt, keeping with the policy of encouraging bondholders to accept “voluntary” losses to help restore the country’s finances. Leaders will meet again on October 26th.
The Japanese yen held at post-World War II highs versus the U.S. dollar overnight. Japan’s exports increased more than expected in September. Shipments rose 2.4% last month from a year earlier, the Ministry of Finance said in Tokyo today. The print beat analysts forecast for a 1.0% increase. However, recent economic data have suggested that the currency appreciation and the global slowdown are taking their toll on the world’s third largest economy. Industrial output, retails sales and exports were all weaker than economist forecasts in August.
The British pound was largely unchanged against the U.S. dollar but rose to a 2-week high versus the Euro on uncertainty that European leaders will forge a durable solution to the debt crisis. The pound saw residual strength after data released on Friday showed that the U.K. budget deficit narrowed in September more than economists forecast. Meanwhile, U.K. Prime Minister David Cameron and French President Nicolas Sarkozy yesterday argued over the right of non-euro nations to attend the October 26th meetings as leaders scrabble to reach and agreement. Cameron said the talks should include leaders from all European Union states. Sarkozy replied if the U.K. wanted to be involved it should have joined the Euro.
