The U.S. dollar traded to a 6-week high against the Euro as the European debt crisis has continued to dominate headlines and trading. Yesterday, the spread on Italian bonds increased to 7.0% for a second time, a level that triggered Portugal, Ireland and Greece to request bailouts. Meanwhile, the U.S. economic docket showed that the cost of living in the U.S. unexpectedly fell in October for the first time in four months, a sign that inflationary pressures may be starting to recede. The consumer-price index declined 0.1% from the month prior after a 0.3% rise, the Labor Department reported today. The “core” rate that excludes volatile food and fuel costs rose 0.1%, matching the smallest gain this year. Later this morning, Industrial Production is expected to rise 0.4% in October, up from 0.2% the month prior.
The Euro fell against the U.S. dollar after European Commission President Jose Barroso said the region is facing a “truly systemic crisis.” Europe’s economic recovery has hit a standstill, Barroso said today at the European Parliament in Starsbourg, France. There is “no way out of the crisis” without economic growth in Europe, he said. The Euro pared some of its losses after the European Central Bank was said to be buying Spanish and Italian government bonds, narrowing their yield gap over benchmark German bunds. The ECB bought larger-than-usual sizes and quantities of the Italian debt, said two people with knowledge of the trades, who declined to be identified because the deals are private.
The British pound fell for a third day against the greenback as U.K. unemployment increased and joblessness among young people climbed above 1 million for the first time since at least 1992. The Office for National Statistics said British unemployment rose the most since 2009 with the rate climbing to a 15-year high of 8.3%. The pound was also under pressure as the Bank of England said Britain faces a “markedly weaker” outlook for economic growth, signaling it may expand stimulus. Growth may be “broadly flat” in the first half of 2012, central bank Governor Mervyn King said in a press conference today.
