The U.S. dollar fell significantly overnight against the majority of its counterparts, pulling back from recent highs as global equity markets rebounded. Indeed, European equities and U.S. stock futures both rose over 2.5% overnight. The dollar retreated from an 8-week high versus the Euro on speculation European leaders are taking additional steps to stem the region’s debt crisis. The greenback lost the most versus the New Zealand dollar after Prime Minister John Key was re-elected with his party’s biggest majority in 60 years. The large majority likely strengthens Key’s ability to balance the budget. Later this morning, the economic docket is expected to show that new home sales expanded at 0.6% in October, down from 5.7% the month prior. Tomorrow sees the release of S&P Case Shiller Home price index and consumer confidence, followed by ADP private employment data and pending home sales on Wednesday. Weekly jobless claims, construction spending and ISM manufacturing data is expected on Thursday, while Non-farm payrolls and the unemployment rate will round out the week on Friday.
The Euro pulled back from recent lows versus the U.S. dollar after German Finance Minister Wolfgang Schaeuble urged fast-track treaty changes to tighten budget discipline and a newspaper reported that German Chancellor Angela Merkel and French President Nicolas Sarkozy are planning a stability pact to counter the crisis. A treaty change is necessary to give veto power over member-state budgets to the European Union Commission, Germany’s Schaeuble said in an interview yesterday. “We can do that quickly and this will send an important signal to markets that the euro is and remains a stable currency,” he said. Merkel and Sarkozy may start a coalition of euro-zone members that would commit to greater fiscal discipline without waiting to change EU treaties, Germany’s Welt newspaper reported, without saying where it got the information. The Euro stayed higher after a report showed consumer confidence in Germany will rise in December. The index from GfK SE will advance to 5.6 from 5.4 in November, the market research company said.
The Japanese yen was largely unchanged against the U.S. dollar overnight. However, Bank of Japan Governor Masaaki Shirakawa signaled the central bank’s preparedness to bolster stimulus should Europe’s deepening sovereign-debt crisis pose a larger risk to Japan’s economy and financial markets. It is the third time in as many weeks that the governor has spoken about the threat Europe’s debt woes pose on an economy that is still recovering from a record March earthquake.
The British pound gained against the U.S. dollar as the greenback remained under pressure against all of its higher-yielding counterparts. However, the sterling weakened against some of is peers after data showed U.K. house prices dropped last month and the British Chambers of Commerce cut its economic growth forecasts. The average cost of a home fell 0.2% from October and was down 2.3% from a year earlier, Hometrack reported today. The British Chamber of Commerce said today gross domestic product will increase 0.9% this year, 0.8% in 2012 and 1.8% in 2013, compared with previous forecast of 1.1%, 2.1% and 2.5% respectively.
