After weakening during the Veteran’s day holiday on Friday, the U.S. dollar rebounded against the majority of its counterparts as risk aversion once again entered the market. European stocks declined after Italian borrowing costs increased, stoking concern the new government will struggle to contain the nation’s debt crisis. The Swiss franc fell against the greenback after a government report showed producer prices and import prices fell for a sixth month in October. There is no major economic data slated for release today in the United States but a slew of data scheduled for later this week will likely have a direction on overall market sentiment and thus the direction of the greenback. Tomorrow sees the release of the producer price index, retail sales and Empire state manufacturing, followed by the consumer price index, industrial production and a housing market index. Housing starts, weekly jobless claims and the Philly Fed are slated for Thursday, while leading indicators will round out the week on Friday.
The Euro weakened for the first time in three days as the spread on Italian 5-year securities rose to 6.29%, up from 5.32% at the previous auction and the highest since June 1997. Italy’s 10-year bond yields surged above 7.0% last week, an important level that caused Portugal, Greece and Ireland to seek bailouts. Meanwhile, Italy’s President offered the position of premier to former European Union Competition Commissioner Mario Monti yesterday after the resignation of Silvio Berlusconi on Saturday. Monti will try to reassure investors that Italy can cut a 1.9 trillion-euro debt load and spur growth that has lagged behind the euro-region average for more than a decade. Also, Greek Prime Minister George Papandreou resigned last week to make way for a coalition led by former ECB Vice President Lucas Papademos. The euro remained under pressure after Spiegel magazine reported that German lawmakers are preparing for Greece’s departure from the currency in case the new government doesn’t commit to carry forward reforms that have already been agreed to.
The Japanese yen continued to push modestly higher versus the U.S. dollar, reaching its strongest level since Japan intervened in the markets on October 31st. Meanwhile, the economic docket showed that Japan’s economy expanded at a 6.0% annual pace in the third quarter, the Cabinet Office said in Tokyo today. The print beat a median forecast of a 5.9% increase.
The British pound slumped versus the U.S. dollar as an index of U.K. employers’ hiring intentions fell as the crisis in the euro region damped demand for labor, the Chartered Institute of Personnel and Development said today. The hiring intentions index fell to minus 3 in the fourth quarter from minus 1 in the previous three months. The findings add to evidence the European sovereign debt crisis and U.K. government plans for austerity are weighing on the labor market.
