The single currency tumbled from 1.3180 to 1.2933 and from 119.28 to 115.96 against the greenback and the Japanese yen respectively as U.S. reports showed a drop in durable goods orders and a record number of jobless claims, prompting investors to buy U.S. dollar as safe-heaven currency.
Orders for U.S. durable goods declined 2.6% last month, following a 3.7% drop in November. Continuing claims for U.S. unemployment benefits rose to 4.776 million in the week ended Jan. 17, the highest since record keeping started in 1967. U.S. jobless claims also rose to 588,000 in the week ended Jan. 17 versus the previous week’s reading of 585,000.
George Soros said the euro may not ‘survive’ unless the European Union pushes for a global plan to deal with toxic debt. The eurozone consumer sentiment declined to a record low of 68.9 in January, the lowest level since it was started in 1985, from an upwardly revised 70.4 in December.
The single currency weakened against the Swiss franc from 1.5169 to 1.4892 after Swiss National Bank President Jean-Pierre Roth said he has yet to see an ‘overshooting’ of the franc although SNB Vice President Philipp Hildebrand said last week the central bank may sell unlimited amounts of francs at a fixed rate to combat a renewed appreciation of the currency. The greenback weakened versus the Swiss franc from 1.1581 to 1.1406 before rebounding on dollar’s strength against other European currencies.
U.K. Chancellor of the Exchequer Alistair Darling gave the Bank of England authority to manage a 50 billion pound fund to purchase assets, providing another tool to fight the recession. In a letter from Darling to BOE Governor Mervyn King which indicated King must write to the Treasury for permission to operate the fund as a way to achieve quantitative easing, which applies when interest rates near zero. King then replied saying that the MPC will review whether quantitative easing is needed to meet its 2 percent inflation target. Bank of England policymaker David Blanchflower said surveys suggest Britain's recession will deepen in 2009 and the Bank of England needs to consider all options to stimulate the economy. The British pound rallied from 1.4071 to 1.4411 before retreating on the comments.
Friday will see the release of Japan’s manufacturing PMI, unemployment rate, household spending, Tokyo CPI and industrial production, U.K. Gfk survey, Japan’s housing starts and construction orders, eurozone CPI, U.S. annualized GDP, core PCE, Chicago PMI and University of Michigan survey.