The euro moved lower vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2905 level and was capped around the $1.3085 level. The common currency moved lower after it was reported the European Central Bank may need to downwardly revise its current economic forecasts. In December ECB staff members released a forecast the eurozone economy may shrink as much as 1% this year. Germany reported it will not establish a bad bank where it can nationalize bad bank debt. In contrast, the German media reported the government is working on a new rescue plan where it troubled banks can remove hundreds of billions of euro in bad assets from their balance sheets. Bank of France reported it expects negative inflation in the eurozone and U.S. for one or more months this year, but stopped shorting of characterizing this as deflation. Data released in the eurozone today saw November industrial orders register a record decline. ECB member Tumpel-Gugerell reported We are aware that the crisis is far from over, we are aware that the effects on the real economy have only started to be felt and we also are aware that there are substantial differences between euro area countries. IMF reduced its 2009 German GDP forecast to -2.5% from -0.8%. In U.S. news, weekly initial jobless claims increased 589,000 from 527,000 the previous week, the highest level since 1982. Also, December housing starts were off 15.5% to an annualized rate of 550,000 units. This represented the largest percent decline since January 2007. Similarly, December new building permits fell 10.7% to 549,000. In 2008, housing starts and permits fell 33.3% and 36.2%, respectively. Euro bids are cited around the US$ 1.2475 level.
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