The euro moved weakened vis-Ã -vis the U.S. dollar today as the single currency tested bids around the US$ 1.3280 level and was capped around the US$ 1.3440 level. Federal Reserve Chairman Bernanke testified today and said the U.S. economy should start growing later this year, the most optimistic assessment he has made in several quarters. Nonetheless, he said the economic recovery will coincde with €œfurther sizable job losses€ over the coming months. Bernanke estimates the economy may climb €œsomewhere€ in the 9% range, contrary to many private sector forecasts that see unemployment climbing to 10%. Current private sector forecasts also see the economy contracting up to 3% in the current second quarter. Bernanke said €œthe pace of contraction may be slowing€ and said the housing market has evidenced some signs of bottoming while consumer spending improved in the first quarter. Data released in the U.S. today saw April ISM services sector activity contract with the headline index printing at 43.7, up from 40.8 in March. Sub-indices saw the new orders index improve to 47.0 while the employment index improved to 32.3. Bernanke also indicated there have been some indications of improvements in easing credit strains in the economy. The big news this week will be the results on banks€™ stress tests on Thursday. There is now chatter that up to ten banks will be requested to firm up their balance sheets with additional capital. Bernanke said problems banks will have six months to implement €œcomprehensive capital plans for establishing the required buffers€ to protect against future losses€ or they will need to obtain assistance from the government. In eurozone news, French President Sarkozy is seeking a stronger European Union role on bank regulation. German Chancellor Merkel reported she is opposed to take hikes until the financial and economic crisis are over. Data released in the eurozone today saw March industrial producer prices register their sharpest decline in 22 years, off 0.7% m/m and 3.1% y/y. The European Central Bank is expected to reduce its main refinancing rate target to 1.0% from 1.25% on Thursday. Euro bids are cited around the US$ 1.2765 level.
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