The euro weakened vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4525 level and was capped around the $1.4645 level. European Central Bank officials spoke about the economy today with member Constancio noting There is still great uncertainty regarding the depth and sustainability of a global recovery, which has led some analysts to say it might be slower than is desirable. The low level of capacity utilization and the moderate salary increases we are seeing place the European economy very far from a situation of overheating that could reignite inflationary pressures. ECB member Sramko added the ECB has supplied a giant amount of liquidity into financial markets over the past year and noted inflation could become a serious problem if excess liquidity is left in the system for too long. ECB President Trichet reiterated the financial crisis is not over and now is not the time to employ exit strategies. Eurogroup chairman Juncker expects exit strategies will be employed from 2011. The Group of Seven will meet in Istanbul this weekend with the International Monetary Fund and World Bank. Eurozone data released today saw the EMU-16 September overall economic sentiment indicator improve to 82.8 from 80.8 in August while September industrial confidence improved to -24 from -25 in August. Also, September consumer confidence improved to -19 from -22. In U.S. news, September consumer confidence fell to 53.1 from 54.5, below expectations. Also, the July S&P/ Case-Shiller home price index was off 13.3% y/y, an improvement from the revised June print of -15.40% y/y. Dallas Fed President Fisher indicated there is a limit to the life support the Fed can provide to the housing market. Fisher also said he views a greater risk of deflation or disinflation than inflation. World Bank President Zoellick yesterday reported the U.S. dollar could lose its status as the dominant reserve currency but noted it will remain a major currency, adding the euro is a respectable alternative if the dollar is weak. The FDIC is proposing that banks prepay their deposit fees through 2012. Euro bids are cited around the US$ 1.4445 level.
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