The euro depreciated vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3255 level and was capped around the $1.3420 level. The common currency continues to weaken on worsening conditions in Greece. The European Union is now estimating that Greece's 2009 deficit is worse than previously reported and Moody's Investors Service downgraded the government's debt ratings to A3 from A2. Many dealers expected a greater credit downgrade. Credit default swaps on Greek five-year debt surged 91 basis points to a record 577 and ten-year bond yields touched 9%, the highest level since 1998. All of these factors render it increasingly likely Greece will be forced to accept a bailout from eurozone partners and/ or the International Monetary Fund. Greece may be forced to reduce or postpone payments to bond investors for now. Data released in the eurozone today saw April PMI services print at 55.5, up from the prior reading of 54.1, while EMU-16 consumer confidence improved to -15 in April from -17. It was also reported that the eurozone's debt-to-GDP ration escalated to 78.7% at the end of 2009 from 69.4% at the end of 2008. In U.S. news, data released today saw the March headline producer price index climb 0.7% m/m and 6.0% y/y while the core rate was up 0.7% m/m and 0.9% y/y. Also, weekly initial jobless claims fell to 456,000 from the revised prior reading of 480,000 while continuing jobless claims fell to 4.646 million from the prior reading of 4.686 million. Moreover, March existing home sales were up 6.8% m/m to an annualized 5.35 million units and the February house price index was off 0.2% m/m. President Obama called for a financial overhaul that would offer the strongest consumer protection ever. Obama's plan calls for a ban on future bank bailouts. Euro bids are cited around the US$ 1.3175 level.
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