The dollar is currently trading mixed against its major competitors on Tuesday, following the weaker than expected housing market index report. The U.S. currency is weakening against both the Euro and the Japanese Yen, but is gaining ground against the pound sterling.
Homebuilder confidence in the U.S. unexpectedly deteriorated in the month of February, according to a report released by the National Association of Home Builders on Tuesday. The report said the NAHB/Wells Fargo Housing Market Index edged down to a reading of 46 in February from 47 in January.
The modest drop by the Housing Market Index came as a surprise to economists, who had expected the index to inch up to 48.
Meanwhile, Germany’s economic confidence rose significantly this month to the strongest level since April 2010 on hopes of the situation improving over the coming months, data from the Center for European Economic Research/ZEW showed Tuesday.
The ZEW Indicator of Economic Sentiment rose 16.7 points to 48.2 in February. This was the third consecutive increase and the reading far exceeded the consensus forecast of 35.
The French government will likely cut its growth forecast for the economy this year to 0.2-0.3 percent from the previously estimated 0.8 percent, Foreign Minister Laurent Fabius said in a radio interview on Tuesday.
“We have to revise it downward,” the minister told RTL radio. He noted that the forecast was around 2.1 percent earlier and then it came down to 0.8 percent.
Fabius’ remarks come a day after Finance Minister Pierre Moscovici said that the French government could adjust its economic forecast and budget targets once the European Commission releases its forecasts on February 22.
European Central Bank President Mario Draghi on Monday warned against keeping interest rate at a low level for a protracted period, saying that this may create a number of challenges, including formation of asset price bubbles.
“Protracted monetary accommodation may fuel bubbles in house prices and other asset markets,” he told European lawmakers in Brussels. “As the crisis has painfully demonstrated, the bursting of such bubbles inflicts large costs for the real economy,” Draghi said.
According to him, a protracted period of low interest rates and ample liquidity may lead to a situation where banks have less incentives to monitor credit risk properly as it facilitates rolling-over loans at very low costs. As a result, banks may provide too many loans to non-profitable business.
The dollar reached a high of $1.3328 against the Euro on Tuesday, but has since dropped to a 2-session low of $1.3393.
Eurozone’s construction output decreased further in December, and at a slightly faster pace compared to the previous month, data released by statistical office Eurostat showed Tuesday. Construction production fell 4.8 percent on an annual basis in December, after falling 4.7 percent in November and 3.3 percent in October.
Europe’s new car registrations declined at a slower pace in January, but total sales reached a historic low for the month of January, the European Automobile Manufacturers’ Association said Tuesday.
Demand for new cars decreased 8.7 percent year-on-year in January. The rate of decline was much slower than the 16.3 percent fall seen in December.
New registrations totaled 885,159 units, the lowest sales for a month of January, since the start of the series in 1990, it said.
The greenback fell to an early low of $1.5503 against the pound sterling Tuesday, but has since risen to a 7-month high of $1.5417.
The Japanese government is likely to announce its candidates for three top posts at the Bank of Japan next week after Prime Minister Shinzo Abe returns from his U.S. visit.
Prime Minister Abe will likely decide the BoJ candidates after his meeting with U.S. President Barack Obama, Chief Cabinet Secretary Yoshihide Suga said Tuesday. The Japanese premier will visit the U.S. between February 21 and 24.
There is said to be some difference of opinion between Abe and Finance Minister Taro Aso over who should replace Masaaki Shirakawa as BoJ Governor. Abe wants someone who shares his view of an aggressive monetary easing to take over the mantle.
Japan’s Finance Minister Taro Aso reportedly said Tuesday that the government is not planning to buy foreign bonds as part of its efforts to ease monetary policy. The government is also not considering an immediate change to the law governing the Bank of Japan, he told reporters in Tokyo.
The buck has fallen to over a 1-day low of Y93.347 against the Japanese Yen on Tuesday.
A leading indicator of the Japanese economy recorded a notable increase in December, and came in line with preliminary estimates, final data from the Cabinet Office showed Tuesday. The leading economic index increased to 93.4 in December from a downwardly revised 92 in November. The latest figure matched preliminary estimates.