The dollar has added to its recent gains against its major European competitors on Thursday, but has pulled back slightly against the Japanese Yen. Following yesterday’s strong rally in equity markets, investors are playing it much more cautious today and putting their money into safe havens. With the fiscal cliff issue now resolved, investors have shifted their focus to the U.S. debt ceiling issue.
The U.S. reached its statutory borrowing limit on December 31, 2012 and the treasury has begun employing extraordinary measures, giving two months time to the law makers to raise debt ceiling. The debt ceiling would do more damage to the world’s largest economy than the fiscal cliff. After passing the deal to avert the fiscal cliff, Republicans said they would press their demand to secure new spending cuts.
Moody’s Investors Service said it expects further fiscal measures in months ahead to lower future budget deficits, which are necessary if the negative outlook on the government’s bond rating is to be returned to stable.
Standard & Poor’s Ratings Services, elsewhere, said the Congressional compromise designed to prevent the “fiscal cliff” may support the U.S. economic rebound, but it does not affect the view of the country’s credit outlook.
The International Monetary Fund on Thursday said the U.S. government should do more to put the country’s public finances back on a sustainable path, without hampering the fragile recovery. The announcement came a day after the Senate approved a legislation to avert the so-called ‘fiscal cliff’.
The IMF called for a comprehensive plan that ensures both higher revenues and containment of entitlement spending over the medium term. Also, the debt ceiling must be raised expeditiously and the remaining uncertainties about the spending sequester and expiring appropriation bills should be removed.
The dollar has extended yesterday’s gains against the Euro on Thursday and has reached over a 2-week high of $1.3081.
Germany’s unemployment rate remained unchanged in November, data released by the Federal Statistical Office showed Thursday. The adjusted unemployment rate, which is based on the calculation concept of the International Labor Organization (ILO), remained unchanged month-on-month at 5.4 percent in November. In November 2011, the jobless rate was 5.6 percent.
Germany’s unemployment increased in December, but the increase was less-than-expected, as the economy likely entered a contraction in the fourth quarter of 2012. The number of unemployed rose only 3,000 in December, following an increase of 5,000 a month ago, the Federal Labor Agency said Thursday. Economists had forecast an increase of 11,000 for December.
Spain’s unemployment decreased for the first time in five months in December as service providers increased their head-counts during the holiday season, giving rise to hopes that the country might emerge from recession in late 2013, latest data showed Thursday.
The number of unemployed persons decreased 1.2 percent from the previous month to around 4.85 million in December, the Labor Ministry said.
The buck has also extended its gains from the prior session against the pound sterling on Thursday, climbing to a high of $1.6142, from yesterday’s low of $1.6341.
U.K. construction sector contracted at the fastest pace in six months in December, driven mainly by a steep reduction in housing activity, data from a survey by Markit Economics and the Chartered Institute of Purchasing & Supply (CIPS) showed Thursday.
The seasonally adjusted purchasing managers’ index (PMI) for the construction sector dropped to 48.7 in December from 49.3 in November, hitting the lowest level since June. Economists had forecast the index to rise to 49.5.
U.K. house prices declined in December as demand and supply conditions in the housing market remained weak, a survey by the Nationwide Building Society showed Thursday. House prices declined 0.1 percent month-on-month in December, after recording no change in the previous month. Economists had expected prices to remain flat in December.
The greenback has retreated from yesterday’s 29-month high of Y87.331 against the Japanese Yen, to around Y86.930 on Thursday.
Private sector employment in the U.S. increased by much more than economists had anticipated in the month of December, according to a report released by payroll processor Automatic Data Processing, Inc. (ADP) on Thursday.
ADP said private sector employment increased by 215,000 jobs in December following an upwardly revised increase of 148,000 jobs in November. Economists had expected employment to rise by about 150,000 jobs compared to the addition of 118,000 jobs originally reported for the previous month.
First-time claims for U.S. unemployment benefits came in above economist estimates in the week ended December 29th, according to a report released by the Labor Department on Thursday. The report showed that jobless claims climbed to 372,000, an increase of 10,000 from the previous week’s revised figure of 362,000. Economists had expected jobless claims to rise to 363,000.