The dollar has begun to inch higher in comparison to its major European rivals Wednesday afternoon. The U.S. Federal Reserve announced further stimulus today and appears to have laid the groundwork for another program of asset purchases, or QE3.
The Federal Reserve announced following the completion of its 2-day meeting that it has decided to extend its Operation Twist bond swapping program, which was set to expire at the end of this month.
The central bank kept its benchmark interest rate at effectively zero, and repeated its view that economic slack will probably warrant “exceptionally low” interest rates through at least late 2014.
Concerns about longer-term price stability kept the Fed from offering further stimulus despite lingering weakness in the U.S. housing and jobs markets. However, the Fed noted a decline in the pace of increases in household spending.
The Fed shaved its forecast for economic growth this year. The FOMC now expects GDP growth down to a range of 1.9 percent to 2.4 percent from 2.4 percent to 2.9 percent in April. The Fed projects that the unemployment rate will hold above 8 percent through the end of 2012 and will be above 7 percent through 2014.
The dollar briefly touched a 2-day low of $1.2742 versus the Euro on Wednesday, but has since bounced back to around $1.2665.
The stage is set to form a three-party coalition government in Greece led by the conservative New Democracy party, with the smaller socialist PASOK, Democratic Left parties agreeing on Wednesday to join it, reports said.
Germany’s producer price inflation slowed more than expected to 2.1 percent in May, Destatis said Wednesday. Economists were expecting the rate to ease to 2.2 percent from 2.4 percent in April.
Germany’s leading index dropped slightly in April largely reflecting the weakness in consumer sentiment, the Conference Board said Wednesday. The leading index was down 0.1 percent, reversing March’s 0.2 percent increase. While four of the seven components of the indicator improved in April, stock prices, consumer confidence and new residential construction orders deteriorated.
Bank of England policymakers retained the size of quantitative easing at GBP 325 billion earlier this month as demand for more stimulus by Governor Mervyn King and three others was overturned by a majority of five.
Although members acknowledged that further stimulus is likely to become warranted, a majority found merit in waiting for events occurring over the coming weeks before finalizing additional stimulus, the minutes of the meeting held on June 6 and 7 showed Wednesday.
The buck dropped to nearly a 1-month low of $1.5777 versus the pound sterling Wednesday, but has since climbed back to around $1.5700.
The number of persons claiming job seekers’ allowance in the U.K. increased unexpectedly in May as the economy’s return to recession made firms hesitant to hire more staff. The claimant count increased by 8,100 from the previous month to 1.60 million in May. The figure was forecast to fall by 4,000 on a month-on-month basis. The claimant count rate remained steady at 4.9 percent as expected.
Bank of Japan Governor Masaaki Shirakawa repeated Wednesday that the financial turmoil in Eurozone posed the biggest risk to Japan’s economic recovery.
The greenback reached a low of Y78.783 versus the Japanese Yen early Wednesday, but has since rallied to a one-week high of Y79.695.
Japan posted a merchandise trade deficit of 907.25 billion yen in May, the Ministry of Finance said on Wednesday, slipping into the red for the seventh time in eight months. The headline figure was well shy of forecasts for a deficit of 583.0 billion yen following the downwardly revised 522.0 billion yen shortfall in April.
Japan’s all industry activity grew slightly as expected in April after declining for three straight months, data from the Ministry of Economy, Trade and Industry revealed Wednesday. The all industry activity index rose 0.1 percent month-on-month in April, following a 0.3 percent fall a month ago.