The dollar weakened in early trade Friday, ahead of today’s speech from Fed Chief Ben Bernanke. The currency has reversed direction following the completion of the speech, after Bernanke did not announce a third round of quantitative easing. Expectations for further stimulus have been running high since the Fed released the minutes from its latest monetary policy meeting. The Fed had then stated that “many members” believed additional easing could be needed “fairly soon” unless the economy shows signs of “substantial and sustainable strengthening.”
Federal Reserve Chairman Ben Bernanke acknowledged the continued challenges facing the U.S. economy on Friday, but did not specifically outline new monetary policy easing in a closely watched speech.
While speaking at the Kansas City Fed’s Economic Symposium in Jackson Hole, Wyoming, Bernanke cited some positive signs for the economy but said the “economic situation is obviously far from satisfactory.”
In light of the sluggishness of the economy recovery, Bernanke noted that the Fed will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.
European Central Bank Governing Council member Ewald Nowotny said the central bank is set to downgrade its economic outlook for 2012 and 2013. “There will not be an improvement, but rather a deterioration in expectations,” Nowotny who also heads the Austrian central bank told reporters late Thursday. The report is due next week.
The European Central Bank’s bond purchases in debt markets should be subject to strict conditionality, Executive Board member Benoit Coeure said Friday. The conditionality should be based on an official request for support from the bailout funds EFSF and ESM, he added.
Moody’s Investor Service said its review of Spain’s government rating for a possible downgrade will continue through the end of September because of pending information.
The review is dependent on the scope of the bank recapitalization, support available under the European Stability Mechanism and potential changes to the existing crisis-management framework, the rating agency said late Thursday.
Moody’s said it cannot exclude the need for more immediate action if Spain’s ability to refinance maturing debt was to deteriorate sharply, prompting the country to seek external support beyond the recapitalization programme.
The dollar reached nearly a 2-month low of $1.2636 versus the Euro Friday morning, but has since bounced back to around $1.2570.
Eurozone unemployment rose to a record high and inflation accelerated more than expected, suggesting that household spending will remain muted going forward and weigh further on economic activity. According to Eurostat data, the seasonally adjusted jobless rate remained unchanged at a record 11.3 percent in July, in line with forecast. The June rate was revised up from 11.2 percent.
Flash estimate from Eurostat showed today that inflation accelerated more than expected in August to 2.6 percent from 2.4 percent in July. The rate was forecast to rise to 2.5 percent.
German retail sales unexpectedly dropped for the first time in three months in July amid a continued rise in unemployment, raising concerns that consumer spending may fail to underpin growth of the biggest Eurozone economy grappling with the sovereign debt crisis and the threat of a possible recession in the currency-bloc.
Retail sales fell a calendar-and-seasonally adjusted 0.9 percent month-on-month following a 0.5 percent increase for June and a flat reading for May, the Federal Statistical Office reported Friday. Economists had expected sales to grow 0.2 percent in July.
The British Chambers of Commerce on Friday said the government should take bold measures to boost growth. The BCC expects government borrowing to overshoot its target, saying it will fail to hit the target of eliminating the budget deficit by 2016-17.
The greenback fell to nearly a one-week low of $1.5894 against the pound sterling this morning, but has since inched back to around $1.5865.
Consumer confidence in the United Kingdom remained at a low level in August, contrary to economists’ forecast for an improvement, as a modest uplift from the Olympics was offset by the grim economic outlook, latest data showed Friday.
The consumer confidence index remained unchanged month-on-month at -29 in August, data from market research agency GfK NOP showed. Economists had forecast the index to improve to -27. However, the latest reading was better than -31 recorded in August last year.
Residential property prices in the United Kingdom rebounded strongly in August after falling for two months in a row, indicating that the housing market remains stable despite continuing weakness in consumer sentiment and the grim economic outlook, results of survey revealed Friday.
The average price of a U.K. home increased a seasonally adjusted 1.3 percent sequentially, reversing declines of 0.8 percent and 0.5 percent recorded in July and June, data from the Nationwide Building Society showed.
The buck dropped to over a 2-week low of Y78.176 versus the Japanese Yen on Friday, but has since rebounded to around Y78.315.
The unemployment rate in Japan came in at a seasonally adjusted 4.3 percent in July, the Ministry of Internal Affairs and Communications said on Friday, in line with expectations and unchanged from the previous month.
The core inflation rate in Japan came in at -0.3 percent on year, the Ministry of Internal Affairs and Communications said on Friday, which was exactly as expected and slowed from -0.2 percent in June.
Industrial production in Japan contracted a seasonally adjusted 1.2 percent on month in July, the Ministry of Economy, Trade and Industry said in Friday’s preliminary reading. That was well shy of forecasts for an increase of 1.7 percent following the 0.4 percent gain in June.
Activity in the Japanese manufacturing sector deteriorated at the sharpest pace in sixteen months in August, data from a survey by Markit Economics and the Japan Materials Management Association (JMMA) showed Friday.
The seasonally adjusted purchasing managers’ index (PMI) for the manufacturing sector dropped to 47.7 in August from 47.9 in July, indicating the fastest deterioration in operating conditions since April 2011.
Japan’s housing starts declined for the second consecutive month in July, the Ministry of Land, Infrastructure, Transport and Tourism showed Friday. Housing starts fell 9.6 percent annually, bigger than the 0.2 percent drop seen a month ago. Nonetheless, the decrease was smaller than the 10.3 percent decline forecast by economists.
While Chicago-area business activity saw continued growth in the month of August, a report released by the Institute for Supply Management – Chicago on Friday showed that the pace of growth slowed by more than economists had been anticipating.
The ISM Chicago said its business barometer fell to 53.0 in August from 53.7 in July, although a reading above 50 indicates continued growth. Economists had been expecting the business barometer to edge down to a reading of 53.5.
Consumer sentiment in the U.S. improved by more than previously estimated in the month of August, according to a report released by Thomson Reuters and the University of Michigan on Friday.
The report showed that the consumer sentiment index for August was upwardly revised to 74.3 from the mid-month reading of 73.6. Economists had expected the index to be unrevised from the preliminary reading.
Factory orders rose more than expected in July, according to new government statistics released Friday. With the advance, the figure rebounded from a decline posted in the previous month.
The U.S. Department of Commerce revealed that factory orders rose by 2.8 in July. This followed a decline of 0.5 percent in the previous month. Economists had expected factory orders to rise by 2.0 percent.