The dollar is up slightly against its major European competitors on Tuesday and slightly lower against the Japanese Yen, but overall is little changed for the session. The uncertainty generated by the Italian elections remained in focus today, but investors were also closely watching the testimony of Ben Bernanke.
Federal Reserve Chairman Ben Bernanke downplayed speculation that the central bank is getting ready to end its controversial quantitative easing program. In semi-annual testimony before the U.S. Senate Banking Committee, Bernanke said the Fed’s $85 billion/month asset-buying program is needed to preserve a nascent housing recovery and modest improvement in the jobs market.
The economy has been adding jobs, but the unemployment rate edged up to 7.9 percent in January. The Fed has pledged to keep buying government and mortgage-backed bonds until unemployment drops below 6.5 percent.
Early results showed that no single party or coalition has secured enough seats in the Italian parliamentary elections to form a government on their own. The center-left Democratic Party led by Pier Luigi Bersani was slightly ahead in the Lower House, while the center-right coalition led by former Prime Minister Silvio Berlusconi was leading in the Senate.
Italy’s borrowing costs rose on Tuesday as the inconclusive election results signaled political instability in the coming weeks.
The Rome-based Treasury raised EUR 8.75 billion from the sale of 6-month bills, in line with the target set for the auction. However, the yield on the 6-month paper rose to 1.237 percent from 0.731 percent paid on January 29. The bid-to-cover ratio shrunk to 1.44 from 1.65.
The country is set to auction up to EUR 6.5 billion of five-and-10-year bonds on Wednesday. On Tuesday, the 10-year Italian benchmark rose more than 30 points to around 4.80 percent.
The dollar slipped to a low of $1.3122 against the Euro on Tuesday, but has since bounced back to around $1.3050.
Bank of England Deputy Governor Paul Tucker said on Tuesday that he is open to do more quantitative easing depending on the outlook for demand and inflation.
“I would also judge that the existing degree of monetary easing from QE is likely to gain more traction on spending than it had last autumn, given reduced tail risks from the international environment,” he said in a written testimony to the Treasury Select Committee.
The buck dipped to a low of $1.5218 against the pound sterling Tuesday, but has since climbed to around $1.5140.
Retail sales in the United Kingdom increased at the weakest pace in five months in February, data released by the Confederation of British Industry (CBI) showed Tuesday.
The balance of the percentage of retailers who reported a growth in sales and those who registered a contraction declined to +8 percent in February from +17 in January. The rate of growth slowed for the third successive month, and the latest figure was the lowest since September 2012. Economists had forecast a modest decline to +16 percent.
The Japanese government is expected to nominate Takehiko Nakao, the country’s top currency official, as the next head of the Asian Development Bank (ADB,) if Haruhiko Kuroda takes over as the Governor of the Bank of Japan, reports said.
The greenback reached an early high of Y92.738 against the Japanese Yen on Tuesday, but has since pulled back to around Y91.525.
Confidence among Japan’s small scale businesses improved for a third consecutive month in February, data released by the Shoko Chukin Bank showed Tuesday. The small business confidence index increased to 46 in February from 44.3 in January and 43.8 in December.
Home prices in major U.S. metropolitan areas rose by slightly more than expected in the month of December, according to a report released by Standard & Poor’s on Tuesday.
The report showed that the S&P/Case-Shiller 20-City Composite Home Price Index increased by a seasonally adjusted 0.9 percent in December following a 0.7 percent increase in November. Economists had been expecting the index to increase by about 0.8 percent.
New home sales in the U.S. showed a substantial rebound in the month of January, according to a report released by the Commerce Department on Tuesday, with sales reaching their highest level in well over four years.
The Commerce Department said new home sales surged up by 15.6 percent to a seasonally adjusted annual rate of 437,000 in January from the revised December rate of 378,000. Economists had been expecting new home sales to show a more modest increase to an annual rate of 381,000 from the 369,000 originally reported for the previous month.
With fiscal cliff uncertainty and worries about the impact of an increase in payroll taxes waning, the Conference Board released a report on Tuesday showing a substantial rebound in U.S. consumer confidence in the month of February.
The Conference Board said its consumer confidence index jumped to 69.6 in February from a revised 58.4 in January. Economists had been expecting the index to climb to 61.0 from the 58.6 that had been reported for the previous month.