The dollar is trading mixed in comparison to its major competitors on Wednesday. The dollar eased back from over a 2-year high versus the Euro, after comments from the ECB’s Ewald Nowotny and the weaker than expected U.S. new home sales report. The U.S. currency added to its recent gains versus the pound sterling, following the U.K.’s weaker than expected GDP announcement. New home sales in the U.S. saw a sharp and unexpected drop in June, according to a report released by the Commerce Department on Wednesday, although the report also showed upward revisions to the data for the three previous months.
The Commerce Department said new single-family home sales for June came in at a seasonally adjusted annual rate of 350,000. The annual rate for June reflects an 8.4 percent drop from the revised May sales rate of 382,000 and comes in well below the 370,000 sales rate most economists had predicted.
There are arguments in favor of providing a banking license to Europe’s permanent bailout fund, European Central Bank Governing Council member Ewald Nowotny told Bloomberg in an interview.
“I am not aware of specific discussions within the ECB at this point but it is of course a discussion we have at the European level,” he said. “I think there are pro arguments for this.” A banking license will give the European Stability Mechanism an access to ECB lending.
Germany sold its 30-year debt at a record-low yield at an auction on Wednesday, in a sign that the safe haven demand has recovered. The safe haven appeal of German debt suffered a blow after Moody’s downgraded the outlook of the triple A rated sovereign to ‘negative’ from ‘stable’ late Monday, pushing the country’s 10-year yield higher yesterday.
The country raised EUR 2.322 billion from the sale of its 2.50 percent July 2044 Federal Bonds or Bunds against a target of EUR 3 billion, Bundesbank said. The auction drew bids totaling EUR 3.367 billion. An amount of EUR 678 million was set aside for secondary market operations. The yield fell to a record-low 2.17 percent from 2.41 percent paid in the previous sale on April 25.
The greenback has pulled back from Tuesday’s 25-month high of $1.2041 versus the Euro on Wednesday, to around $1.2125.
Confidence among German firms deteriorated for the third successive month in July to the lowest level in more than two years as heightened tensions surrounding the debt crisis weighed on business expectations, more notably in the manufacturing sector, results of a key survey revealed Wednesday.
The Ifo Institute said its headline business climate index fell to 103.3 in July from a revised 105.2 in June. Economists had expected the index to fall to 104.5.
The U.K. economy contracted at the fastest pace in more than three years due to widespread weakness in construction, manufacturing and services output in the second quarter. The gross domestic product was down by a more than expected 0.7 percent sequentially, marking the biggest fall since the first quarter of 2009, preliminary estimate from the Office for National Statistics showed Wednesday.
The drop follows GDP declines of 0.3 percent and 0.4 percent in the first quarter and the fourth quarter, respectively. Economists expected a more modest 0.2 percent decline for the second quarter.
The dollar rose above a 2-day trading range around the $1.55 level versus the pound sterling on Wednesday and set nearly a 2-week high of $1.5457.
The buck bounced back slightly to around Y78.200 compared to the Japanese Yen Wednesday, from yesterday’s low of Y78.061.
Japan posted a merchandise trade surplus of 61.7 billion yen in June, the Ministry of Finance said on Wednesday – bouncing into the black for just the second time in nine months. The headline figure was well above forecasts for a deficit of 140.0 billion yen following the downwardly revised shortfall of 910.4 billion yen in May.