The dollar spiked higher versus the euro on Wednesday, blasting through resistance after a dismal German bond auction heightened fears that the European sovereign debt crisis has spiraled out of hand.
German officials and the European Central Bank have downplayed radical solutions the the sovereign debt crisis, and bond traders have little faith in the austerity measures proposed by heavy debtors.
With the region’s economy seen slumping into recession, borrowing costs have risen sharply on Europe’s periphery and powerhouse Germany may now be having trouble raising cheap money.
The dollar rose to $1.3326 versus the euro, up from $1.3450 in the previous session.
The dollar also touched its highest since early October versus the sterling, hitting $1.5496.
Solid gains took the dollar to Y77.50 versus the yen, away from October’s record low Y75.55.
The German bond auction overshadowed a flurry of economic news from both sides of the Atlantic.
The Labor Department released a report Wednesday morning showing a modest increase in first-time claims for U.S. unemployment benefits in the week ended November 19th, but claims remained below the key 400,000 level.
The report showed that initial jobless claims edged up to 393,000 from the previous week’s revised figure of 391,000. Economists had been expecting jobless claims to inch up to 390,000 from the 388,000 originally reported for the previous week.
U.S. durable goods orders fell less than forecast in October, according to figures released Wednesday by the Commerce Department. The drop in new orders of manufactured durable goods of $1.4 billion marks a 0.7 percent decline — better than the one percent decline expected by analysts.
Analysts took note of a large downward revision to the numbers reported for the previous month. Durable goods orders were down 1.5 percent in September, almost twice the decline initially reported.
U.S. personal income increased by more than expected in October, but spending came in lower than expected, according to figures released Wednesday by the Commerce Department.
Personal income rose by $48.1 billion in October, an increase of 0.4 percent. Most economists had predicted a slightly smaller 0.3 percent increase.
U.S. consumer sentiment in the month of November improved by slightly less than initially estimated, according to a report released by Reuters and the University of Michigan on Wednesday, although the consumer sentiment index is still at a five-month high.
Eurozone private sector output contracted for a third month running in November as the manufacturing activity diminished to the weakest level since July 2009, fueling recession fears amid the region’s deepening debt crisis.
Flash results of a survey from Markit Economics showed Wednesday that the composite output index scored 47.2, up from 46.5 in October. Despite the modest uptick, the reading stood below 50, suggesting contraction in the private sector output. Economists had expected the index to drop to 46.1.