Yesterday the euro fell to the lowest level in almost two years against the dollar as Spain struggled to rescue its troubled banks, adding to signs the European debt crisis is spreading to the region’s larger economies. Spain’s 10-year bond yield rose as high as 6.70 percent, approaching the 7 percent level that led to bailouts in Greece, Ireland and Portugal, after central bank Governor Miguel Angel Fernandez Ordonez resigned a month early amid criticism over the nationalization of Bankia group.
The 17-nation currency slid for a seventh day versus the yen, the longest losing streak in four months, after Italy sold less than its maximum target at a debt auction.
The yen and dollar strengthened as investors sought safer assets after a European report showed economic confidence dropped more than economists estimated in May. The European Commission called for direct euro-bloc aid for troubled banks and touted a Europe-wide deposit-guarantee system and common bond issuance as antidotes to the debt crisis now threatening to overwhelm Spain.
EUR/USD: yesterday the pair fell to a figure, below $1.2400.
GBP/USD: yesterday the pair fell on one and a half figure, below $1.5500.
USD/JPY: yesterday the pair fell to Y79.00.
European data for Thursday starts at 0600GMT with Germany retail sales and also the ILO measure of employment data. France data at 0645GMT sees PPI and also consumer spending data, which is expected to come in at 0.3% m/m, 0.2% y/y. The main German unemployment data is due at 0755GMT and is expected to show a change of -5k. At 1100GMT, ECB Governing Council member Ewald Nowotny is due to be present at the Austrian finals of Generation Euro school competition, in Vienna. US data includes same-store sales, although scheduled releases start at 1130GMT with Challenger layoffs. This is followed by the ADP National Employment Report at 1215GMT, while at 1230GMT the weekly jobless claims are due along with the second revision of Q1 GDP data. Also at 1230GMT, Cleveland Federal Reserve Bank President Sandra Pianalto speaks to the National Association for Business Economics, in Cleveland, on monetary policy and the economic outlook. At 1345GMT, the MNI Chicago PMI is forecast to rise to a reading of 56.8 in May after falling sharply in April. Other regional data already released have been mixed. At 1430GMT, the weekly EIA Natural Gas Storage, followed at 1500GMT by the EIA Crude Oil stocks data. At 1500GMT, the New York Federal Reserve Bank releases it's Q1 report on Household Debt and Credit. Late US data sees the 1900GMT release of farm prices data and the 2030GMT release of M2 Money Supply.
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