ICM Brokers | Aug 09, 2012 05:57AM ET
EUR/USD
Light trading session took place in the currency market yesterday. Earlier, the euro dropped a little bit against its major peers after one of the biggest credit rating agency, S&P downgraded Greek’s credit outlook. Standard and Poor downgraded the credit rating outlook on Greece to “negative” amid deterioration in economic activity would make it difficult for the government to make further spending cuts which the agency considers a “crucial stage” to secure the next disbursement under the international bailout program. Meanwhile, German trade surplus unexpectedly widened in June as imports declined at a pace double than that of exports, indicating that the sovereign debt crisis and the economic slowdown had set aside both domestic and foreign demand. Exports fell 1.5 percent month-on-month, the Federal Statistical Office showed. This was faster than economists' had forecast for a 1.3 percent drop. While, imports fell 3 percent month-on-month following a 6.2 percent rise in the preceding month. Trade surplus for June was EUR 17.9 billion compared to expectations of EUR 14.6 billion. It grew from EUR 15.6 billion in May and EUR 12.5 billion in June last year. In calendar and seasonally adjusted terms, the balance was in a surplus of EUR 16.2 billion. However, in the second largest economy in the euro periphery, France trade deficit continued to widen. Its trade deficit increased to EUR5.99 billion in June from EUR5.47 billion in May. Export of goods decreased to EUR36.54 billion in June from EUR37.24 billion in the previous month, data showed. The value of imports was EUR42.53 billion during the month, down from EUR42.71 billion recorded in May, the Directorate General of Customs and Excise said.
The Bank of England reduced U.K.'s growth estimate amid fiscal consolidation and Eurozone debt crisis weigh on demand plus below-target inflation forecast added hopes of more asset purchases by the year end. The central bank said economic growth is likely to be around 2 percent in two years down from the 2.6 percent expansion estimated in May, in its quarterly Inflation Report revealed. The biggest threat to recovery stems from the risk that an effective policy response is not implemented sufficiently promptly in the euro area, the Bank of England said. The central bank expects the Funding for Lending Scheme and quantitative easing to spur a modest recovery. The U.K. economy is navigating through tough waters and efforts to rebalance the economy will require patience, Governor Mervyn King said. The economy fell deeper into recession in the second quarter. Gross domestic product dropped 0.7 percent from a quarter ago on an extra public holiday and poor weather. However, optimism prevails in the third quarter by expecting to see a rebound, King added. Meanwhile, inflation is expected to fall further throughout the year. At the moment, it is seen near 1.7 percent in two years time which is below the central bank's 2 percent target. The central bank said the near-term outlook for inflation is lower than three months ago. The downgrade reflects fall in energy prices and some broader-based weakness in price pressures.
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