The combination of growing confidence in Europe’s economy and mounting evidence of a slowdown in the U.S. is driving the Euro higher. After tracking the Euros’ slide form $1.45 at the beginning of 2010, the median forecast of currency strategists has remained within 2-cents of $1.20 since the start of June. However some of the major banks including Goldman Sachs Group Inc, Wells Fargo & Co., and Deutsche Bank AG have raised their forecasts in the past two weeks joining HSBC Holdings Plc in predicting a stronger Euro going forward. While the Euro weakened 15 percent in the first half as the region’s debt crisis threatened to tear the currency union apart, investors have shifted their focus to the U.S. as the dollar depreciated 8 percent from a four-year high in June. U.S. economic data fell short of economists’ estimates this month while economic data from Euro land exceeded forecasts since April. Confidence in the Euro returned after the most-indebted countries in the region announced budget cuts and the European Union crafted a 750 billion-Euro ($970 billion) financial backstop in May to forestall defaults. Spain, Portugal, Ireland, and Greece successfully auctioned more than 17 billion euros worth of bonds and bills since July 13th. The Euro opens this morning at $1.2945.
The British Pound advanced to its strongest level in more than three months against the dollar after major U.K. Banks passed European Union stress tests. Sterling surpassed $1.55 level against the dollar for the first time since April 16. The pound rose even amid data signalling that the economic recovery may be in danger of stalling as the government cuts spending to reign in the budget deficit. The U.K. economy expanded 1.1 percent in the three months through June, from 0.3 percent growth in the previous quarter, a government report showed on July 23. Sterling opens this morning at $1.5525.
Today's Opening Rates (Mid-Rate) (as at 08:30 E.D.T.)
| EUR/USD | 1.2935 | USD/JPY | 86.84 | GBP/USD | 1.5500 | USD/CHF | 1.0503 |
| USD/CAD | 1.0357 | AUD/USD | .8964 | NZD/USD | .7280 | EUR/GBP | .8336 |
| USD/PLN | 3.1211 | USD/MXN | 12.712 | USD/DKK | 5.7655 | USD/SEK | 7.3307 |
Equity Indices (as at 08:30 E.D.T.)
| Dow Jones | 10,426 | FTSE | 5,309 | Nikkei | 9,507 |
| ISEQ | 2,933 | NASDAQ | 2,269 | |
Indicative Opening Deposit Rates
| Time Period |
$ Deposit |
Euro Deposit |
| 1 Week |
0.30 |
0.29 |
| 2 Week |
0.31 |
0.29 |
| 3 Week |
0.32 |
0.29 |
| 1 Month |
0.32 |
0.36 |
| 2 Month |
0.40 |
0.29 |
| 3 Month |
0.48 |
0.61 |
| 6 Month |
0.70 |
0.93 |
| 9 Month |
0.88 |
1.08 |
| 12 Month |
1.08 |
1.22 |
FOCUS: E.U. STRESS TESTS
E.U. regulators scrutinized 91 of the bloc’s banks to assess whether they have enough capital to withstand a recession and sovereign-debt crisis, with a Tier 1 capital ratio of 6 percent as a floor. Seven European Union banks failed the region’s stress tests with a combined capital shortfall of 3.5 billion euros ($4.5 billion), according to the Committee of European Banking Supervisors, which coordinated the initiative. Governments are seeking to reassure investors about the health of financial institution after the debt crisis pummelled the bonds of Greece, Spain and Portugal. The evaluations took into account potential losses only on government bonds the banks trade, rather than those they are holding to maturity, according to CEBS. That means the tests are set to ignore the majority of bank’ holdings of sovereign debt, investors said.
Regulators tested portfolios of sovereign five-year bonds, assuming a loss of 23.1 percent on Greek debt, 12.3 percent on Spanish bonds, 14 percent on Portuguese bonds and 4.7 percent on German state debt, according to CEBS. The tests also assessed the impact of a four-step credit rating downgrade on securitized debt products, a 20 percent slump in European equities in both 2010 and 2011 and 50 other macroeconomic parameters, including a drop in the EU’s gross domestic product over two years.
