The Federal Reserve said U.S. economic growth slowed in some areas over the past two months, dragged down by commercial real estate and the expiration of a tax credit for homebuyers. “Economic activity has continued to increase, on balance, since the previous survey,” the central bank said today in its Beige Book business survey, while noting that two of the Fed’s 12 districts reported the economy “held steady” and two said the pace of expansion slowed. The report underscored the Fed’s view that the recovery, while still moving forward, is progressing at a slower pace than earlier in the year. The dollar gave up gains after the report, driving the single currency back above the $1.30 level. The Euro opens stronger this morning close to $1.31 after a report showed economic confidence in the region rose more than forecast in July. An index of executive and consumer sentiment in the 16 Euro nations rose to 101.3 from 99 in June. Sentiment is beginning to build that the U.S. economy is slowing as stimulus measures are being removed.
The Australian dollar relinquished over 100-pips at the start of the Asian session following a softer than anticipated print in the consumer price index, While the RBA has shifted toward a more hawkish tone at the last meeting, incoming economic reports can temper the pace at which the Bank tightens policy in the upcoming meetings. The headline CPI figure missed calls for an increase to 1.0%, instead printing at 0.6% in Q2 compared with a 0.9% reading in the previous quarter while the yearly CPI figure climbed by less than anticipated to 3.1% from 2.9%. The RBA trimmed mean CPI fell 0.5% versus 0.8% q/q. Aussie/dollar tumbled from .9027 to 89.26 shortly after the data release. On the downside support for the currency lies at 0.89, followed by 0.8860.
Today's Opening Rates (Mid-Rate) (as at 08:30 E.D.T.)
| EUR/USD | 1.3068 | USD/JPY | 86.95 | GBP/USD | 1.5610 | USD/CHF | 1.0450 |
| USD/CAD | 1.0338 | AUD/USD | .9015 | NZD/USD | .7263 | EUR/GBP | .8374 |
| USD/PLN | 3.0608 | USD/MXN | 12.649 | USD/DKK | 5.5970 | USD/SEK | 7.2470 |
Equity Indices (as at 08:30 E.D.T.)
| Dow Jones | 10,498 | FTSE | 5,358 | Nikkei | 9,696 |
| ISEQ | 2,935 | NASDAQ | 2,265 | |
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.
