Economic Confidence In Europe And USA Plunges Most Since 2008 - 31.8.2011

US Dollar The dollar gained ground against the majority of its counterparts yesterday. Several economic report released yesterday again showed poor economic conditions in the USA, boosting demand for the safety of Treasuries. US government bonds rose, driving their yields toward record lows. The yield of the benchmark 10-year US bonds fell to 2.16%. Demand for refuge reappeared as confidence among US consumers plunged to the lowest level in more than two years as Americans’ outlooks for employment and incomes soured. The consumer confidence index slumped to 44.5, the weakest since April 2009, from a revised 59.2 reading in July, according to yesterday’s figures. It was the biggest point drop since October 2008. Amid weakening economic conditions in the largest economy some analysts are expecting more stimulus measures from the central bank. Yesterday were released minutes of the Federal Open Market Committee's meeting from August 9. The minutes showed that a few members of the FOMC favored a “more substantial move” beyond the pledge adopted by the panel to hold rates at record lows for the next two years. Yet some Fed officials “judged that none of the tools available” to the central bank “would likely do much to promote a faster economic recovery,” the minutes said. These officials were concerned that providing additional stimulus would risk boosting inflation without providing a “significant benefit” in the form of faster growth or lower unemployment. However an “increased downside risks to the outlook for economic growth,” were widely accepted. Today reports may show companies in the US added 103000 jobs this month compared with 114000 new jobs in July, according to preliminary estimations before data from ADP Employer Services is released today. The key figures from the labor market will be released on Friday. Euro The euro fell yesterday against the dollar and Japanese yen as economists forecast unemployment in the region remained last month at its highest level since February, adding to signs that Europe’s economic recovery is faltering. The unemployment rate was steady in July at 9.9%, according to estimations before official statistics is released today. Initial estimates for the region’s inflation rate this month remained at annual 2.5% in August, a separate survey indicates before today’s report. In compliance with a weaker than expected confidence figures from the USA, European confidence in the economic outlook also plunged the most since December 2008 this month as a persistent debt crisis roiled markets and clouded growth prospects across the 17-nation euro region. The index of economic confidence, which reflects purchasing, business spending and investment activities, fell to 98.3 from a revised 103 in July, the European Commission reported yesterday. That’s the lowest level since May 2010. At the same time the consumer confidence declined to minus 16.5 from minus 11.2. Pair EUR/USD fell yesterday from a two-month high 1.4550 to 1.4384, but recovered in Asian hours today reaching 1.4450. Japanese Yen The yen gained ground on reviving demand for refuge after Japan’s industrial production rose less than expected in July, signaling that the nation’s recovery is stalling. Factory output increased by 0.6% in July from June, the slowest gain since March, according to the Ministry of Trade. Economists meanwhile projected a 1.4% gain after 3.8% in June. In annual figures the measure of production activity declined to minus 2.8% from minus 1.7%. Weakening economic conditions were also confirmed this month by falling exports figures, which declined more than expected in July, by the jobless rate, which rose for a second month and by weaker retail sales. Pair USD/JPY fell somewhat today toward its record low from 76.76 to 76.53.