Euro Gains Before Germany Vote - 29.9.2011

Asian stocks were mixed on Thursday, following declines of major US stock indices as weak economic data was released. S&P 500 index dropped by 2.07% by the end of the trading session, while Japanese Nikkei, however, managed to gain almost 1%. Treasuries on the other hand fell somewhat, driving the yield of 10-year securities to almost 2%, reflecting a declining demand for safety. US Dollar The dollar reversed today its previous gains, falling against its counterparts at the beginning of the European trading session. Yesterday data showed that the number of durable goods orders in the US declined in August by 0.1%, adding to signs the US economy is cooling. However, economists expected even a deeper drop of 0.2% after a 4.1% rise in July. Today we will also see some important statistics. First, according to preliminary estimations, the number of initial jobless claims stayed above 420 thousand in the previous week, giving no chance for unemployment rate to decrease. Moreover, another sign of a problematic situation in the economy may come from the housing market. A report may reveal that the number of pending home sales declined in August by 2.1% after falling by 1.3% in July. The dollar index, which tracks the US unit against a basket of six currencies of main US trading partners, fell today to 77.62 from 78.86 on Monday. Euro The euro strengthened against most of its major peers in Asian trading hours today before German lawmakers vote on changes to a European bailout fund. German Chancellor Angela Merkel meanwhile is seeking a support among her coalition lawmakers for the vote in order to expand the European Financial Stability Facility’s firepower. The vote in Berlin would allow the fund to buy bonds of distressed states and offer emergency loans to governments. US President Barack Obama said recently that Europe’s debt crisis continues to be a drag on the US economy. “In Europe, we haven’t seen them deal with their banking system and their financial system as effectively as they needed to,” he said. The euro strengthened today above 1.36 against the greenback, as investors are widely expecting the measure will be passed successfully, despite the data may show another fall in the euro zone economic confidence. An overall measure of economic sentiment in the euro zone may fall to 96 from 98.3 in August, reflecting a worse data of purchasing, business spending and investment.