The Euro traded lower against the U.S. dollar yesterday, after Federal Reserve Chief Ben Bernanke stated that the U.S. economy faced “significant risks”, but held back from indicating that the central bank was prepared to implement any fresh stimulus measures.
Ratings agency Fitch has downgraded Spain, Europe's fourth largest economy, from A rating to a BBB rating, which is deemed extremely negative for the country.
In Spain, long-term debt was strong at yesterday’s auction, as the country's Treasury managed to sell €2.074 billion worth of bonds maturing in 2014, 2016 and 2022, out of a €1-2 billion target. The country saw its yields rise, although not as much as initially expected. The decision was supported by positive Service sector and Construction sector fingers, which is the UK’s biggest contributor.
Yesterday we saw the Euro weaken against the Pound after the announcement that interest rates in the UK were to stay the same at 0.50%, which was a figure very much expected. In regards to Quantitative Easing this was put on hold at £325 Billion until further turbulence.
David Cameron spoke in Berlin and stated that he wants the Euro to succeed but insists that the UK will not be part of further integration which is seen as "necessary" to help it continue. The prime minister also said that all of Europe's economies, whether in the Euro or not, needed a swift resolution of the current instability and the single currency area as a whole needed to act to demonstrate that it could "live within its means".
Looking ahead today, Mervin King from the Bank of England speaks regarding Inflation for UK. Historically Mr King tends to “talk down” the Pound however his attempts have failed over the last few months due to concerns mounting in the Eurozone. The USD is likely to strengthen as the week comes to an end.
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