Forexpros – The euro fell against the dollar Thursday as the market overlooked European Central Bank efforts to pump the financial system full of liquidity and ran to the security of the dollar.
EUR/USD hit 1.3037 during early Asian trade, down 0.08% and slightly up from a session low of 1.3036 and off from a high of 1.3052.
The pair was likely to find support at 1.2983, Monday’s low, and resistance at 1.3086, Wednesday’s high.
The European Central Bank on Thursday loaned EUR489.19 billion to 523 eurozone banks with the aim of facilitating lending and easing the credit crunch there.
Economists noted the decision to arrange such lending, which drew anticipatory applause in recent secessions, in the end was not enough to seriously navigate the continent out of its crisis and thus prompted the euro to retrench.
Furthermore, banks didn’t appear to use the loans to invest in government debt as much as markets had hoped.
While the ECB won’t directly buy government bonds from banks in an effort to inject liquidity into the financial system, the loans to banks were seen as an alternative.
Yields on Italian 10-year government bond yields climbed 12 basis points to 6.69 percent while the rate on comparable Spanish debt surged 17 basis points to 5.2 percent, according to Bloomberg data.
“It doesn’t take away the problem of the sovereign-debt financing and the amount of sovereign debt being held by banks becoming a concern for other counterparties,” said David Mann, regional head of research for the Americas at Standard Chartered in New York, according to Bloomberg.
“What we saw was a good result, but it wasn’t enough to draw a line under the crisis.”
Meanwhile in the U.K., Bank of England minutes revealed that London monetary policy officials might continue what their counterparts at the ECB refuse to do, which is step in and buy assets directly from banks, officially known as quantitative easing.
“Some members continued to note that the balance of risks to inflation in the November Inflation Report projections meant that a further expansion of the asset purchase program might well become warranted in due course,” the Bank of England said in a statement.
“Of those members, some thought that the outlook had deteriorated somewhat on the month, and noted the further weakening in the labor market and increased concerns for credit supply arising from the continuing strains in bank funding markets.”
Meanwhile in the United States, the National Association of Realtors reported that existing home sales during the 2007-2010 were revised down by 14%, meaning the housing crisis was much worse than originally anticipated.
The real estate group added that sales of existing homes increased 4.0% to a seasonally adjusted annual rate of 4.42 million in November from 4.25 million in October, and are 12.2% above the 3.94 million-unit pace in November 2010.
The euro was up slightly against the pound, with EUR/GBP climbing 0.01% to hit 0.8325.
Later on Thursday, the U.K. will release its latest gross domestic product growth and business investment figures as well as the country’s most recent current account balance numbers.
In the U.S., weekly initial jobless claims will hit the wire along with overall economic growth figures as well.
The Michigan Consumer Sentiment Index will shed some light on the willingness to spend in the world’s largest economy as well.
Forexpros
