Forexpros – The euro dropped to multi-year lows against the U.S. dollar and the yen and the other major currencies on Friday, amid growing fears that Spain will need a full bailout, after the state of Valencia requested financial aid from the government.
The euro fell to its lowest level since June 2010 against the dollar, with EUR/USD dropping 1.01% to settle at 1.2156. The single currency fell to an 11-year low against the yen, with EUR/JPY down 1.14% to 95.39.
Against the pound, the euro tumbled to a three-and-a-half year low, with EUR/GBP losing 0.34% to settle at 0.7782 and hit record lows against the Australian, New Zealand and Canadian dollars.
The yield on Spanish 10-year bonds jumped to 7.26% on Friday, rising above the critical 7% threshold widely considered unsustainable in the long run, after the indebted state of Valencia said it would need financial help from Madrid. Spain’s government also cut growth forecasts for 2013 and said the economy would stay in recession next year.
Earlier Friday, euro zone finance ministers approved the terms of a loan of as much as EUR100 billion to recapitalize Spanish banks.
The dollar had come under pressure earlier in the week as market participants focused on testimony by Federal Reserve Chairman Ben Bernanke amid speculation that weak economic data out of the U.S. would prompt a third round of quantitative easing by the central bank.
In testimony on the economy, Bernanke said growth had lost momentum in the first half of the year and added that progress on cutting the U.S. unemployment rate was “frustratingly” slow.
However, he refrained from indicating whether a fresh round of stimulus was imminent, but reiterated that the central bank was prepared to take further action to support the economic recovery if necessary.
In the week ahead, investors will be focusing on developments in Spain, while euro zone data on manufacturing and service sector activity will be closely watched amid fears of the impact of the region’s debt crisis on economic growth.
Market participants will also be anticipating U.S. data on second quarter economic growth, in order to gauge the strength of the country’s recovery.
Ahead of the coming week, Forexpros has compiled a list of these and other significant events likely to affect the markets.
Monday, July 23
Australia is to release official data on producer price inflation, a leading indicator of consumer inflation.
Later in the day, the euro zone is to publish a report on consumer confidence.
Tuesday, July 24
The Governor of the Reserve Bank of Australia Glenn Stevens is to speak in Sydney; his comments will be closely watched for clues to the possible future direction of monetary policy.
The euro zone is to release preliminary data on manufacturing and service sector activity, leading indicators of economic health. Germany and France are also to release individual reports.
The U.K. is to release industry data on mortgage approvals, a leading indicator of housing market demand.
Canada is to produce official data on retail sales, the foremost indicator of consumer spending, which accounts for the majority of overall economic activity.
Later Tuesday, Federal Reserve Chairman Ben Bernanke is to speak; his comments will be closely watched for clues to the possible future direction of monetary policy. The U.S. is also to release preliminary data on manufacturing activity, a leading indicator of economic health.
Wednesday, July 25
New Zealand is to publish official data on its trade balance, the difference in value between imported and exported goods and services. Japan is also to publish data on its trade balance.
Australia is to produce government data on consumer price inflation, which accounts for the majority of overall inflation. The country is also to publish an index of leading economic indicators.
In the euro zone, the Ifo Institute for Economic Research is to release data on German business climate, a leading indicator of economic health.
The U.K. is to publish preliminary data on second quarter gross domestic product, the broadest measure of economic activity and the foremost indicator of the economy’s health. The country is also to produce a report on industrial order expectations.
Also Wednesday, the U.S. is to publish official data on new home sales, a leading indicator of economic health, as well as data on crude oil stockpiles.
Thursday, July 26
The Reserve Bank of New Zealand is to announce its benchmark interest rate. The announcement is to be accompanied by the bank’s rate statement, which outlines the reasons for the bank’s policy decision and discusses the economic outlook.
In Japan, central bank Governor Masaaki Shirakawa is to speak; his comments will be closely watched for clues to the possible future direction of monetary policy.
In the euro zone, the Gfk Institute is to release data on German consumer climate, a leading indicator of consumer spending. The euro zone is also to publish data on M3 money supply.
Later in the day, the U.S. is to release official data on durable goods orders, a leading indicator of production, as well as data on pending home sales and initial jobless claims.
Friday, July 27
Japan is to release official data on consumer price inflation, which accounts for the majority of overall inflation. The country is also to publish government data on retail sales.
In the euro zone, Germany is to produce preliminary data on CPI. Elsewhere in Europe, Switzerland is to publish the KOF index of leading indicators, designed to predict the future direction of the economy.
The U.S. is to round up the week with advance data on second quarter GDP, the broadest measure of economic activity and the foremost indicator of the economy’s health. In addition the University of Michigan is to release revised data on consumer sentiment and inflation expectations.
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