Investing.com - The euro was lower against the U.S. dollar on Friday, paring some of the week’s gains after a three notch downgrade to Spain’s sovereign rating, while weak economic data out of Germany and Italy also weighed.
Rating’s agency Fitch cut Spain's credit rating by three notches to triple-B on Friday, and indicated that further cuts could still be made as the country struggles to stabilize its fragile banking system.
The downgrade came as senior European Union officials prepared to discuss options for financial aid to Madrid in a telephone conference on Saturday morning.
Sentiment on the euro was also hit after official data showed that German imports fell by the most in two years in April, dropping 4.8%, fuelling concerns over the impact of the euro zone crisis on the region’s largest economy.
A separate report showed that Italian industrial production fell 1.9% in April, far outstripping expectations for a 0.5% decline.
Traders also remained cautious after China announced a surprise interest rate cut on Thursday, which some market participants took as a sign that the world’s second largest economy may be slowing more than previously thought.
The greenback had gained ground against its major counterparts on Thursday, after Federal Reserve Chairman Ben Bernanke warned that the U.S. economy faced “significant risks” arising from the crisis in Europe, but refrained from indicating that the central bank was prepared to implement any fresh stimulus measures.
In testimony to a congressional committee in Washington, Bernanke said that the Fed remained "prepared to take action" to protect the U.S. economy and financial system if stresses on the financial system escalate, but stopped short of indicating what these actions might be.
Earlier in the week, European Central Bank head Mario Draghi also disappointed markets hoping for fresh stimulus measures in order to calm investor nerves over the escalating crisis in the euro zone.
Draghi said the bank would extend its policy of lending to banks until mid-January 2013 but didn't announce any new three-year lending operations. The ECB left euro zone interest rates unchanged at 1%, in a widely expected decision.
In the week ahead, markets will be keeping a close eye on developments in Spain, as Madrid begins to hammer out the details of a rescue package for its banks, while uncertainty over the outcome of Greek elections on June 17 is likely to weigh.
Investors will also be eyeing rate decisions by Japan, Switzerland and New Zealand, as well as Wednesday’s U.S. retail sales data, as investors try to gauge the strength of the country’s economic recovery.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, June 11
Japan is to release official data on manufacturing activity, as well as preliminary data on machine tool orders. Meanwhile, markets in Australia are to remain closed due to a national holiday.
In the euro zone, official data is to be published on French industrial production, a key gauge of economic health.
Tuesday, June 12
Japan is to release government data on tertiary industry activity, a key indicator of economic health. Later in the day, Bank of Japan Governor Masaaki Shirakawa is due to speak; his comments will be closely watched for any indication of the future possible direction of monetary policy.
Australia is to publish a report on business confidence, an important signal of economic health, while New Zealand is to release industry data on house price inflation, an important gauge of the housing industry’s health.
Switzerland is to release government forecasts for economic growth, an important indication of the economic outlook.
The U.K. is to release official data on manufacturing production, a key indicator of economic health, as well as industry data on house prices.
The U.S. is to publish official data on import prices as well as a government report on the federal budget balance.
Wednesday, June 13
Reserve Bank of Australia Governor Glenn Stevens is scheduled to speak at the Prime Minister's Economic Forum, in Brisbane. Australia is also to produce industry data on consumer sentiment.
Japan is to publish government data on core machinery orders, a leading indicator of production.
The U.K. is to release a report on consumer confidence, while Switzerland is to produce official data on producer price inflation, a key indicator of consumer inflation.
The euro zone is to release official data on industrial production, while Germany is to hold an auction of 10-year government bonds.
Later Wednesday, the U.S. is to release official data on retail sales, the foremost indicator of consumer spending, which accounts for the majority of overall economic activity. The country is also to produce data on producer price inflation, business inventories and crude oil stockpiles.
Thursday, June 14
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 and a press conference to discuss the rate decision. Later in the day, RBNZ Governor Alan Bollard is due to speak before the Parliament's Finance Select Committee.
Australia is to publish a report on inflation expectations.
The Swiss National Bank is to announce its Libor rate. The announcement is to be accompanied by the central bank’s monetary policy statement and followed by a press conference. The SNB is also to publish its financial stability report.
The euro zone is to release official data on consumer price inflation, which accounts for the majority of overall inflation. Meanwhile, the European Central Bank is to produce its monthly bulletin, which reveals the statistical data that the ECB Governing Board evaluated when making the latest interest rate decision, and provides detailed analysis of current and future economic conditions.
Elsewhere in Europe, Bank of England Governor Mervyn King is to speak; his comments will be closely watched for any indication of the future possible direction of monetary policy.
Canada is to publish official data on new housing price inflation, a key indicator of the housing industry’s health.
Also Thursday, the U.S. is to produce official data on consumer price inflation and the country’s current account, as well as a government report on initial unemployment claims.
Friday, June 15
The BoJ is to announce its benchmark interest rate; the announcement is to be accompanied by the bank’s rate statement and a press conference to discuss the rate decision.
The U.K. is to produce official data on trade balance, the difference in value between imported and exported goods.
In the euro zone, ECB president Mario Draghi is to speak; his comments will be closely watched for any indication of the future possible direction of monetary policy.
Canada is to publish official data on manufacturing sales, a leading indicator of economic health.
The U.S. is to round up the week with official data on manufacturing activity in the New York area, the capacity utilization rate and industrial production. The country is also to release preliminary data by the University of Michigan on consumer sentiment and inflation expectations.
Rating’s agency Fitch cut Spain's credit rating by three notches to triple-B on Friday, and indicated that further cuts could still be made as the country struggles to stabilize its fragile banking system.
The downgrade came as senior European Union officials prepared to discuss options for financial aid to Madrid in a telephone conference on Saturday morning.
Sentiment on the euro was also hit after official data showed that German imports fell by the most in two years in April, dropping 4.8%, fuelling concerns over the impact of the euro zone crisis on the region’s largest economy.
A separate report showed that Italian industrial production fell 1.9% in April, far outstripping expectations for a 0.5% decline.
Traders also remained cautious after China announced a surprise interest rate cut on Thursday, which some market participants took as a sign that the world’s second largest economy may be slowing more than previously thought.
The greenback had gained ground against its major counterparts on Thursday, after Federal Reserve Chairman Ben Bernanke warned that the U.S. economy faced “significant risks” arising from the crisis in Europe, but refrained from indicating that the central bank was prepared to implement any fresh stimulus measures.
In testimony to a congressional committee in Washington, Bernanke said that the Fed remained "prepared to take action" to protect the U.S. economy and financial system if stresses on the financial system escalate, but stopped short of indicating what these actions might be.
Earlier in the week, European Central Bank head Mario Draghi also disappointed markets hoping for fresh stimulus measures in order to calm investor nerves over the escalating crisis in the euro zone.
Draghi said the bank would extend its policy of lending to banks until mid-January 2013 but didn't announce any new three-year lending operations. The ECB left euro zone interest rates unchanged at 1%, in a widely expected decision.
In the week ahead, markets will be keeping a close eye on developments in Spain, as Madrid begins to hammer out the details of a rescue package for its banks, while uncertainty over the outcome of Greek elections on June 17 is likely to weigh.
Investors will also be eyeing rate decisions by Japan, Switzerland and New Zealand, as well as Wednesday’s U.S. retail sales data, as investors try to gauge the strength of the country’s economic recovery.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, June 11
Japan is to release official data on manufacturing activity, as well as preliminary data on machine tool orders. Meanwhile, markets in Australia are to remain closed due to a national holiday.
In the euro zone, official data is to be published on French industrial production, a key gauge of economic health.
Tuesday, June 12
Japan is to release government data on tertiary industry activity, a key indicator of economic health. Later in the day, Bank of Japan Governor Masaaki Shirakawa is due to speak; his comments will be closely watched for any indication of the future possible direction of monetary policy.
Australia is to publish a report on business confidence, an important signal of economic health, while New Zealand is to release industry data on house price inflation, an important gauge of the housing industry’s health.
Switzerland is to release government forecasts for economic growth, an important indication of the economic outlook.
The U.K. is to release official data on manufacturing production, a key indicator of economic health, as well as industry data on house prices.
The U.S. is to publish official data on import prices as well as a government report on the federal budget balance.
Wednesday, June 13
Reserve Bank of Australia Governor Glenn Stevens is scheduled to speak at the Prime Minister's Economic Forum, in Brisbane. Australia is also to produce industry data on consumer sentiment.
Japan is to publish government data on core machinery orders, a leading indicator of production.
The U.K. is to release a report on consumer confidence, while Switzerland is to produce official data on producer price inflation, a key indicator of consumer inflation.
The euro zone is to release official data on industrial production, while Germany is to hold an auction of 10-year government bonds.
Later Wednesday, the U.S. is to release official data on retail sales, the foremost indicator of consumer spending, which accounts for the majority of overall economic activity. The country is also to produce data on producer price inflation, business inventories and crude oil stockpiles.
Thursday, June 14
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 and a press conference to discuss the rate decision. Later in the day, RBNZ Governor Alan Bollard is due to speak before the Parliament's Finance Select Committee.
Australia is to publish a report on inflation expectations.
The Swiss National Bank is to announce its Libor rate. The announcement is to be accompanied by the central bank’s monetary policy statement and followed by a press conference. The SNB is also to publish its financial stability report.
The euro zone is to release official data on consumer price inflation, which accounts for the majority of overall inflation. Meanwhile, the European Central Bank is to produce its monthly bulletin, which reveals the statistical data that the ECB Governing Board evaluated when making the latest interest rate decision, and provides detailed analysis of current and future economic conditions.
Elsewhere in Europe, Bank of England Governor Mervyn King is to speak; his comments will be closely watched for any indication of the future possible direction of monetary policy.
Canada is to publish official data on new housing price inflation, a key indicator of the housing industry’s health.
Also Thursday, the U.S. is to produce official data on consumer price inflation and the country’s current account, as well as a government report on initial unemployment claims.
Friday, June 15
The BoJ is to announce its benchmark interest rate; the announcement is to be accompanied by the bank’s rate statement and a press conference to discuss the rate decision.
The U.K. is to produce official data on trade balance, the difference in value between imported and exported goods.
In the euro zone, ECB president Mario Draghi is to speak; his comments will be closely watched for any indication of the future possible direction of monetary policy.
Canada is to publish official data on manufacturing sales, a leading indicator of economic health.
The U.S. is to round up the week with official data on manufacturing activity in the New York area, the capacity utilization rate and industrial production. The country is also to release preliminary data by the University of Michigan on consumer sentiment and inflation expectations.