Euro Fights Back Versus Swiss Franc
The euro rebounded from record lows against the Swiss franc and was steady versus the dollar on Tuesday, even as a major ratings agency warned about the consequences of further foot dragging on a Greek rescue.
Standard & Poor’s downgraded Greece’s sovereign rating by three notches to the lowest grade, citing possibility of one or more defaults over the coming 12 months.
European officials were meeting this week ahead of a pivotal summit on the Greek problem, desperate to hammer out a plan to prevent a run on Greek bonds.
Germany insists the private sector should participate in a second rescue package, while the European Central Bank fears the region’s banking sector remains too fragile.
Still, with U.S. retail sales not as awful as feared, increased risk appetite helped the euro rise against the safe haven Swiss franc. Relatively tame U.S. inflation data also signaled the Federal Reserve may keep interest rates near zero all year.
The euro improved to CHF 1.22 from Monday’s all-time low a hair from CHF 1.20.
Against the dollar, the euro was stuck near $1.44, unable to build on modest overnight gains.
The euro was near its overnight highs versus the yen, fetching Y116.20 compared to Y115 a day ago.
On the other hand, the euro continued to struggle versus the sterling amid the release of data showing inflation remains a problem in the U.K. The euro bought GBP 0.88, compared to yesterday’s 12-day low of GBP 0.8783.
British annual inflation held steady at the fastest rate since October 2008 in May, exceeding the 2 percent target for the 18th consecutive month on rising food and energy prices.
U.K. consumer price annual inflation came in at 4.5 percent in May, unchanged from April, data from the Office for National Statistics showed.
The U.S. Commerce Department said retail sales for May came in at $387.1 billion, a 0.2 percent decline from April, marking the first drop since June 2010.
Analysts expected retail sales to drop 0.3 percent.
With a drop in food prices offsetting a continued increase in energy prices in the month of May, the Labor Department released a report on Tuesday showing that producer prices for the month increased at the slowest rate in ten months.
The Labor Department said its producer price index edged up by 0.2 percent in May following a 0.8 percent increase in April.
In Asia, the People’s Bank of China on Tuesday raised reserve requirement ratio for banks for the sixth time this year to absorb excess liquidity in the economy.
The central bank lifted the reserve ratio by 50 basis points, effective from June 20.
