The Euro declined against the majority of its live Forex peers after a flurry of reports suggested the debt crisis is spreading to the larger economies within the bloc. Germany announced a drop of 0.9% in industrial production while the Italian and Spanish ratings were downgraded to A, which is only four notches from junk. Furthermore, the Standard & Poor’s reduced the outlook for Greece’s CCC rating from stable to negative.
In the U.K., the Bank of England lowered its growth outlook, thereby indicating that recovery will come at a slow pace; however, bank Governor Mervyn King reiterated his support for Prime Minister David Cameron’s budget plan, a factor that contributed to the advance of the Pound against the majority of the Forex exchange majors. The Sterling strengthened the most in close to three weeks versus the Euro after Governor King stated that reducing lending costs would be “counterproductive.”
The Australian Dollar came close to a four-month high subsequent to the release of home loan approval data revealing that the June increase was the most for 2012. This was an indication that the economy is recovering. But the New Zealand Dollar fell against all of its money currency counterparts as Prime Minister John Key announced that the central bank may consider lowering the interest rate. Demand for the two South Pacific monetary units declined in anticipation of what economists predicted would be lackluster economic reports out of China and Germany.