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In the month of June, real estate sales in the United States dropped to 8.4 percent. Sales currently stand at 350,000, which marks the lowest rate for five months. With all of the speculation surrounding the European and American economy, many investors are betting on future quantitative easing measures by the Federal Reserve.
Swiss Franc Drops Against the Greenback
In Asia, the United States dollar was trading at 0.06 percent higher against the Swiss franc. The greenback was at 0.9894 around GMT 0300. Support for the pair is expected to be at 0.9853 and resistance should be at 0.9949. If any drastic changes occur, support could be as low as 0.9813 and resistance could be pushed up to 1.0005. The future exchange rate between the franc and greenback is mostly decided by any news surrounding the United States dollar. Switzerland is not expected to issue any economic data in the coming week so any changes in value will be hinged on develops in the American marketplace.
Bailout Woes Still trouble Spain
During Thursday’s trading, the euro fell against some of the gains made on Wednesday. Trading on Wednesday saw the euro recover from a two-year low of $1.2043. Investors are still mired in speculation over the financial future of Spain. Currently, market analysts estimate that as many as six different provincial regions in Spain could be requesting financial aid. If this happens, it would be difficult for Spain to recover without having any bailout. After a rough few weeks, the euro dropped a further 0.2 percent today to $1.2130. During Wednesday’s trading session, the euro gained to a level of $1.121705.
In the United States, the Federal Reserve Bank is expected to meet and discuss new policy measures. Many analysts believe that the euro is falsely buoyed right now by the possibility of fiscal easing measures. If the Federal Reserve Bank decides to take action, it could cause a fall in the value of the dollar. At the same time, the value of the euro would rise. In the short term, this kind of speculation will keep Europe’s currency falsely higher than it ought to be. The only way to stop the ongoing fall of the euro is for the United States to enact new quantitative easing measures.
Luckily for the euro, the chance of new fiscal easing measures appears to be high. With skyrocketing bond rates in Italy, Greece and Spain, the Federal Reserve Bank may feel forced to react. Bond rates in Spain have dropped from the high of 7.75 percent, but the interest rate for ten-year bonds is still at a 7.40 percent. In previous bailouts, countries had to request bailout funds after the ten-year bond rates broached 7 percent. Although Spain has avoided these drastic measures for now, the high interest rate could be a sign that a bailout is imminent. Since the month of May, the euro has dropped a total of 9 percent.
Fed Policy Decision
Next Wednesday, the Federal Reserve Bank in the United States will be meeting to discuss future policy measures. The greenback has had a tough time making any gains this week since some investors believe the Federal Reserve will adopt more fiscal policy measures. Trading on Thursday showed that the dollar index was 0.1 percent higher and was standing at 83.586. The United States dollar was at a stable 78.18 yen. Earlier this week, the greenback set a seven-week record of 77.94 yen. With many Japanese importers demanding the United States dollar, the greenback should be able to avoid any major falls.
In response to the changing marketplace, the Federal Reserve may adopt a third round of quantitative easing. If this happens, the Fed will purchase large amounts of bonds in an effort to make interest rates lower. On Friday, the United States government will also be issuing the GDP for the second-quarter.
Although the home sales report came as bad news for the United States, it was warmly welcomed in China. After the data was issued, the Chinese currency grew the most that is has over the week amid rumors of future Federal Reserve measures. China’s currency gained 0.07 percent to end up reaching a rate of 6.3841 versus the United States dollar. This change in value was an improvement over yesterday’s trades of 6.3967.