Euro Bounces Back from Two Year Lows

The euro continued its slide against the pound during trading on Friday. Currently, the it is trading at 0.7857. This exceptional exchange rate is the lowest level it has seen since November of 2008. The euro has sustained a 0.6 percent loss for the day and 0.9 percent drop for the week to date.

The pound has been propped up because of its status as a safe haven. If the European Union continues to have debt crises, it could translate into an appreciation of the United Kingdom’s pound. As one of Europe’s leading trading partners, the United Kingdom’s economy is closely tied to Eurozone. If the Eurozone undergoes economic problems, it could have a ripple effect within the United Kingdom.

Data released from the United Kingdom shows that output from the construction sector fell by 6.3 percent during the month of May. Weak economic data could push the central bank in the United Kingdom to adopt further quantitative easing measures.

Part of the change in the euro comes as a result of Moody’s recent rating change. Moody’s cut Italian bonds ratings by two notches. This rating cut places Italian bonds just two notches above junk status.

Fed Chairman Expected to Give a Report

Next week, the United States Federal Reserve chairman is expected to issue a report. Ben Bernanke will discuss future monetary policy measures. Analysts expect this report to provide a glimpse into the possibility of future quantitative easing measures within the United States.

Canadian Dollar Advances

The Canadian dollar, nicknamed the loonie, rose against the euro during trade on Friday. It is currently trading at .8078 euros which marks its highest level since the euro began. Canada was one of the few countries to enjoy an appreciation in their currency following the release of Chinese economic data.

Chinese data showed an increase of just 7.6 percent in their GDP in the second quarter. This increase is in line with the expectations of investors and fueled speculation in the commodities market. As a key player in commodities, Canada’s currency rose after the announcement by China. Prices for oil and coppers for Canada rose during the day of trading. Analysts believe that the Bank of Canada will keep their interest rates at the current level until at least mid-2013.

Indian Rupee Rallies

Although imports dropped in June, most of the fall was attributed to the lower price of oil. Investors are still investing large amounts of money in the Indian bond and stock markets. As India approaches presidential elections on July 19, investors are speculating about potential changes to government policies. With all of the speculation surrounding India, the rupee rallied to complete its third week in a row with a net gain.

India has enjoyed a falling trade deficit as the cost of oil dropped. This drop in the deficit has smoothed out foreign fears and worries surrounding the emerging market. The rupee rose 0.5 percent over the last week as investors injected $1.63 billion into the marketplace. Three-month forward contracts are currently being purchased at 56.06.

Euro Versus the Greenback

In its most recent trade, the euro was at $1.2289 against the United States dollar. This marks a rise of 0.3 percent for the day and the euro’s best performance for two weeks. Early on in the trading session, the euro hit its lowest level for two years before bouncing back. The euro is still down by 5 percent for 2012.

The euro is trading at 96.90 versus the yen. This is a 0.2 percent rise from Thursday’s trading session, but a fall of 0.8 percent for the entire week. With ratings cuts and debt crisis, the euro has had a difficult time swaying investors away from the safe haven of the Japanese yen or United States dollar.

Further Downgrades Possible

With the Italian bond market just two steps away from junk status, Moody’s warned that further cuts could be possible.  The Italian government has to shore up their finances and adopt austerity measures if they want to maintain their new rating.

United States Consumer Sentiment Down

The United States dollar managed to stay steady despite economic data indicating a slowed marketplace. Consumer sentiment for June was at its lowest level for the last seven months. Meanwhile, producer prices are just a little higher than they were for previous months. Although this data suggests an economy headed for a minor downturn, investors have mostly shrugged it off. With all of the debt crises going on in Europe, a drop in consumer sentiment is just a blip on a newsfeed.