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United States Unemployment Falls

On Thursday, the euro fell against the dollar amid skepticism around the summit in the Eurozone. The European Union is hosting a summit today and tomorrow to address the continued European financial crisis and discover ways to stabilize the euro. Contributing factors to the fall include new United States data shows a drop in unemployment.

During trading on Thursday, the euro dropped as low as 1.2408 against the dollar. This marks the lowest level for the euro since June 4, 2012. Analysts believe that the euro will find support at 1.2441 and resistance at 1.2582. These two numbers mark the two-week low for the euro and the recent high it reached on June 22.

Previously, investors had hoped that Europe would set up an EU-wide method of consolidating finances and sharing debt. After German Chancellor Angela Merkel warned going in to the conference that shared debt would not happen, investors’ hopes were crushed and the euro dropped further. Instead, the EU is intending to focus on short-term measures that will help to ease the financial instability facing bailout nations in the Eurozone.  

Italian Bonds Rise

Italian bonds are currently at their highest levels since December. Ten-year bonds reached 6.19 percent while five-year bonds rose to 5.84 percent. At an earlier auction, Italian five-year bonds had only managed to hit a rate of 5.66 percent.

Over in Spain, government issued ten-year bonds rose to a rate of 7 percent. This marks the level that other Eurozone nations like Greece, Portugal and Ireland were forced to request bailout money.

In today’s trading, the euro rose to 0.8021 against the British pound while hovering around the three-week low of 98.65 against the yen.

United States Unemployment Falls

The Department of Labor recently released the number of people filing for unemployment for the last week. Unemployment aid fell by 6,000 people to hover at 386,000. Although this is lower than the previous estimate of 7,000, it marks a turnaround for the United States employment market. The previous week showed a total of 392,000 individuals filing for unemployment within the United States. Other United States reports showed the economy expanded 1.9 percent during the first quarter. This number is in line with previous forecasts by market analysts.

Canadian Dollar Falls

For the second day in a row, the Canadian dollar fell. The drop in the loonie is attributed to continued Eurozone issues. The Canadian government is closely tied to the price of raw materials and natural resources. As the world’s demand for goods fall, the loonie is expected to continue its drop. In total, Canada’s currency has managed to fall 0.8 percent against the United States dollar this month. This drop is the largest since the loonie fell 1.3 percent in August of 2011.

China Creates Experimental Zone

China intends on creating a zone specifically designed to experiment with a convertible currency. The new experiment will take place in the city of Shenzhen. This decision is driven by the Chinese desire to make the renminbi into a convertible currency that vies with the United States dollar for the role of being the world’s currency.

Hong Kong bankers will now be able to directly lend the renminbi to borrowers and companies within Qianhai Bay. This bay is set up as a new economic zone and lies directly across from Hong Kong. Market analysts believe that this move—if successful—could be the first step toward doing away with capital controls. China would be opening up its markets to the world and establishing its own pre-eminence in global trade.

In the preceding two years, China has allowed its companies to deal with international trade in the Chinese currency. This has enabled the nation to send large amounts of the renminbi abroad for the first time.

The choice of Shenzhen is not without historical precedent. Previously, Shenzhen was set up as the nation’s first special economic zone. In 1980, this area was designated as a hotspot for foreign investment and trade. After the 1980 experiment with Shenzhen succeeded, China began to open its markets to the world and became the second-largest economy on earth. Analysts believe that China will need to relax their control on interest rates and the Chinese bond market before the renminbi can move freely throughout the country.

 

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