BLBG:Euro Falls As Merkel Says European Project At Risk; Pound Drops
The euro weakened after German Chancellor Angela Merkel said the “European project” is at risk unless policy makers work harder, fueling concern a solution to the region’s debt crisis remains elusive.
The pound fell against the dollar for the first time in four days after the Bank of England said it may be appropriate to weigh cutting interest rates. The yen and the dollar rose against most of their 16 major peers before Federal Reserve Chairman Ben S. Bernanke gives a second day of testimony to Congress and Asia stocks and U.S. index futures fell.
Merkel’s comment “is quite a remarkable statement,” said Simon Derrick, chief currency strategist at Bank of New York Mellon Corp. in London. “That has pulled the rug from underneath the euro. It’s a reminder that you can never take your eye from the euro crisis. On the medium term we are still targeting below $1.20.”
The euro dropped 0.5 percent to $1.2238 at 6:17 a.m. New York time, and slid 0.5 percent to 96.74 yen. The greenback was little changed versus the Japanese currency at 79.05.
The Dollar Index (DXY), which tracks the U.S. currency against those of six trading partners, climbed 0.3 percent to 83.270.
Sterling fell 0.4 percent to $1.5590.
The Bank of England’s nine-member Monetary Policy Committee was unanimous in a decision to keep its benchmark interest rate at a record low 0.5 percent this month, minutes of the July 4-5 released today showed. While it said cutting the rate had “drawbacks” compared with more asset purchases and the arguments for and against such a move were the same as in June, this assessment could change in light of the new credit measures.
The MSCI Asia Pacific Index of stocks dropped 0.5 percent, and futures on the Standard & Poor’s 500 Index slid 0.3 percent.
To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net
To contact the editors responsible for this story: Daniel Tilles at dtilles@bloomberg.net.
