(MENAFN- Kuwait News Agency (KUNA)) Major currencies witnessed a volatile week, as new plans from the European Central Bank increased risk appetite in the FX markets, causing a massive rally for the Euro, said a National Bank of Kuwait (NBK) report, Sunday.
"The US Dollar witnessed a rough week, as Ben Bernanke's speech at Jackson Hole last week confirmed the Federal Reserves' willingness to introduce more stimuli, should the economic situation in the US deteriorate further. This in turn pushed the greenback lower against its European counterpart." The report also noted that European Central Bank President, Mario Draghi, "announced his plan to safeguard the single currency. Draghi has unveiled details of a new bond-buying program aimed at easing the regions debt crisis. The President of the ECB have said that the central bank will engage in 'Outright Monetary Transactions,' or 'OMT's,' to address 'severe distortions' in government bond markets based on 'unfounded fears.' "The ECB will engage in unlimited bond buying at the short end, if the peripheral government requests a bailout program.
The OMT program will be open ended, and the liquidity created by it will be fully sterilized and will focus on buying bonds with maturities of between one and three years. Strict conditionality of the EFSF/ESM program has to be adhered, for the governing council could suspend the program for a member state in case of non-compliance.
"Mario Draghi is hoping that the ECB intervention in the bond markets will help reduce the borrowing costs of debt-laden countries such as Spain and Italy and lessen the likelihood of them needing to ask for a full sovereign bailout, an eventuality that could bankrupt the Eurozone and cause the collapse of the euro." Regarding US employment figures, "fewer Americans have filed for unemployment benefits from last weeks' seven-month low, a sign that the labor market is taking less time to gain traction, and easing concerns that it may weaken in the second half of the year. Applications for jobless benefits decreased last week by 12,000 claims to 365,000, against market expectations of a drop to 370,000," said the report.
"The unemployment rate unexpectedly dropped to 8.1% from 8.3% in July, against market expectations." Moving on to Europe, NBK noted the Draghi remarks above, mentioning also the remarks by the Spanish Prime Minister, Mariano Rajoy, which indicated no rush on Thursday to seek a bailout that comes with harsh conditions for the troubled country under a new European Central Bank plan to bring relief to struggling Eurozone members."
As for the key EU economy, Germany's, the report indicated, "German factory orders rose more than forecasted in July, due to a solid increase in domestic contracts. The rise in turn boosted hopes that domestic demand will prop up Europe's biggest economy during the Eurozone crisis. The index of factory orders came out at 0.5 percent on the month, beating economist expectations of 0.3 percent, significantly higher than the previous months' figure at -1.7 percent."
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.