by Ladislav Jakab
WBP Online

Frankfurt/New York - Euro lost against most of its peers as the Italian Prime Minister Mario Monti and German Chancellor Angela Merkel meets on Wednesday in order to talk over measures to cease the European debt crisis.

Traders are waiting for a plan of sovereign bonds purchase to be announced by the European Central Bank.

US dollar benefits on hopes that Wednesday's US pending home sales reading may show that the US economy is recovering, a factor that may increase the Federal reserve (Fed) reluctance to adopt further monetary easening stimulus. 

Markets may be further shook by the latest report on the world's largest economy due to be released later Wednesday.

The European single currency was trading 0.15% lower against the greenback to $1.2545, while the British pound gained 0.22% against the euro, standing at £0.7921 as of 2:06pm GMT.

The EUR/JPY cross was flat at ¥98.60 as of 2:07pm GMT, while the so-called Australian aussie gained against the 17-countries common currency 0.10% to AU$1.2090 as of the same time.

The British pound rose 0.16% against the greenback to $1.5839 at the same time, while the US dollar advanced 0.15% to ¥78.59 against the yen, while it was traded 0.03% lower against the Australian dollar at $1.0376.

Catalonia needs aid

The Spanish debt woes came into focus once again on Tuesday as a spokesman for Catalonia said the region, which generates around a fifth of Spain's economic output, will need financial aid amounting to over €5 billion from the central government.

Spanish Prime Minister Mariano Rajoy refused speculation that Spain as a whole country will request financial aid besides the already agreed upon €100 billion granted to the nation's banking system.

"There isn't any negotiation about this issue. We are not negotiating anything," Rajoy claimed after a working lunch with President of the European Council Herman Van Rompuy on Tuesday.

The latest data published on Tuesday failed to reassure investors about the state of the Spanish economy as latest data showed the economy contracted 0.4% in the second quarter, compared to the prior three months. 

Italian short-term debt auction

Italy conducted a short-term debt auction on Wednesday with yields falling almost a percentage point in an auction of 6-month bills.

The Italian Finance Ministry sold €9 billion worth of 6-month bills with an average yield of 1.585% compared to 2.454% in a prior auction on July 27, as investors’ demand for the security was stable. The bid-to-cover ratio rose to 1.69 compared to 1.61 in last month’s auction.

Another report from the Italian National Institute of Statistics showed retail sales rose 0.4% in June from a month ago, although the average of the last three months compared to the previous three months decreased by 1.7%. June’s retail sales fell 0.5% compared to the same month a year ago.

To contact the author of the story e-mail ladislav.jakab@wbponline.com

Photo: ISIFA