U.S. economic growth in the second quarter of 2012 was stronger than initially reported but still fell short of the growth seen in the first quarter. According to the Commerce Department, U.S. gross domestic product was upwardly revised to show a 1.7 percent increase in the second quarter. Moreover, the Pending home sales in the U.S. rose by 2.4 percent to 101.7 in July (more than expected) in the month of July, according to a report released by the NAR on Wednesday.
Italian PM Mario Monti traveled to Berlin on Wednesday to hold crisis talks with German Chancellor Angela Merkel. During a subsequent press conference the German leader assured that the possibility of Italy asking for EU bailout funds was not discussed. Angela Merkel said that Italian reforms are “impressive” and that soon they will bear fruit by resulting in a decrease of the country's borrowing costs. She stressed that there is still a lot to be done to regain market confidence in the euro, assuring however that sufficient means are in place to reach this goal. Nevertheless, the German Chancellor said that according to EU treaties the ESM should not have a banking license, allowing it to buy debt of distressed countries. Spain and Italy are counting on such a solution and Mario Monti suggested that “treaties can be changed,” adding however that such changes cannot be taken lightly.
Countering arguments made by the German economics establishment since before the introduction of the euro, European Central Bank President Mario Draghi said it’s in Germany’s interest to consent to extraordinary steps to preserve the currency shared by 17 nations. Draghi used the pages of German weekly Die Zeit to plead for a more expansive role for the central bank and to say that the crisis-struck currency can be stabilized without sacrificing each country’s independence to a unified European political system, according to an article published by Bloomberg News.
AUD/USD: Australia’s dollar fell against all of its major peers and the country’s bonds rose after a government report showed July building approvals fell more than economists estimated and American economic data showed signs of growth, damping speculation of further stimulus. The pair was trading at 1.03335 at the time of writing. Market sentiments remain weak on the AUD on bad construction and mining related data in Australia. The London session ahead, investors will closely watch the German unemployment rate, Italian 10-Year BTP Auction and Italy consumer sentiment as well as some soft data in the Eurozone to indications on the trend of the pair. The key risk events for the pair today will be the Personal Spending (MoM), Initial Jobless Claims and Core PCE Price Index (MoM) in the U.S. Economists are expecting the Consumer spending in the U.S. to increase in July by the most in five months and forecasting a slight decrease in the Initial jobless claims data. If these data come in as expected, then it will be bullish for the USD. The resistance level is at 1.03640 and the support level 1.02881.