The Federal Reserve said today that the U.S. economy was expanding “modestly” last month

Oct. 11, 2012 - PRLog -- The Federal Reserve said today that the U.S. economy was expanding “modestly” last month, supported by improvements in housing and auto sales, even as the labor market showed little change. “Consumer spending was generally reported to be flat to up slightly since the last report,” the Fed said in its Beige Book business survey, which is based on accounts from the 12 district Fed banks.

International Monetary Fund Managing Director Christine Lagarde said Greece should get two years to meet fiscal targets and suggested debt reductions are needed before a 130 billion-euro ($167 billion) bailout can proceed. “It’s sometimes better to have a bit more time,” Lagarde said today at a press conference in Tokyo marking the start of the fund’s annual meeting. “This is what we advocated for Portugal, this is what we advocated for Spain and this is what we are advocating for Greece.’

The rating agency Standard and Poors downgraded Spain from to 'BBB-' from 'BBB+', with the outlook negative. The deepening economic recession is limiting the Spanish government's policy options. Rising unemployment and spending constraints are likely to intensify social discontent and contribute to friction between Spain's central and regional governments. Doubts over some Eurozone governments' commitment to mutualizing the costs of Spain's bank recapitalization are, in our view, a destabilizing factor for the country's credit outlook, the S&P said.

EUR/USD: The EUR/USD was trading in negative territory at 1.28714 at the time of writing after the Standard & Poor’s cut Spain’s debt rating to one level above junk, boosting demand for the greenback as a haven. Meanwhile, IMF statements pointing to the European debt crisis as the global economy's strongest headwind fueled a risk-off sentiments that sent the dollar up. In addition, Japan's Economic and Social Research Institute reported earlier that Japan’s core machinery orders fell 3.3% in August after rising 4.6% in July; these data boosted the demand for USD. Lots of volatility is expected today as a few important economic data will be released in the Eurozone and the U.S today.  The main risk events for the EUR will be the German CPI (MoM), French CPI (MoM) and ECB Monthly Report. While the risk events for the USD will be Initial Jobless Claims, Trade Balance and the Federal Budget Balance later in the day. Investors should also focus on the latest development in the Eurozone and the U.S to better assess the movement of the pair. The resistance level is at 1.29365 and the support level is at 1.28032

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