The U.S. dollar traded in a quiet range overnight, largely holding on to its gains from last week, as global equities ebbed and flowed between gains and losses. The greenback gained against the Australian dollar after a report from the statistics bureau showed retail sales were unchanged in November. Economists surveyed by Bloomberg had predicted a gain of 0.4%. In the United States, there is no economic data slated for release today or tomorrow and only the Fed’s Beige Book on Wednesday. Weekly jobless claims and retail sales will likely affect markets on Thursday. International trade, import and export prices and consumer sentiment will round out the relatively light economic docket on Friday morning. With a lack of risk events in the United States this week, look for news surrounding the European debt crisis and the results of European bond auctions to drive the overall risk sentiment and thus the direction of the greenback.
The Euro held near its lowest level in 15 months against the U.S. dollar even as leaders of Germany and France met to craft a plan for rescuing the 17-nation common currency. German Chancellor Angela Merkel and French President Nicolas Sarkozy held talks in Berlin today to flesh out a new rulebook for fiscal discipline negotiated at a December 9th summit that seeks to create a “fiscal compact” for the euro area. Merkel said that euro-area leaders will discuss making the European bailout fund “more efficient” and that Germany and France “are ready to examine” how to speed up capital payments into the European Stability Mechanism bailout fund. Meanwhile, the economic docket showed that industrial production in Germany, Europe’s biggest economy, declined in November. Later this week, both Spain and Italy will hold bond auctions. The spread on Italian 10-year bonds remains above 7.0%, a threshold that led Greece, Portugal and Ireland to seek bailouts.
The British pound slipped modestly against the U.S. dollar and dropped against the Euro, snapping a three-day gain, after an industry report showed Briton’s concern about losing their jobs increased to a record last month. The Lloyds Bank Corporate Markets index of job security fell to the lowest in December since the measure began in 2004. Nevertheless, the sterling remains near 16-month highs against the common currency. Later this week, the Bank of England is widely expected to keep interest rates on hold at a record low 0.5% and is likely to leave its bond-purchase target unchanged.
