The U.S. dollar held a largely tight range against the majors overnight as overall risk sentiment ebbed and flowed as trader’s await today’s U.S. economic data. Indeed, European stocks and U.S. equity futures seesawed between positive and negative territory and opened this morning flat from yesterday. The economic docket showed that sales at U.S. retailers climbed in January. The 0.4% gain followed little change in December that was initially reported as a 0.1% increase, Commerce Department figures showed. The print failed to meet expectations of a 0.88% increase. However, retail sales excluding cars, demand climbed 0.7%, more than expected. In addition, prices of goods imported into the U.S. rose in January for the second time in six months, reflecting higher costs of petroleum. The 0.3% increase follows a 0.1% decrease in December Labor Department figures showed. The data has surprisingly had little effect on the direction of the U.S. dollar thus far this morning.
The euro remained largely unchanged versus the dollar overnight after a mixed bag of data was released. Successful bond auctions in Spain and Italy were certainly euro-positive. Italian three-year borrowing costs are the lowest since March, and Spanish 12-month bills are the lowest since October 2010. Also, German consumer confidence reached its highest level in ten months. . However, euro zone industrial production fell to –2.0% in January, down from the –0.3% figure in December. Additionally, Greece saw its GDP drop to –7.0% last quarter, while Moody’s slashed the credit ratings of six euro zone members, including Italy, Spain, and Portugal. Tomorrow, finance ministers will meet in Brussels to determine if newly formed Greek austerity measures warrant a second bailout.
The Japanese yen fell to its weakest level in three weeks after the Bank of Japan said it would increase the size of its asset-purchase fund. The central bank will increase its fun by 10 trillion yen to 65 trillion yen, expanding economic stimulus measures for the first time since October. The Bank of Japan also said it will target 1.0% inflation “for the time being.”
The British pound weakened against its major counterparts after Moody’s Investor Service threatened to reduce its credit rating if the U.K. economy continues to falter. The combination of exposure to the ongoing euro zone crisis and the sluggish economic conditions at home are proving difficult to overcome. The consumer price index was on par with forecasts as retail price indices were slightly off expectations, worse than the previous month. The Bank of England will release their inflation report tomorrow, as well as unemployment data.
