Better than expected USD eco reports
Yesterday proved to be a fairly volatile day for many currency pairs, amidst a mixture of different releases and developments. The US Dollar traded higher against all of the major currencies on one of those rare days when good data was actually positive for the Dollar. Better than expected US economic reports helped drive the Dollar sharply higher against the Yen, offsetting some of the risk aversion that has benefitted other currencies. The Philly Fed index fell short of expectations but sharp improvements were seen in existing home sales and jobless claims, which had their sharpest fall for nearly a year. The data does show the US economy moving in the right direction.
The rebound in the Dollar, however, could also be attributed to trouble brewing on the horizon, with the positive US data providing more comfort that it is a safe haven from woes elsewhere. Indeed, it was a shaky day for the Euro which fluctuated and out of negative territory, if anything on the lack of any major update on the sovereign debt situation. Moody’s have warned of a downgrade for Portuguese debt, though this could hardly be described as a startling revelation, though German producer prices give an annualised growth rate that is the highest in more than 10 years.
Further afield, the Aussie Dollar, whose strength, in a commodity-centric economy, is largely correlated to global growth prospects, has had a weak month, hurt further yesterday as stronger than expected Chinese growth further fuelled speculation of monetary policy tightening from Beijing as they try to pull the reins in on the country’s runaway growth. Other commodity linked currencies also suffered on the prospect of weaker demand for natural resources from China, such as the Canadian Dollar, the Norwegian Krone and the Kiwi Dollar. China’s economy grew at an annual pace of 9.8% in the last 3 months, defying expectations that tightening measures by the People’s Bank of China would trigger a slowdown.
Today, Eurozone consumer confidence will feature brightly as investors dive onto whatever info is available for the region at present, whilst for the UK, today’s retail sales report should also be interesting in gauging the impact that bad weather had on pre-Christmas trading. Related data in the run-up to this release have been mixed. Likewise, reports from major retailers have also been somewhat varies, with some notable casualties but also some bucking the trend. But overall it would be a surprise if there was not a fall in the official sales measure on the month.