The US dollar was consolidating following major gains the previous day, but some buying of the dollar’s dips was also observed. For example, the euro rallied all the way up to 1.0640 level the previous day but fell below the 1.06 level after traders reestablished some long dollar positions. Euro / dollar traded as low as 1.0495 during the previous day but there was certainly a degree of excess in the dollar’s sharp move higher and it needed to return some of its gains.
Weaker-than-expected retail sales for February out of the United States also caused some profit-taking in the dollar. Weak retail sales do not bode well for first quarter GDP growth, but some of the blame rested with unseasonably cold weather according to analysts. The market is already focusing on next week’s Federal Reserve meeting and the changes in the policy statement’s language that will reflect the latest economic developments such as the strong employment report released the previous Friday.
There was also profit-taking involving the British Pound, after the Bank of England Governor Mark Carney expressed some dovish views concerning inflation; mainly that a strong pound and disinflationary forces from abroad could keep UK inflation subdued. This meant that the Bank of England was probably in no hurry to raise interest rates, which in turn led to profit-taking for the UK currency. Euro / pound moved away from the 70 pence level to trade at 0.7120 while cable dropped below 1.49 at 1.4880.
The main economic news of the coming day will be the Canadian employment numbers for February, and Producer Prices and University of Michigan preliminary consumer confidence out of the United States.