The dollar was broadly weaker today, allowing the euro to bounce off a 12-year low. Disappointing US retail sales data did not help. February sales figures showed a decrease of 0.6%, contrary to forecasts for an increase of 0.3%. Last month’s fall was less than January’s 0.8% drop but it was the third consecutive monthly fall and this caused a sell-off in the greenback, which fell to 120.68 versus the yen before steadying back at pre-data levels. Bad weather was cited as a likely factor behind the weakness in retail sales.
On the other hand, US initial jobless claims data were not as bad and showed that the number of Americans filing for unemployment benefits fell by 36,000 to 289,000 in the week ending March 7 from a revised 325,000 in the prior week. This was the lowest in three weeks. Forecasts called for a drop to 305,000 claims.
Meanwhile, the recent rally of the dollar is beginning to cause concern in the markets that the currency’s strength will change the Fed’s interest rate outlook. Until recently, expectations were for rate hikes to begin by the middle of this year, especially after the latest strong nonfarm payrolls report.
The retracement in the dollar today helped lift the euro off a 12-year low of 1.0493 touched in the Asian session today. It rose to a high of 1.0680 before steadying around 1.0640. European data today was mixed. The Eurozone industrial production numbers fell by 0.1% m/m in January but final German CPI was up 0.9% m/m.
The pound was briefly above the key 1.5000 level but eased back down to 1.4923 after hitting high of 1.5021 following upbeat UK trade balance data. The nation’s overall trade deficit for goods and services narrowed to its smallest since mid-2013 in January to 616 million pounds from 2.14 billion pounds in December. Sterling however is likely to maintain a downside bias in the buildup to the UK elections in May due to a lot of uncertainty surrounding the outcome.Current polls show a narrow gap between the Labour Party and Conservatives. Meanwhile, Bank of England Governor Mark Carney signalled in a speech today that he was in no rush to raise interest rates