The euro was lifted off a near 1-year low of 1.3159 to rise to a peak of 1.3195. Despite soft Eurozone inflation data, the euro bounced because the numbers were in line with expectations. The headline number came in at 0.3% versus a previous 0.4%.
Market participants chose to ignore the headline print and focused on the increase in the core inflation rate which rose to 0.9% year-on-year. This slightly more upbeat data helped prevent a further decline in the euro and should lessen the likelihood of policy action by the ECB at next week’s meeting.
Other data from Europe today included German retail sales which declined 1.4% in July, disappointing expectations for a 0.1% rise, after a 1.0% gain in June.
The pound was stable this week, trading within a range of 1.6534 and 1.6612. UK consumer confidence and CBI business sentiment both unexpectedly rose and helped lend support to sterling. A key risk event for the currency will be next week’s Bank of England policy meeting.
The dollar edged higher against the yen to test the key 104.00 level, moving up from a low of 103.64. The dollar seemed to shrug off disappointing US personal spending data today. Today’s data comes after a report yesterday showed US GDP expanded more than initially estimated in the second quarter at 4.2% from a 4% initial estimate.
A broadly weaker yen helped buoy the greenback. A slew of Japanese data today including retail sales unexpectedly contracting and disappointing industrial production lower-than-expectations dented sentiment for the yen.
The main risk event for the dollar will be next week’s US nonfarm payrolls report which is forecast to show employers added more than 200,000 jobs for a seventh straight month.