Weaker than expected economic data released in the US did not help the dollar, which was already facing selling pressure. The eurozone figures are expected to see a small improvement over growth seen in the third quarter. Data is likely to reveal anaemic and uneven growth, however, which could help to limit the euro’s upside. Uncertainty surrounding the outlook for the Italian government as well as comments from ECB policy makers could also help to limit the euro’s rise. While there is no local data out in the UK, the sterling continues to ride high after the BoE’s upbeat quarterly inflation report that was seen.
Sterling
The sterling continues to find support against a weaker dollar. Cable opens near three-year highs, but there is no local data on the agenda that will give this cross momentum. Given the positive outcome of the BoE’s quarterly inflation report, it may take more than a miss or two in economic data to pull this currency back. Banter over the September vote for independence for Scotland is starting to heat up, and could be used as a catalyst for profit taking. Politicians have warned that a yes vote for independence means Scots would be giving up the pound sterling.
US dollar
The dollar was not helped by economic data released, but in truth the dollar had already been pushed lower heading into the figures. The weekly jobless claims rose by 8,000, which was more than forecast. Retail sales slipped by 0.4 per cent, but perhaps more disappointing were the downward revisions seen in the prior two months. Business inventories rose 0.5 per cent, just slightly above forecast. While yesterday’s figures were likely negatively skewed for weather reasons, today’s figures could see the opposite effect. Industrial output data could get a boost on the back of higher utilities, which tend to do better in extreme weather conditions.
Euro
The euro opened near a two-week high against the US dollar, but also near a three week low against the sterling. The euro crept higher throughout the session despite calls for the resignation of Italy’s Prime Minister. Despite the political uncertainty, Italian bond yields eased. Even comments from ECB policymakers failed to dent the euro. Investors will be faced with Q4 GDP data this morning alongside trade figures. Italian output data is expected to have helped its GDP, while France could miss the forecast. The figures are likely to show anaemic growth and uneven conditions.