Sterling saw the biggest moves in the session. Strong consumer demand data helped to lift the outlook for the economy and supported the currency. In the eurozone, the euro continues to face challenges as German import prices, consumer prices and Italian producer prices are all going to be considered in light of next Monday’s flash HICP. More soft prices pressures would increase the chances of policy action at next week’s meeting and put further downside pressure on the euro, much to the benefit of exporters. An offset to the weak price pressures could be the release of sentiment figures, which have shown signs of improvements over several months. In the US, jobless claims dropped to four-month lows, but that good news was quickly offset by weak pending homes sales.

Sterling

Sterling was catapulted higher by retail sales figures showing the consumer not only alive and well, but also out shopping with a big wallet. The British currency took back nearly all the losses from the week before, made against the US dollar, and rose to three-week highs against the euro. The release had a greater impact on sterling because BRC retail sales and a CBI distributive trades figure seen earlier in the week suggested that the consumer remained in hibernation. The outlook for growth during the first quarter of this year continues to improve, bringing forward rate expectations and supporting sterling.

US dollar

Q4 growth saw its final release at 2.6 per cent, which was slightly below what was expected. Jobless claims dropped to a four-month low. Pending home sales declined. The drop is a little disappointing given the decline in new home sales seen earlier. Housing data have started to call into question the strength of this sector of the economy. The data did little to stir trade in currency markets well beyond what had already been witnessed.

Euro

Eurozone money supply figures picked up, but private-sector loan growth remained in negative territory. The data did not help the euro as investors continue to gear up for next week’s ECB policy meeting. Indeed, inflation figures in Germany, starting with import prices, as well as data in Italy and consumer prices in Germany will give investors an indication as to what flash HICP might look like at the beginning of next week. The good news is that there is a potential offset to weak price developments, which would weigh more on the euro.