The euro opens at the lower end of ranges seen against the US dollar. Eurozone industrial output figures were released in line with forecast, which provided some support for the single currency, but gains were hard to hold on to. The dollar surged to life when retail sales figures rose at their fastest pace in one-and-a-half years. Sterling is struggling to hold on to higher levels since BRC retail sales showed a decline of 1.7 per cent. The currency should be able to shake off the weaker release knowing that it was negatively skewed by seasonal effects. Rather attention swings to price data, which could be damaging to the British currency as consumer prices are forecast to come in below four-year lows seen last month.
Sterling
BRC retail sales declined 1.7 per cent year on year in March. That was well under the 1 per cent gain expected and could help hold back sterling gains. On the other hand, investors could do well to overlook the figure. The release was negatively skewed by last year’s Easter break falling in the month of March instead of April, as this year. Indeed, the BRC maintained an optimistic outlook for upcoming sales. The impact should therefore be limited on sterling, particularly in the run-up to CPI figures. Consumer prices are at a four-year low and expected to head lower. That will limit the Bank of England’s need to raise rates anytime soon. Weak price pressures generally tend to weigh on a currency, but traders will not get too glum on sterling with the claimant count and unemployment data out a little later this week.
US dollar
US retail sales reversed any selling pressure on the dollar as sales rose at their fastest pace in one-and-a-half years. The ‘pent up demand’ story is already helping springtime figures and supports the view that the FOMC can continue to taper their Quantitative Easing programe. The dollar’s upside is seen as limited going into the CPI data. Price pressures remain benign and could help to weaken the dollar. On the other hand, growth and sentiment figures could help to offset the soft price data.
Euro
Industrial output continued to suggest a gradual recovery was underway in the eurozone. Output rose 0.2 per cent month on month, which was in line with market forecast. The most promising aspect of the release was the news that output in the southern periphery countries continues to improve. The data helped to offset harsh comments from the head of the European Central Bank, that suggested that additional policy measures would be taken if the euro did not stop strengthening.