The U.S. Dollar improved against some petro-currencies such as NOK and CAD, as well as commodity-based currencies like SEK, AUD, and NZD.
Overview
Other majors were flat after gaining on the dollar for the past four days, knocking it down to its weakest overall point since November. Producer Price Index figures from yesterday are being interpreted in a way that puts down the prices of riskier assets and can affect supplies. PPI in December advanced just 0.2%, the slowest pace in 13 months, which could mean that inflationary growth is not as much of a threat as economists and investors bet it can be.If indeed there is a slowdown and prices are not too likely to increase anywhere near the way they did last year, the Fed will not need to raise interest rates. More importantly, if things can slow down on the economic growth front, why should any other central bank consider several hikes themselves?Today’s release of Retail Sales for December gives further credit to the belief that the economy could in fact cool off and that the accommodative environment is worth maintaining. While a month-to-month contraction was expected, it ended up being way more negative than estimated. The forecast for Retail was (-0.1), but it came out at (-2.3%). We shall see how these data points shape the plans laid out by the Fed and if the buck has more room for losses.
What to Watch Today…
- No major economic events are scheduled for today
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EUR ⇑
The Euro rose slightly, but it remains highly volatile following a mixed message from European Central Bank President Christine Lagarde. In a speech in Estonia, she defended the ECB’s path towards hiking interest rates but also warned that in order to fix inflationary pressures, a far more contractionary policy will be needed.
In fact, she said just cooling down the economy may not be enough. While determined, it looks like the ECB is willing to see some level of economic pain, and other officials are afraid that the economy could take too big a hit, especially as it is already experiencing a very precarious Housing situation. For now, higher interest rates help with Euro appreciation.
GBP ⇑
Sterling has a bit more momentum than any other currency this morning, up by over half a percent without any data to chew. In fact, the latest Purchasing Managers Index suggests that while Construction may have expanded, in general, the economy has a contraction going on as recent months have made for major headaches across all economic activity, not to mention the need to revamp government revenues. With Rishi in charge, new plans have been discussed as reasonable, and here is to hoping better headlines emanate from the U.K. For now, houses are at their lowest prices in 2 years.
