Soft economic numbers from other major developed economies as well as some stabilization in risk assets helped the US dollar to continue to regain some of the ground it has lost recently. Overall the dollar seems to be going through a period of consolidation presently following its significant gains during the third quarter and it looking like trading in a range until fundamental developments – most probably in its favor – drive it outside this range.
In particular, a sharp deterioration in the ZEW investor survey out of Germany showed that the country could head towards a recession, while the German government slashed its growth forecast to 1.2% this year from 1.8% previously. This weighed on the euro and euro / dollar fell to the 1.2640 level from 1.2711 it was trading the previous day before the data and Germany’s government announcement came out.
Against the yen the dollar managed to eke out some gains to trade at 107.28. A wave of risk aversion has benefitted the yen recently, but the previous day’s trading did not feature any further drop in risk assets and dollar / yen remained above the 107 level.
Finally, the pound was the biggest loser out of major currencies during the past 24 hours, languishing at the 1.5903 level against the dollar, following much weaker-than-expected inflation numbers the previous day. This development reduces the chances of an early rate hike by the Bank of England.
Today’s economic calendar is quite busy as it features the key employment report out of the UK, advance retail sales out of the US and no less than 2 speeches by ECB President Mario Draghi (one during the early European session and one later during the US session). The Beige book survey of economic conditions, compiled by the regional Federal Reserve banks will also be looked at for signs that the US economy is still on course.