The euro gained ground vis--vis the U.S. dollar today as the single currency tested offers around the US$ 1.5885 level and was supported around the $1.5670 level. Traders lifted the common currency on doubts that concerted global foreign exchange market intervention would materialize from this weeks Group of Seven communiqu in which policymakers surprised markets by acknowledging there have been sharp fluctuation in major currencies since the last G7 meeting. Policymakers added they are concerned about the implications for economic and financial stability but the markets doubt there will be sufficient follow-through in actual intervention. The shift in sentiment in the G7s communiqu underscores the extent to which exchange rate fluctuations have moved beyond disorderly. The greenback also erased early intraday gains following a surprise announcement that U.S. banking giant Wachovia lost money in Q1. Data released in the U.S. today saw March retail sales rise 0.2% m/m and 2.0% y/y while the ex-autos component was up 0.1%. Also, February business inventories came in around expectations at +0.6%. In eurozone news, European Central Bank member Noyer was quoted as saying recent price increases have risen to levels that are clearly outside our price stability objective we must ensure that actions do not maintain inflation at the abnormally high level that it has reached for what should be a short period. Traders interpreted Noyers comments as an indication that the ECB will not be reducing interest rates anytime soon. Similarly, ECBs Quaden reported eurozone inflation will remain over 2% for months. Data released in the eurozone today saw EMU-15 February industrial output up 0.3% m/m and 3.1% y/y. It was also reported that core EMU-15 PPI was up 0.4% m/m and 3.1% y/y. Euro bids are cited around the US$ 1.5345 level.
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