The US dollar recovered some lost ground in European trading as USD-negativity gave way to concerns that EU proposals to double the amount of lending facilities to distressed EU countries may undermine the EUR. EU leaders at a summit in Brussels are under pressure to restore confidence to struggling central and eastern European members, but the cost appears to be borne primarily by countries sharing the Euro, raising fears over the fiscal costs. The USD also recovered lost ground against most other major currencies after two days of heavy selling looked to be excessive.
EUR/USD came up short of making a new high and topped out at around 1.3725/30 before dropping back to the mid-1.35 area, while GBP/USD peaked just shy of 1.46 again and then dropped lower to 1.4400 before recovering. USD/JPY also recovered on widespread USD short-covering, gaining from around 94.50 to 95.50. Gold prices moved lower after cresting just above $965/oz and fell to the $947 area by the NY open. European shares are mostly flat on the day and US stock futures point to a small positive open.
In European data, January Eurozone industrial production confirmed the deterioration in individual national manufacturing reports, with industrial output dropping -17.3% YoY, worse than the -15.5% decline forecast. German Feb. producer prices also pointed to ongoing declines in inflation, falling -0.5% MoM and bringing the YoY rate down to 0.9% from the prior 2.0%.
Upcoming data releases:
3/20/2009 12:30 CA New Motor Vehicle Sales MoM JAN - - - -
3/20/2009 12:30 CA Retail Sales MoM JAN -5.40% - -
3/20/2009 12:30 CA Retail Sales Less Autos MoM JAN -3.20% - -
3/20/2009 13:00 EC ECB's Weber Speaks in Berlin 20-Mar
3/20/2009 16:00 US Bernanke Speaks on Panel at Convention in Phoenix 20-Mar