The greenback relinquished some of its earlier gains against the euro, slipping to the 1.3625-region and 1.5680 versus the pound. US economic reports released today tempered the slide in the equity bourses with the Dow Jones, S&P 500 and Nasdaq clawing back from earlier losses. Weighing on markets overnight and triggering a renewed shift to risk-averse assets was the announcement from China to further rein-in liquidity to hit the brakes on the economy. The PBOC revealed its decision to lift the reserve ratio required by banks to 50-basis points, stepping in to slow an overheating economy and moving to prevent further fuelling asset bubbles.
The economic reports released this morning saw the headline January retail sales improve by 0.5%, beating estimates for an increase of 0.3% from a decline of 0.2% in December. The excluding automobiles retail sales reading also beat forecasts, rising by 0.6% and edging past calls for an improvement to 0.5% from a decline of 0.2% previously. The University of Michigan consumer sentiment survey fell to 73.7 versus 75.0. The preliminary expectations survey declined to 66.9 from 70.9 and the conditions sentiment edged up to 84.1. Meanwhile, business inventories slumped by 0.2% from a 0.4% increase previously.
Euro Drifts Lower
Growth data in the Eurozone printed weaker than expected with the headline Q4 GDP figure increasing by 0.1%, missing calls for the economy to expand by 0.3% from 0.4% in Q3. On an annualized basis, the economy contracted by 2.1% from a 4.0% contraction in the previous year. Industrial production plummeted by 5.0%, adding to the 7.1% decline previously.
EURUSD trades just above the 1.36-level with support eyed at 1.3570, followed by 1.3540 and 1.35. Subsequent floors are seen at 1.3460, backed by 1.3430 and 1.34. On the topside, resistance is eyed at 1.3640, followed by 1.3680 and 1.37. Additional resistance will emerge at 1.3740, backed by 1.3760 and 1.38.