The greenback and yen relinquished earlier session gains versus the majors as the euro edged up off lows to pop back above the 1.28-level and 116-handle, respectively.

The US economic reports released earlier in the session were mixed, with weekly jobless claims continuing to point toward deterioration in the labor market. Weekly jobless claims were larger than expected, at 623k versus forecasts for an improvement to 610k from a revised 631k a week earlier. Meanwhile, January retail sales were unexpectedly better than anticipated with the headline figure posting a 1.0% compared with a revised 3.0% decline a month earlier and the excluding automobiles reading up by 0.9% compared with a 3.2% drop previously. The December business inventories declined by 1.3% and exceeding the forecasted loss of 0.9% versus a 1.1% decline from November.

The calendar for Friday will see the release of the February University of Michigan consumer sentiment survey. Consensus estimates call for the preliminary survey to deteriorate to 60.2 versus 61.2 in January

Euro Regains Footing

The euro initially slumped against the dollar and yen, dropping to 1.2723 and 114.92, respectively. The Eurozone December industrial production posted disappointing results, lower by 2.6% versus a 1.6% decline a month earlier and plunging by 12.0% compared with a 7.7% drop a year earlier. Traders will look ahead to Q4 growth data from the Eurozone, with consensus estimates looking for the economy to contract by 1.3% on a quarterly basis versus a 0.5% decline and a 1.7% slide in GDP for the year, compared with a 0.9% contraction previously.

The single currency remains susceptible to risk aversion and we maintain our bias toward a weaker euro. EURUSD hovers near the 1.2780 region, with interim support seen at 1.2730, backed by 1.27 and 1.2660. Subsequent floors are eyed 1.2630, followed by 1.26 and 1.2550. On the topside, resistance will emerge at 1.28, followed by 1.2840 and 1.2870. Additional ceilings are eyed at 1.29, backed by 1.2930 and 1.2965.